0001876945FALSE00018769452024-08-282024-08-28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
___________________________
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 28, 2024
___________________________
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| Gold Flora Corporation | |
| (Exact name of registrant as specified in its charter) | |
___________________________
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| Delaware | | 0-56348 | | 93-2261104 |
| (State or other jurisdiction of incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
3165 Red Hill Avenue
Costa Mesa, CA 92626
(Address of Principal Executive Offices, including Zip Code)
(949) 252-1908
(Registrant’s Telephone Number, including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
Loan Agreement
On August 28, 2024, Gold Flora Corporation (the “Company”) entered into a Loan Agreement (the “Loan Agreement”) with an accredited investor (the “Investor”) dated as of August 27, 2024 but effective as of August 28, 2024, pursuant to which, among other things, the Company agreed to issue and sell to the Investor, in exchange for the payment by the Investor of $6,864,000, a senior secured promissory note in an aggregate principal amount of $9,295,000 (the “Initial Note”). The Loan Agreement also provides for the future issuance of up to three additional notes (the “Additional Notes” and together with the Initial Note, the “Notes”) subject to certain conditions and on substantially the same terms as the initial closing. Each subsequent closing would result in the issuance of an Additional Note with an original principal amount of $2.78 million and a funded amount of $1.92 million.
The Initial Note is secured by a pledge of the Company’s stock and other equity interests in certain of its subsidiaries pursuant to a pledge agreement between the Company and the Investor (the “Pledge Agreement”), which will constitute a lien and security interest if the Investor accelerates the amount due under the Initial Note or any Additional Note during an event of default. The Company will be required to make weekly payments of $125,000 following the issuance of the Initial Note and continuing for eight weeks, after which the Company will be required to make weekly payments of $184,333.33 for 45 weeks through the maturity date of September 11, 2025 (the “Maturity Date”), at which time all remaining outstanding principal and accrued but unpaid interest will be due. The Initial Note may be prepaid, and the principal amount will be reduced to approximately $8.33 million if prepaid within 30 days of issuance, to approximately $8.55 million if prepaid between 30 and 60 days after issuance, and to approximately $8.84 million if prepaid between 60 and 90 days after issuance.
The Initial Note imposes certain customary affirmative and negative covenants upon the Company, as well as covenants that (i) restrict the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, (ii) restrict the issuance or repurchase of shares of the Company’s common stock, subject to specified exceptions, and (iii) restrict the declaration of any dividends or other distributions, subject to specified exceptions. If an event of default under the Notes occurs, the principal amount will be multiplied by 110% and interest will begin accruing at a default rate of 10% per annum from the date of a default. Upon an event of default and following any applicable cure periods, the Investor may elect to accelerate the Initial Note and thereafter convert all or a portion of the outstanding Notes into shares of the Company’s common stock. The conversion price for any such conversion will be equal to 90% of the average of the four lowest volume weighted average closing prices of the Company’s common stock on the Cboe Canada exchange during the 20 trading days prior to the conversion, subject to adjustment in the event of any issuance of securities at a lower purchase, exercise or conversion price, and subject to applicable limitations of the Cboe Canada exchange. The Company entered into a Registration Rights Agreement with the Investor that will require the Company to file a resale shelf registration statement registering the resale of the conversion shares within 60 calendar days following the closing date.
The Loan Agreement also contains customary representations and warranties of the Company and the Investor. The representations, warranties and covenants contained in the Loan Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Loan Agreement, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Loan Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Loan Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with Securities and Exchange Commission (the “SEC”).
The foregoing summaries of the Initial Note, the Loan Agreement, the Pledge Agreement and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the copies of the Initial Note, the Loan Agreement, the Pledge Agreement and the Registration Rights Agreement that are filed herewith as Exhibits 4.1, 10.1, 10.2 and 10.3, respectively.
Item 2.03. Creation of a Direct Financial Obligation.
The information set forth in Item 1.01 of this Current Report on Form 8-K regarding the Loan Agreement and the Initial Note is incorporated herein by reference into this Item 2.03.
Item 3.02. Unregistered Sales of Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference into this Item 3.02.
The Initial Note, the Additional Notes and any shares of common stock issuable upon conversion of the Note and, if issued, the Additional Notes (collectively, the “Securities”) were and will be offered and sold to the Investor in a transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder. The Investor represented that it was an “accredited investor,” as defined in Regulation D, and is acquiring the Securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Accordingly, the Securities will not be registered under the Securities Act and the Securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
Neither this Current Report on Form 8-K nor the exhibits attached hereto is an offer to sell or the solicitation of an offer to buy shares of Common Stock, notes, or any other securities of the Company.
Item 8.01. Other Events.
On August 28, 2024, the Company issued a press release announcing its entry into the Loan Agreement and the issuance of the Initial Note. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits. | | | | | |
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| Exhibit No. | Description |
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| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.
** Furnished but not filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | GOLD FLORA CORPORATION | |
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Dated: August 28, 2024 | By: | /s/ Marshall Minor | |
| | Name: | Marshall Minor | |
| Title: | Chief Financial Officer | |
Installment Note
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION. THESE SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR PROSPECTUS REQUIREMENTS AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND CANADIAN SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS SECURITY.
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| Original Issue Date: August 27, 2024 | | Funding Amount | $ | 6,864,000 |
| Final Maturity Date: September 11, 2025 | | Original Principal Amount: | $ | 9,295,000 |
GOLD FLORA CORPORATION
INSTALLMENT NOTE
THIS INSTALLMENT NOTE is a duly authorized and validly issued promissory note of Gold Flora Corporation., a Delaware corporation (the “Company”), designated as its secured installment note (the “Note”).
FOR VALUE RECEIVED, the Company promises to pay to J.J. Astor & Co., or its registered assigns (the “Lender” or the “Holder”), the $9,295,000 Original Principal Amount of this Note as set forth above (the “Original Principal Amount”) in fifty-three (53) weekly installments of $125,000 per week for the first 8 weeks followed by $184,333.33 per week for the final 45 weeks each (the “Weekly Installments”) commencing on September 5, 2024 and thereafter on each Scheduled Payment Date (as defined below) until the Final Maturity Date as set forth above, or such earlier date as this Note is required or permitted to be repaid as provided hereunder (as the case may be, the “Maturity Date”). This Note is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note: (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement, and (b) the following terms shall have the following meanings:
“Acceleration Event” shall have the meaning as that term is defined in the Loan Agreement.
“Acceleration Notice” shall have the meaning as that term is defined in the Loan .Agreement.
“Additional Notes” shall have the meaning as that term is defined in the Loan Agreement.
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, or (f) the Company or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” shall have the meaning as that term is defined in the Loan Agreement.
“Capital Lease Obligations” means the aggregate capitalized amount of obligations under any lease of property, plant, equipment, or intangible asset that, in accordance with GAAP, would be capitalized on a balance sheet.
“Cboe Exchange” shall have the meaning as that term is defined in the Loan Agreement.
“Change of Control Transaction” means the occurrence after the date hereof of any of: (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion of a Note), (b) the Company or its Significant Subsidiaries merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company or its Significant Subsidiaries and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction or less than 50% of the equity of its Significant Subsidiaries, (c) the Company sells or transfers all or substantially all of its assets or the assets of its Significant Subsidiaries to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.
“Contingent Obligation” means, with respect to any Loan Party any obligation of such Loan Party guaranteeing or intended to guarantee any Indebtedness (“primary obligations”) of any other
Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Loan Party of the obligation of a primary obligor, (b) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, and (c) any obligation of such Loan Party, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the Holder of such primary obligation against loss in respect thereof; provided, however, that the term “Contingent Obligation” shall not include any product warranties extended in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Loan Party is required to perform thereunder), as determined by such Loan Party in good faith.
“Conversion Notice” shall have the meaning as that term is defined in Section 5(b) of this Note.
“Conversion Price” shall have the meaning as that term is defined in the Loan Agreement.
“Conversion Shares” shall have the meaning as that term is defined in the Loan Agreement.
“Default Amount” means, with respect to the Note, the sum of: (1) the amount obtained by multiplying (x) the Outstanding Principal Amount of this Note by (y) 110%, plus (2) all other amounts, costs, and expenses due under or in respect of this Note, if any.
“Escrow Agreement” shall have the meaning as that term is defined in the Loan Agreement.
“Event of Default” shall have the meaning set forth in Section 5(a) of this Note.
“Exchange” shall have the meaning as that term is defined in the Loan Agreement.
“Grace Period” shall mean seven (7) Business Days from the date any Outstanding Principal Amount of the Notes shall become due and payable (whether on a Scheduled Payment Date, the Maturity Date, by mandatory prepayment, acceleration or otherwise).
“Hedging Agreements” shall mean interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, or any other agreements or arrangements designed to protect a Person against fluctuations in interest rates or currency exchange rates.
“Indebtedness” means, with respect to any Loan Party, without duplication, (a) all indebtedness of such Loan Party for borrowed money; (b) all obligations of such Loan Party for the deferred purchase price of property or services (other than trade payables and accrued expenses or other accounts payable incurred in the ordinary course of such Loan Party’s business); (c) all obligations of such Loan Party evidenced by bonds, debentures, notes or other similar instruments; (d) all reimbursement, payment or other obligations and liabilities of such Loan Party created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such Loan Party, even though the rights and remedies of the lessor, seller and/or lender thereunder may be limited to repossession or sale of such property, (e) all Capitalized Lease Obligations of such Loan Party; (f) all obligations and liabilities, contingent or otherwise, of such Loan Party, in respect of letters of credit, acceptances and similar facilities other than obligations and liabilities that are cash collateralized on terms reasonably satisfactory to the Lender; (g) all net obligations and liabilities, calculated in accordance with accepted practice, of such Loan Party under Hedging Agreements; (h) all monetary obligations under any receivables factoring, receivable sales or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet financing or similar financing; (i) all Contingent obligations; and (j) all obligations referred to in clauses (a) through (i) of this definition of another Loan Party secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Loan Party, even though such Loan Party has not assumed or become liable for the payment of such Indebtedness, provided, however that if recourse in respect of any Indebtedness of the foregoing is limited to specific assets, then such Indebtedness shall be deemed to be equal to the lesser of (x) the aggregate unpaid amount of such Indebtedness and (y) the fair market value of the asset encumbered thereby as determined by such Loan Party in good faith; provided further, that Indebtedness shall not include (i) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase price of an asset to satisfy warranties or other unperformed obligations of the seller of such asset, (ii) endorsements of checks or drafts arising in the ordinary course of business, and (iii) any earnout or similar purchase price obligation until such obligation is required to be reflected on the balance sheet of such Person in accordance with GAAP. For the avoidance of doubt, “Indebtedness” shall exclude operating leases.
“Initial Note” as defined in the Loan Agreement, means this Note.
“Loan Agreement” means the Loan Agreement, dated as of August 27, 2024, by and among the Company and the Lender, as the original Holder of the Note, as amended, modified, or supplemented from time to time in accordance with its terms.
“Loan Party” means the individual or collective reference to the Company and each Subsidiary Guarantor.
“Maturity Date” shall have the meaning set forth in the second paragraph of this Note.
“Maximum Conversion Shares” shall have the meaning as set forth in the Loan Agreement.
“Maximum Conversion Percentage” shall have the meaning as set forth in the Loan Agreement.
“Minimum Installment Payment” has the meaning set forth in Section 2(a) of this Note.
“Notes” shall mean the collective reference to this Note and all Additional Notes issued by the Company to the Lender.
“Original Issue Date” means the date of the first issuance of the Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Note.
“Original Principal Amount” means $9,100,000 as set forth on the first page of this Note
“Outstanding Principal Amount” means at any point in time the Original Principal Amount less all Minimum Installment Payments made, or in the case of a prepayment made on or prior to ninety (90) days following the Original Issue Date, the applicable Prepayment Discount; provided that from and after the occurrence of an Event of Default beyond any cure periods, the Outstanding Principal Amount shall be the Default Amount.
“Payment Amount” means, at any point in time with respect to any Notes at any time, the sum of: (A) (i) the Original Principal Amount of this Note or the Default Amount (as applicable), at such time, less all Minimum Installment Payments, or (ii) in the case of a prepayment made on or prior to ninety (90) days following the Original Issue Date, the applicable Prepayment Discount, plus (B) all other amounts, costs, and expenses due under or in respect of this Note.
“Pledge Agreement” shall have the meaning as set forth in the Loan Agreement.
“Prepayment Discount” means, with respect to any prepayment of this Note: (i) if prepaid on or before thirty (30) days of the Original Issue Date, the Original Principal Amount of this Note shall be reduced to $8,334,857.14 less all Minimum Installment Payments made prior to such date of repayment, (ii) if prepaid after thirty (30) days of the Original Issue Date but on or before sixty (60) days of the Original Issue Date, the Original Principal Amount of this Note shall be reduced to $8,549,357.14 less all Minimum Installment Payments made prior to such date of repayment, and (iii) if prepaid after sixty (60) days of the Original Issue Date but on or before ninety (90) days of the Original Issue Date, the Original Principal Amount of this Note shall be reduced to $8,835,357.14 less all Minimum Installment Payments made prior to such date of repayment.
“Registration Rights Agreement” shall have the meaning as that term is defined in the Loan Agreement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Scheduled Payment Date" means, Thursday of each week from and after the Original Issue Date, commencing with September 5, 2024 and continuing on each of the following Thursday for fifty-two (52) consecutive weeks.
“Significant Subsidiary” shall have the meaning as that term is defined in Rule 1-02(w) of Regulation S-X)
“Subsidiary Guarantees” shall have the meaning as that term is defined in the Loan Agreement.
“Trading Market” means any of the markets or Exchanges referred to in the Loan Agreement on which the Common Stock is or may be listed for trading or quoted on the date in question.
“Transfer Agent Instructions” shall have the meaning as that term is defined in Section 5(b) of this Note.
“Utah Courts” shall have the meaning set forth in Section 6(d).
Section 2. Payment, Prepayment; Interest.
(a)On each Scheduled Payment Date, the Company shall make a payment of the principal under this Note in an amount as $125,000 per week for the first 8 weeks followed by a payment of $184,333.33 per week for the final 45 weeks (each a “Minimum Installment Payment”) until the entire Outstanding Principal Amount shall have been paid in full. On the Maturity Date, the entire Outstanding Principal Amount shall become immediately due and payable.
(b)The Company may prepay this Note in full at any time after the Original Issue Date in an amount equal to the Outstanding Principal Amount. The Company shall give the Lender not less than five (5) days advance notice of its intention to prepay this Note.
(c)From and after the occurrence of an Event of Default, the Outstanding Principal Amount of this Note shall increase to the Default Amount and this Note shall bear interest accruing at ten percent (10%) per annum, calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily until payment in full of the Default Amount.
Section 3. Registration of Transfers and Exchanges.
(a)Different Denominations. This Note is exchangeable for an equal aggregate Outstanding Principal Amount of Note of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b)Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Loan Agreement and may be transferred or exchanged only in compliance with the Loan Agreement and applicable federal and state securities laws and regulations.
(c)Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the official Note register of the Company as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Negative Covenants. As long as any portion of this Note remains outstanding, unless the Lender or any subsequent holder of outstanding Notes (together with the Lender, the “Holders”) shall have otherwise given prior written consent, the Company shall not, and shall not permit any of its Subsidiary Guarantors to, directly or indirectly:
(a)amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of Holders of Note;
(b)issue, repay, repurchase or offer to repay, repurchase or otherwise acquire shares of Common Stock, except for Exempt Issuances, provided that such payments or acquisitions shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default shall exist; .
(c)incur, repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, except for (i) the Indebtedness to the Lender; (ii) trade indebtedness or obligations incurred in the normal course of business on ordinary terms to vendors, suppliers, or other persons providing goods and services for use by any Loan Party, (iii) Exempt Issuances, and (iv) Indebtedness of any Loan Party referenced in Section 3.01(r) of the Disclosure Schedules to the Loan Agreement; provided in the case of clauses (ii) and (iii), that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default shall exist;
(d)grant or suffer to exist any Liens on its property or assets, other than Permitted Liens;
(e)amend or modify the agreed upon form of Transfer Agent Instructions, unless required by applicable securities laws or the rules of any Exchange on which the Common Stock is then traded.
(f)pay cash dividends or make any distributions on any equity securities of the Company, other than (i) pursuant to existing agreements or to service existing obligations with employees, shareholders or members of any Loan Party, (ii) any Loan Party may declare and make dividend payments or other distributions to any other Loan Party in the ordinary course of business, and (iii) Permitted Tax Distributions;
(g)enter into any material transaction with any Affiliate of the Company, other than (i) transactions made on an arm’s-length basis upon fair and reasonable terms that are no less favorable to such Loan Party than would be obtained in an arm's length transaction with a non-affiliated entity or individual, (ii) payment to employees and officers of compensation (including bonuses) and employee benefits in the ordinary course of business, and employee severance arrangements entered into with directors, officers, managers, consultants or employees in the ordinary course of business, (iii) payment of directors' fees in the ordinary course of business, (iv) the reimbursement of out of pocket costs and expenses for employees, directors, officers and consultants in the ordinary course of business, (v) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans in the ordinary course of business, (vi) transactions disclosed on the Disclosure Schedules to the Loan Agreement, and (vii) payments of rent to any landlord that is an Affiliate of any Loan Party pursuant to the terms of any lease agreement in effect with such landlord; or
(h)enter into any agreement or commitment with respect to any of the foregoing.
Section 5. Events of Default.
(a)“Event of Default” means, wherever used herein, the occurrence of any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body) in each case, beyond any applicable cure or grace periods as set forth herein:
(i)any default in the payment or prepayment of any Outstanding Principal Amount of the outstanding Notes as and when the same shall become due and payable (whether on a Scheduled Payment Date, the Maturity Date, by mandatory prepayment, acceleration or otherwise) which default, solely in the case of required payment of principal on any Scheduled Payment Date, is not cured within the Grace Period; provided, however, that the Company acknowledges and agrees that there shall be a maximum of only five (5) Grace Periods allowed over the fifty-three (53) Weekly Installment payments under this Note;
(ii)the Company shall fail to observe or perform any other covenant or agreement contained in Section 4 of this Note, which failure is not cured, if possible to cure, within the earlier to occur of (A) thirty (30) days after the earlier of (x) notice of such failure sent by the Holder to the Company or (y) the Company becoming aware of such failure;
(iii)any material representation or warranty made in the Loan Agreement, this Note, the Subsidiary Guarantee, the Pledge Agreement or the Registration Rights Agreement shall be untrue or incorrect in any material respect as of the date when made.;
(iv)the Company or any Subsidiary Guarantor shall be subject to a Bankruptcy Event;
(v)the Company shall be a party to any Change of Control Transaction; or
(vi)the Common Stock shall have ceased to be listed or quoted on a Trading Market for a period fifteen (15) consecutive calendar days.
(b)Remedies Upon Event of Default. If any Acceleration Event occurs and is continuing (beyond any applicable Grace Period or other cure periods), this Note shall become, at the Holder’s election, accelerated and immediately due and payable in the Default Amount. Following such acceleration, the Holder shall be entitled to exercise all of its rights and remedies under this Note and under the other Transaction Documents. In addition, following such acceleration and subject to Section 4.10 of the Loan Agreement and the limitations and requirements imposed by the Cboe Exchange and any other Trading Market (including with respect to limitations on the Maximum Conversion Percentage, the creation of a new Insider (as defined in the policies of the Exchange) and any requirements to obtain security holder approval) the Holder shall, have the right, in the exercise of its sole discretion, and upon prior written notice to the Company of its intention to convert all or any portion of this Note and all or any
portion of any outstanding Additional Note into Conversion Shares up to the Maximum Conversion Shares (a “Conversion Notice”). Accordingly, the Holder may receive any combination of cash and Conversion Shares.
Notwithstanding anything to the contrary contained in this Note, the Company and the Lender hereby agree to follow the conversion procedures set forth in Section 4.01 of the Loan Agreement. In addition, the Holder shall provide the Company with not less than three (3) Business Days prior written notice of its intent to deliver a Written Direction (as defined in the Escrow Agreement) to the Escrow Agent instructing the Escrow Agent to deliver the Escrow Property (as defined in the Escrow Agreement) to the Lender.
The Company shall be entitled to pay in cash the then entire Outstanding Principal Amount of the Notes in accordance with Section 2(b) hereof and this Section 5(b) prior to any exercise of Lender’s rights under the Pledge Agreement, or in the case of Lender’s delivery of a Conversion Notice, the then Outstanding Principal Amount of the Notes being converted as set forth in the Conversion Notice, in accordance with Section 2(b) hereof and this Section 5(b) prior to any such conversion, in which case the Conversion Notice delivered by Lender shall be null and void.
Upon the payment in full of the Default Amount in either cash or Conversion Shares, or any combination thereof, in accordance with the terms of the outstanding Notes, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind except as otherwise set forth herein or in any other Transaction Document, and thereafter, the Holder may immediately (following the expiration of any notice, grace or cure periods set forth herein or in any Transaction Document) enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to (i) any conversion of all or any portion of the Notes, in which case the applicable Conversion Notice delivered by Lender shall be null and void, (ii) any exercise of Lender’s rights under the Pledge Agreement, in which case the Holder shall immediately notify the Escrow Agent that any Written Direction (as defined in the Escrow Agreement) delivered to the Escrow Agent is null and void, or (iii) payment of the Obligations hereunder, in which case the Holder shall have all rights as a Holder of the Notes until such time, if any, as the Holder receives full payment pursuant to this Section 5(b), in which case the Holder shall immediately notify the Escrow Agent via a Written Direction (as defined in the Escrow Agreement) to deliver the Escrow Property (as defined in the Escrow Agreement) to the Company. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
As set forth in the Registration Rights Agreement, the Company shall register with the Commission for resale under the Securities Act an aggregate number of shares of Common Stock as shall be determined by (a) dividing 200% of an amount equal to 110% of the outstanding principal amount of the Note by (b) the Conversion Price then in effect, without restriction thereunder within 90 days thereafter.
(c)Notwithstanding anything to the contrary herein or in any other Transaction Document, if, following Holder’s acceleration of this Note after the occurrence and during the continuation of an Event of Default (beyond any applicable cure periods), Holder elects to conduct a sale of any Subject Collateral (as defined in the Pledge Agreement), the Holder agrees to consult in good faith with the Borrower and the other Loan Parties in order to achieve an orderly sale of such Pledged Collateral in order to maximize the recovery by Holder of such Subject Collateral.
Section 6. Miscellaneous.
(a)Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth on in the Loan Agreement, or such other, email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 6(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email address or address of the Holder appearing on the books of the Company, or if no such facsimile number or email address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Loan Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via email to the email address set forth on the signature pages attached hereto prior to 5:30 p.m. (Eastern time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via email to the email address set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (Eastern time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b)Absolute Obligation, Security and Ranking. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company and is secured by the Subsidiary Guarantee and, if the Lender elects to accelerate the Notes for payment after the occurrence and during the continuation of an Event of Default beyond any grace period for cure, by the Pledge Agreement. This Note is a senior and direct debt obligation of the Company and ranks pari passu with all other Notes (if any) now or hereafter issued under the terms of the Loan Agreement.
(c)Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the Outstanding Principal Amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt by the Company of (i) evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company, and (ii) a note affidavit reasonably acceptable to the Company, which contains a customary indemnity by the Holder for any misrepresentations contained therein. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement the Note.
(d)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal courts sitting in the County of Salt Lake, Utah (the “Utah Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, Action or Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of this Note, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.
(e)Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
(f)Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
(g)Remedies, Characterizations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
(h)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(i)Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
Section 7. Amendments; Waivers. Any modifications, amendments or waivers of the provisions hereof shall be subject to Section 5.05 of the Loan Agreement.
Section 8. Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by any Holder in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Holder with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Holder to the unpaid principal amount of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Holder’s election.
Section 9. Cannabis Laws. Section 5.20 of the Loan Agreement is hereby incorporated herein in its entirety, mutatis mutandis.
Balance of this page left blank – signature page follows
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date and year first above indicated.
GOLD FLORA CORPORATION
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
LOAN AGREEMENT
This Loan Agreement (this “Agreement”) is dated as of August 27, 2024 and is made and entered into between Gold Flora Corporation, a Delaware corporation (the “Company”), and J.J. Astor & Co., a Utah corporation (including its successors and assigns, the “Lender”).
RECITALS
WHEREAS, the Company wishes to borrow the sum of up to $13,150,000 for working capital and general corporate purposes (other than the payment of dividends and distributions), in the form of a $7,150,000 loan (the “Initial Loan” and up to three additional delayed draw Additional Loans (hereinafter defined) of $2,000,000 each (the “Additional Loans” and together with the Initial Loan, the “Loans”), and the Company wishes to enter into this Agreement and the Exhibits hereto and
WHEREAS, the Company agrees to issue to the Lender, (a) the Initial Note (hereinafter defined) evidencing the Initial Loan, and (b) the Additional Notes (hereinafter defined) evidencing the additional Loans; and
WHEREAS, the Company has agreed to secure the payment obligations to the Lender under the Initial Note and the Additional Notes pursuant to the Subsidiary Guarantees in the form of Exhibit B to be entered on the Closing Date and by granting (or causing its subsidiaries to grant) to the Lender a negative pledge of the capital stock and membership interest equity of all of its direct and indirect Subsidiary Guarantors (hereinafter defined) which shall constitute a Lien and security interest on such equity only if Lender elects to accelerate the Loans for payment upon the occurrence and during the continuation of an Event of Default under and as defined in the Notes (hereinafter defined), pursuant to the Pledge Agreement in the form of Exhibit C to be entered into on the Closing Date; and
WHEREAS, the Company and the Lender are executing and delivering a registration rights agreement in the form of Exhibit D to be entered into on the Closing Date; and effective if the Company elects to convert all or any portion of the Notes into Conversion Shares upon Lender’s acceleration of the Loans for payment after the occurrence and during the continuation of an Event of Default as defined in the Notes.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Lender agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. In addition to the terms defined elsewhere in this Agreement:
(a)capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Note One (as defined herein), and (b) the following terms have the meanings set forth in this Agreement.
“$” means United States Dollars.
“Acceleration Event” means the occurrence and continuation of an Event of Default (as defined in the Notes) beyond the applicable grace period, if any, for cure.
“Acceleration Notice” means a written notice from the Lender that it has elected to accelerate the Loans for payment after the occurrence of an Acceleration Event.
“Action” shall have the meaning ascribed to such term in Section 3.01(k).
“Additional Loans” has the meaning as defined in the Recitals.
“Additional Notes” means up to three additional installment promissory notes each in the original principal amount of $2,780,000 which shall be payable in forty (40) weekly installments as $69,500 and shall contain the other terms and conditions set forth the form of note attached hereto as Exhibit A-2 to evidence the Additional Loans.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act; provided, however, that for purposes of this Loan Agreement and the other Transaction Documents, except as otherwise provided herein, Gold Flora Acquisition Fund 1, LLC, a California limited liability company and its subsidiary entities shall not be deemed to be Subsidiary or an Affiliate of the Company or any Subsidiary.
“Board of Directors” means the board of directors of the Company or Subsidiary Guarantor of the Company, as the context may require or permit.
“Business Day” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of Utah are authorized or required by law or other governmental action to close. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
“Cboe Exchange” means the Cboe Canada Inc.
“Closing” means the closing of the transactions contemplated by this Agreement pursuant to Section 2.01.
“Closing Date” means the Business Day when all of the Transaction Documents to be executed and delivered in connection with the Initial Loan have been executed and delivered by the applicable parties thereto, and conditions precedent to: (i) the Lender’s obligations to provide the Initial Loan to the Company and pay professional fees of its counsel, and (ii) the Company’s obligations to deliver the Initial Note and the other Transaction Documents to be executed and delivered in connection with the Initial Loan have been satisfied or waived.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means (a) the common stock, par value $0.001 per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed, and (b) the common stock of any Subsidiary Guarantor and any other class of securities into which such securities may hereafter be reclassified or changed; provided, such term shall relate solely to a particular Person as the context so requires.
“Common Stock Equivalent” means any convertible notes or convertible preferred stock containing such payment terms or rights, privileges and designations that are approved in writing in advance by the Lender, or other right to subscribe for or purchase any additional shares of Common Stock or any Common Stock Equivalent.
“Company Disclosure Schedule” means the disclosure schedule submitted by the Company to the Lender as exceptions to or disclosures in respect of the representations and warranties of the Company set forth in this Agreement.
“Conversion Notice” shall have the meaning as that term is defined in the Notes.
“Conversion Price” means 90% of the average of the four lowest volume weighted average closing prices of Common Stock of the Company on the Exchange over the twenty (20) trading days immediately prior to each permitted conversion of the Notes (the “Conversion Price Formula”); provided, however, that (a) in the event that after the date hereof and prior to any conversion of any Note, the Company issues any securities, including convertible notes or debentures, Common Stock or Common Stock Equivalents (other than Exempt Issuances) at a conversion price, exercise price or per share price that is less such Conversion Price formula, the Conversion Price shall be reduced to the lowest conversion price, exercise price or per share price issued by the Company; and (b) for so long as the Common Stock of the Company is listed for trading on the Cboe Exchange, the Conversion Price shall not be less than the greater of (x) the Discounted Market Price, and (y) $0.10.
“Conversion Shares” shall mean the shares of Common Stock of the Company issuable upon any full or partial permitted conversion of the Notes and includes shares of Common Stock of the Company issuable if the Lender issues an Acceleration Notice that it elects to accelerate the Loans for payment after the occurrence and continuation of an Event of Default (as defined in the Notes) beyond the applicable grace period, if any, for cure, up to the Maximum Conversion Shares; provided, however, that on any occasion that the Loans shall be subject to conversion if based on the application of the Conversion Price formula, the Conversion Price is calculated to be less than $0.10 per share, the Company shall issue, for no additional consideration, additional “true up” shares of its Common Stock to the Lender so that the total number of Conversion Shares issued to the Lender shall be based on the Conversion Price Formula only.
“Covenant Compliance Agreement” means the agreement executed by the chief executive officer and chief financial officer of the Company in the form of Exhibit F annexed hereto
“Discounted Market Price” means the closing market price of the Common Stock of the Company on the Cboe Exchange on the trading day preceding the date that a Conversion Notice is delivered to the Company, less a discount of 10%.
“Escrow Agent” shall mean Wilmington Trust Company N.A.
“Escrow Agreement” shall mean the escrow agreement between the Company, the Lender and the Escrow Agent in form and content acceptable to the parties thereto.
“Exchange” means the Cboe Exchange provided, however, if the Common Stock of the Company is listed or trades on (a) any recognized United States or Canadian securities exchange, including the Toronto Stock Exchange, the Nasdaq Capital Market or the NYSE:American Exchange, or (b) the OTCQX Market or over-the-counter pink sheets, the term “Exchange” shall also include any one of the foregoing as well as the Cboe Exchange.
“Excluded Dispensaries” shall mean the Dispensaries owned or operated by Higher Level of Care Seaside, Inc., Higher Level of Care Hollister Inc. and Captain Kirk Services, Inc dba Airfield Supply.
“Exempt Issuance” means: (i) the issuance by the Company of the Notes and Conversion Shares thereunder, (ii) the issuance by the Company of Common Stock or Common Stock Equivalents in connection with any financing where the proceeds are used to reduce funded Indebtedness or for working capital and/or other corporate purposes, excluding the payment of any dividends or distributions to stockholders or Affiliates of the Company, (ii) the issuance of Common Stock upon the exercise of any warrants or the conversion of any convertible notes or convertible preferred stock that is outstanding on the date hereof as disclosed in SEC Reports, or (iii) the issuance by the Company of any Common Stock or standard options to purchase Common Stock to directors, officers, employees or consultants of the Company or its Subsidiaries in their capacity as such pursuant to an employee benefit plan which has been approved by the Board of Directors of the Company prior to the date hereof pursuant to which Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, director or consultant for services provided to the Company or its subsidiaries in their capacity as such. For the avoidance of doubt, the term “Exempt Issuance” does not mean or include the issuance of any other debt securities, membership interests or Common Stock Equivalents by the Company or any Subsidiary Guarantor, that has not been approved and consented to in writing in advance by the Lender.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Federal Cannabis Laws” mean any U.S. Federal law, rule, or regulation as applicable to Cannabis or the cultivation, harvesting, production, distribution, sale, use, or possession of Cannabis or the products thereof, which are or could be deemed to be (a) listed as a Schedule 1 controlled substance under Section 202(c) of the United States Federal Controlled Substances Act (21 U.S.C. 812(c), et seq.) or (b) classified as “hemp” or “tetrahydrocannabinols in hemp” (as defined in 7 U.S.C. § 1639o(1) or section 297A of the Agricultural Marketing Act of 1946 under 7 U.S.C. § 38); including, but not limited to, the prohibition on drug trafficking under 21 U.S.C. § 841(a), et seq.; the conspiracy statute under 18 U.S.C. § 846; the bar against aiding and abetting the conduct of an offense under 18 U.S.C. § 2; the bar against misprision of a felony (concealing another’s felonious conduct) under 18 U.S.C. § 4; the bar against being an accessory after the fact to criminal conduct under 18 U.S.C. § 3; Federal money laundering statutes under 18 U.S.C. §§ 1956, 1957, and 1960; the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. § 96, et seq.); and the Agriculture Improvement Act of 2018 (7 U.S.C. § 9001, et seq.).
“FINRA” means the Financial Industry Regulatory Authority.
“Flow of Funds Agreement” means the agreement of the Company and the Lender in the form of Exhibit E hereto, to be executed and delivered by such parties at the time of making of the Initial Loan and each Additional Loan.
“Forecast” shall mean a monthly and quarterly forecast of the consolidated revenues and quarterly forecast of cash flow of the Company and its direct and indirect subsidiaries (including the Subsidiary Guarantors), for each calendar month and calendar quarter, as applicable, from July 2024 through June 2025 entitled “8-27-24 Gold Flora Forecast - Conservative Case Financial (Final)” that has been prepared in good faith by the Company on a conservative basis and delivered to the Lender on or before the Closing.
“Funding Amount” means, with respect to each of the Notes, ninety-six percent (96%) of the Subscription Amount thereof. The Funding Amount takes into account the origination fee due from the Company to the Lender of $286,000, an amount equal to four percent (4%) of the Initial Funding Amount in each of the Notes, which shall be retained by the Lender at Closing for its own account; and for the
avoidance of doubt the Funding Amount (a) under the Initial Loan and Initial Note shall be $6,864,000 and (b) under each of the three Additional Loans, if made, and Additional Notes, if issued, shall be $1,920,000.
“Grace Period” has the meaning as that term is defined in the Notes.
“Indebtedness” has the meaning as that term is defined in the Notes.
“Initial Loan” has the meaning as that term is defined in the Recitals.
“Initial Note” the original issue secured installment promissory note in the original principal amount of $9,295,000 which shall be payable in fifty-three weekly installments as $125,000 for the first 8 weeks followed by $184,333.33 for the final 45 weeks and shall contain the other terms and conditions set forth the form of Note attached hereto as Exhibit A-1 to evidence the Initial Loan.
“Initial Offering Amount” means the Seven Million Dollars ($7,150,000) of funding to be evidenced by the Initial Note in the original principal amount of Nine Million Two Hundred and Ninety-Five Thousand Dollars ($9,295,000).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.01(p).
“Liens” shall mean a lien, charge, security interest, mortgage, encumbrance, right of first refusal, preemptive right or other restriction or adverse claim of a third party.
“Loans” shall have the meaning as that term is defined in the Recitals.
“Loan Parties” as set forth in Section 3.01 of this Agreement, means the collective reference to the Company and each of the Subsidiary Guarantors.
“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.01(b).
“Maximum Conversion Shares” means, subject to the requirements of the Exchange and Section 4.10, after acceleration for payment by Lender of any Note following the occurrence and during the continuation of any Event of Default (as defined in the Notes) which shall not be timely cured by the Loan Parties the then outstanding principal amount of the Notes shall automatically increase to 110% of the outstanding principal amount, and upon the election of the Lender, all or any portion of such increased Outstanding Principal Amount of the Loans may be converted by the Lender into that number of shares of Common Stock of the Company as shall be determined by (a) dividing the then increased Outstanding Principal Amount of the Loans by (b) the Conversion Price then in effect; provided that, (i) notwithstanding the election of the Lender to convert all or any part of the then outstanding principal amount of the Notes, the Company shall have the right to pay in cash the entire then outstanding principal amount of all Notes being converted following Lender’s notice of its election to convert the Notes and prior to any such conversion, and (ii) the maximum number of shares of Common Stock of the Company that may be issued pursuant to any such permitted conversion of the Notes (calculated on a fully-diluted basis) shall not be greater than 24.9% of the number of shares of Common Stock of the Company then issued and outstanding (calculated on a non-diluted basis) unless approval of the shareholders of the Company is obtained.
“Monitoring Fee” shall mean a fee of $4,000 per month commencing September 1, 2024, payable to the Lender or its Affiliate on the first Business Day of each month that any of the Notes remain outstanding, in consideration for Lender monitoring this Agreement and the other Transaction Documents.
“Notes” means the collective reference to the Initial Note and any Additional Notes that may be issued to the Lender.
“Permitted Liens” means (i) pledges or deposits made in the ordinary course of business to secure payment of workmen's compensation, or to participate in any fund in connection with workmen's compensation, unemployment insurance, old-age pensions or other social security programs, (ii) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other nonconsensual restrictions imposed by operation of law; (iii) Liens for taxes, assessments or governmental or similar charges which have not been recorded/filed with the applicable secretary of state and which are not delinquent or which are being diligently contested in good faith and by appropriate proceedings and adequate reserves with respect thereto are maintain on the books of the Loan Parties, (iv) Liens arising solely by virtue of any contractual or statutory or common law provisions relating to banker's liens, rights to set off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, (v) judgement liens that, to the extent not released, would reasonably be expected to result in a Material Adverse Effect, (vi) Liens consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use, (vii) customary anti-assignment provisions in leases and other contracts entered into in the ordinary course of business, (viii) Liens arising from the filing of precautionary UCC financing statements relating solely to personal property leased pursuant to “true” operating leases entered into in the ordinary course of business of the Borrowers and their Subsidiaries, (ix) Liens in favor of the Lender, and (x) other Liens existing as of the Closing Date that are disclosed on Section 3.01(r) to the Company Disclosure Schedule.
“Person” means an individual or corporation, partnership, trust, incorporated or un-incorporated association, joint-venture, limited liability company, joint-stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Pledge Agreement” means the securities pledge agreement in the form of Exhibit C attached hereto which shall be executed on the Closing Date by the Parties but shall only be deemed effective and constitute a Lien and security interest in the equity of the Subsidiary Guarantors if the Lender elects to accelerate the Loans for payment after the occurrence and continuation of an Event of Default (as defined in the Notes) beyond the applicable grace period for cure.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Regulation S” shall mean Regulation S as promulgated by the Securities and Exchange Commission under the Securities Act.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.01(e).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“SEC Reports” has the meaning ascribed to such term in Section 3.01(h).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“State Securities Laws” means the securities (or “blue sky”) rules, regulations, or other similar laws of a particular state.
“Subscription Amount” means, (i) with respect to the Initial Note, the aggregate amount of $7,150,000 to be paid for such Note hereunder, and (ii) with respect to each Additional Note, individually, an amount not to exceed $2,000,000.
“Subsidiary Guarantee” the Subsidiary Guarantee executed by each of the Subsidiary Guarantors and in the form of Exhibit B, attached hereto.
“Subsidiary Guarantors” means those direct or indirect subsidiaries of the Company that are dispensaries engaged in the sale and distribution of cannabis and cannabis related products and paraphernalia (“Dispensaries”) and that are specifically set forth on Section 3.01(a) of the Company Disclosure Schedule.
“Transfer Agent Instructions” has the meaning as that term is defined in Section 4.01 of this Agreement.
“Transaction Documents” means the collective reference to this Agreement, the Notes, the Subsidiary Guarantee, the Pledge Agreement, the Registration Rights Agreement, the Flow of Funds Agreement, the Escrow Agreement, the Covenant Compliance Agreement, the form of Transfer Agent Instructions, the Company Disclosure Schedules and all other appendices, exhibits and schedules hereto and thereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
ARTICLE II
THE LOANS
Section 2.01 The Initial Loan.
(a)On the Closing Date, and upon the terms and subject to the conditions set forth herein and in the other Transaction Documents to be executed and delivered by the parties hereto and thereto, the Lender hereby agrees to make the Initial Loan and the Company hereby agrees to issue to the Lender the Initial Note in the original principal amount of Nine Million Two Hundred and Ninety-Five Thousand Dollars ($9,295,000 and the Lender agrees to accept from the Company the Initial Note.
(b)At the Closing, the Lender shall deliver to the Company, via wire transfer, of immediately available funds, an amount equal to $6,864,000, representing the Funding Amount under the Initial Note.
(c)The Company and its Subsidiaries shall deliver to the Lender such Initial Note and other Transaction Documents to be delivered as of the Closing Date and the Lender shall deliver the other items set forth in Section 2.02 deliverable at the Closing.
(d)Upon satisfaction of the conditions set forth in Sections 2.02 and 2.03, the Closing shall occur at the offices of the Lender’s counsel, or such other location as the parties shall mutually agree or may be closed remotely by electronic delivery of documents.
Section 2.02 Initial Loan Deliverables.
(a)By Lender. On or prior to the Closing Date, the Lender shall deliver or cause to be delivered to the Company the following:
(i)this Agreement duly executed by the Lender;
(ii)the Pledge Agreement to be held in escrow by Wilmington Trust Company, N.A. pursuant to the Escrow Agreement and not deemed to be effective or delivered unless the Lender elects to accelerate the Loans for payment after the occurrence and during the continuation of an Event of Default under and as defined in the Notes beyond any applicable grace period for cure, the form of which is attached hereto as Exhibit C, duly executed by the Lender;
(iii)the $6,864,000 Funding Amount, by wire transfer in immediately available funds to the Borrower pursuant to the wiring instructions set forth in Section 2.03(c); and
(iv)the Registration Rights Agreement in the form of Exhibit D attached hereto; and
(v)the Flow of Funds Agreement duly executed by the Lender and in the form of Exhibit E attached hereto; and
(vi)the Escrow Agreement.
(b)By the Company. On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Lender:
(i)this Agreement, duly executed by an authorized officer of behalf of the Company;
(ii)the Initial Note, the form of which is attached hereto as Exhibit A-1, registered in the name of the Lender, in the original principal amount of $9,295,000, and duly executed by an authorized officer on behalf of the Company;
(iii)the Subsidiary Guarantee, the form of which is attached hereto as Exhibit B, executed by an authorized officer on behalf of each Subsidiary of the Company;
(iv)the Pledge Agreement, the form of which is attached hereto as Exhibit C executed by an authorized officer of the Company and by each Subsidiary Guarantor of the Company, to be held in escrow by Wilmington Trust Company NA pursuant to the Escrow Agreement and not deemed to be effective or delivered unless a the Lender elects to accelerate the Loans for payment after the occurrence and during the continuation of an Event of Default under and as defined in the Notes beyond any applicable grace period for cure;
(v)the Registration Rights Agreement in the form of Exhibit D attached hereto;
(vi)the Flow of Funds Agreement duly executed by the Company and in the form of Exhibit E attached hereto;
(vii) the Escrow Agreement;
(viii) the unexecuted form of Transfer Agent Instructions annexed hereto as Exhibit G which form has been approved by the Company, the Lender, and Odyssey Transfer and Trust Company, the transfer agent of the Company;
(ix)the Forecast; and
(x)an officer’s certificate of the Company and each Subsidiary Guarantor certifying its: (A) resolutions of its Board of Directors, Managers, members or similar governing body approving and authorizing the execution, delivery and performance of the Transaction Documents to which it is (or is to be) a party, and (B) incumbency of officers authorized to execute the Transaction Documents.
Section 2.03 Closing Conditions.
(a)The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met (it being understood that the Company may waive any of the conditions for any Closing hereafter):
(i)the accuracy in all material respects on the Closing Date of the Lender’s representations and warranties contained herein;
(ii)all obligations, covenants and agreements of the Lender required to be performed at or prior to the Closing Date shall have been performed; and
(iii)the delivery by the Lender of the items set forth in Section 2.02(a) of this Agreement.
(b)The obligations of the Lender hereunder in connection with the Closing are subject to the following conditions being met (it being understood that the Lender may waive any of the conditions for any Closing hereafter):
(i)the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless such representations and warranties relate to a prior specific date in which case they shall be accurate in all material respects as of such prior date);
(ii)all obligations, covenants and agreements of the Company and its Subsidiary Guarantors required to be performed at or prior to the Closing Date shall have been performed;
(iii)the delivery by the Company and its Subsidiary Guarantors of the items set forth in Section 2.02(b) of this Agreement;
(iv)there shall have been no Material Adverse Effect with respect to the Company or any of the Subsidiary Guarantors, taken as a whole, since the date hereof;
(c)The wiring instructions for the Company are as follows:
Section 2.04 The Additional Loans.
(a)If requested in writing by the Company (an “Additional Loan Request”) on a date which shall be (i) not earlier than sixty (60) days following the Closing of the Initial Loan for the first Additional Loan, (ii) not earlier than one hundred and twenty (120) days following the Closing of the Initial Loan for the second Additional Loan, and (iii) not earlier than one hundred and eighty (180) days following the Closing of the Initial Loan for the third Additional Loan, but on each occasion, subject to the terms and the conditions set forth herein and in the other Transaction Documents to be executed and delivered by the parties hereto and thereto, the Lender hereby agrees, within fifteen (15) days following each Additional Loan Request, to make one or more Additional Loans of $2,000,000 each and Company hereby agrees to issue to the Lender one or more of the Additional Notes, each in the original principal amount of Two Million Seven Hundred and Eighty Thousand Dollars ($2,780,000) (each, an “Additional Loan Closing”).
(b)At each Additional Loan Closing, the Lender shall deliver to the Company, via wire transfer, of immediately available funds, an amount equal to $1,920,000, representing the Funding Amount under each Additional Note.
(c)The Company shall deliver to the Lender such Additional Note and other Transaction Documents to be delivered at each Additional Loan Closing as set forth in Section 2.05(b), and the Lender shall deliver the other items set forth in Section 2.05(a) at the Additional Loan Closing.
(d)At each Additional Loan Closing, the Subsidiary Guarantors shall execute and deliver a written acknowledgement that the Subsidiary Guarantee includes, without limitation the applicable Additional Loan.
(e)Upon satisfaction of the conditions set forth in Sections 2.05 and 2.06, the Additional Loan Closing shall occur at the offices of the Lender’s counsel, or such other location as the parties shall mutually agree or may be closed remotely by electronic delivery of documents.
Section 2.05 Additional Loan Deliverables.
(a) By Lender. At each Additional Loan Closing, the Lender shall deliver or cause to be delivered to the Company the $1,920,000 Funding Amount, by wire transfer to the Borrower pursuant to the wiring instructions set forth in Section 2.03(c) or such other wiring instructions provided by Borrower in writing to Lender.
(b) By the Company. At each Additional Loan Closing, the Company shall deliver or cause to be delivered to the Lender:
(i)the applicable Additional Note, the form of which is attached hereto as Exhibit A-2, registered in the name of the Lender, in the original principal amount of $2,780,000, and duly executed by an authorized officer on behalf of the Company;
(ii)the acknowledgement of the Subsidiary Guarantors referred to in Section 2.04(d);
(iii)an officer’s certificate of the Company and each Subsidiary Guarantor certifying its resolutions of its Board of Directors, Managers, members or similar governing body approving and authorizing the execution, delivery and performance of the Transaction Documents to which it is (or is to be) a party.
Section 2.06 Additional Loan Closing Conditions. The obligations of the Lender hereunder in connection with each Additional Loan Closing are subject to the following conditions being met (it being understood that the Lender may waive any of the conditions):
(i)the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) of the representations and warranties of the Company contained herein (unless such representations and warranties relate to a prior specific date in which case they shall be accurate in all material respects as of such prior date) as of the date of the Additional Loan Closing;
(ii)no Event of Default under the Notes shall have occurred and be continuing;
(iii)all obligations, covenants and agreements of the Company and its Subsidiary Guarantors required to be performed at or prior to the date of the Additional Loan Closing shall have been performed;
(iv)the delivery by the Company and the Subsidiary Guarantors of the items set forth in Section 2.05(b) of this Agreement;
(v)(A) within 45 days following the end of each of the first three fiscal quarters of any fiscal year and 90 days following the end of each fiscal year, the Company shall provide the Lender the cumulative consolidated actual revenues and gross profit of the Company for such fiscal period and a comparison of such revenue and gross profit to those in the Forecast for such fiscal period, and within 14 days following the end of each month the Company shall provide the Lender the cumulative consolidated actual revenues of the Company for such month and a comparison of such revenues to those in the Forecast for such month; and (B) in the event of a request for an Additional Loan advance, the Company shall also provide (x) evidence that for the three calendar month period ended immediately prior to the proposed funding of suchAdditional Loan the cumulative consolidated revenues of the Company for such three calendar month period equals or exceeds that set forth in the Forecast for such period; (y) evidence that the cumulative consolidated actual net cash flow of the Company for the fiscal quarter most recently ended, calculated and presented in the same form as in the Forecast for such fiscal
quarter, shall be equal to or in excess of the cumulative consolidated net cash flow of the Company as set forth in the Forecast for such fiscal quarter; and (z) evidence that the cumulative consolidated actual revenues of the Company for the calendar month most recently ended prior to the funding of the Additional Loan is equal to or in excess of the cumulative consolidated revenues of the Company as set forth in the Forecast for such month; provided that, in the event that an Additional Loan is requested and scheduled to close prior to the reporting date for any SEC Report with respect to the third fiscal quarter of 2024, then clause (y) above will not apply;
(vi)on each occasion that the Company shall make an Additional Loan Request, the Company shall represent therein that there has been no Material Adverse Effect in the levels of consolidated revenues, gross profit margin or operating expenses of the Company and its direct and indirect subsidiaries, taken as a consolidated whole; and
(vii)there shall have been no Material Adverse Effect with respect to the Company or any of the Subsidiary Guarantors, taken as a consolidated whole, since the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Company. The Company hereby represents and warrants to the Lender on behalf of the Company and each of its Subsidiary Guarantors (together with the Company, the “Loan Parties”) that, except as set forth in the applicable Section of the Company Disclosure Schedule, the following representations are true and complete as of the date of the date hereof.
(a)Subsidiary Guarantors. The names of all Subsidiary Guarantors of the Company, their jurisdictions of formation, and the executive officers of each Subsidiary Guarantor are set forth in Section 3.01(a) of the Company Disclosure Schedule. Each Subsidiary Guarantor has executed and delivered the Subsidiary Guarantee. Except for the Excluded Dispensaries, the Subsidiary Guarantors own or operate 100% of the Dispensaries that are owned or operated by the Company or any of its direct or indirect subsidiaries.
(b)Organization and Qualification. The Company is duly incorporated or otherwise organized, validly existing and in good standing under the laws of the state of Delaware and each of its Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the state of its incorporation (or other formation), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any of its Subsidiaries is in violation or default of any of the provisions of its articles of incorporation or bylaws, each, as amended and in effect. A complete and correct copy of the Company’s certificate or articles of incorporation and bylaws, each as amended and in effect on the date of this Agreement and as they will be in effect on the Closing Date, is attached to the officer’s certificate referenced in Section 2.02(b)(v). There are no other organizational or charter documents of the Company. The Company and each of the Subsidiary Guarantors is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in Material Adverse Effect (as hereinafter defined), and to the Company’s knowledge, no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification. As used herein, “Material Adverse Effect” means (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business, or condition (financial or otherwise) of the Company and each of its Subsidiaries, taken as a whole; or (iii) a material adverse effect on the Company’s or any of its Subsidiaries’ ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”); provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions, (ii) conditions generally affecting the industry in which the Company or any Subsidiary Guarantor operates, (iii) any changes in financial or securities markets in general, (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof, (v) any pandemic, epidemics or human health crises (including COVID-19), (vi) any changes in applicable laws or accounting rules, (vii) the announcement, pendency or completion of the transactions contemplated by the Transaction Documents, or (viii) any action required or permitted by the Transaction Documents or any action taken (or omitted to be taken) with the written consent of or at the written request of the Lender.
(c)Authorization; Enforcement. The Company and each Subsidiary Guarantor has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and each of Subsidiary Guarantor and no further action is required by the Company, any of its Subsidiary Guarantors or the Board of Directors or stockholders thereof in connection therewith (other the Required Approvals). Each Transaction Document to which the Company or any of its Subsidiary Guarantor is a party has been (or upon delivery will have been) duly executed by the Company and such Subsidiaries and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company and such Subsidiary Guarantor enforceable against the Company and such Subsidiary Guarantor in accordance with their respective terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d)No Conflicts. The execution, delivery and performance by the Company and each of its Subsidiary Guarantors of the Transaction Documents to which it is a party and the consummation by the Company and of its Subsidiary Guarantors of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any of its Subsidiary Guarantors’ certificate of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any credit facility, or other agreement or instrument evidencing Indebtedness of the Company or any Subsidiary Guarantor or other agreement to which the Company or any of its Subsidiary Guarantors is a party or by which any property or asset of the Company or any of its Subsidiary Guarantors is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any of its Subsidiary Guarantors is subject (including federal and State Securities Laws and regulations), or by which any property or asset of the Company or any of its Subsidiary Guarantors is bound or affected other than possible violations of Federal Cannabis Laws; except
in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e)Filings, Consents and Approvals. The Company and its Subsidiary Guarantors are not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, provincial, local or other governmental authority or other Person in connection with their execution, delivery and performance of the Transaction Documents, other than: (i) such consents, waivers, or authorizations as have been obtained before the Closing, including the approval of the Exchange; and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable State Securities Laws and applicable Canadian securities laws (collectively, the “Required Approvals”).
(f)Maximum Conversion Shares. The Company has reserved from its duly authorized Common Stock up to the Maximum Conversion Shares for issuance to the Lender or its Affiliates in the event of the full permitted conversion of any Note.
(g)Capitalization. The capitalization of the Company is as set forth in the most recent SEC Reports and further modified in Section 3.01(g) of the Company Disclosure Schedule. Since the date of the most recently filed SEC Report, the Company has not issued any Common Stock, Common Stock Equivalents or other equity interests (other than Exempt Issuances) or (without duplication) pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date hereof. Except in instances where valid waivers have been obtained, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth in the SEC Reports and further modified in the applicable Section of the Company Disclosure Schedule, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Stock or the capital stock or membership interests of any Subsidiary Guarantor, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary Guarantor is or may become bound to issue additional membership interests, Common Stock or Common Stock Equivalents or capital stock of any Subsidiary Guarantor. The issuance and sale of the Note will not obligate the Company or any Subsidiary Guarantor to issue any securities to any Person (other than the Lender) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except for the Required Approvals and waivers that have heretofore been obtained, no further approval or authorization of any stockholder, Board of Directors or other Person(s) is required for the issuance and sale of the Note hereunder.
(h)SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments.
(i)Undisclosed Liabilities. The Loan Parties have no liability, indebtedness, obligation, expense, claim, deficiency or guaranty of any type, whether accrued, absolute, contingent, matured, unmatured or otherwise, required to be reflected in financial statements in accordance with GAAP, which individually or in the aggregate: (A) has not been reflected in the latest balance sheet included in the financial statements referenced hereinabove; or (B) (i) has not arisen in the ordinary course of business, consistent with past practices, since the date of the latest balance sheet included in such financial statements, (ii) has not arisen pursuant to or in connection with this Agreement or other Transaction Document, (iii) are trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, or (vi) are executory performance obligations to be performed after the date hereof in the ordinary course of business pursuant to agreement(s) entered into in the ordinary course of business, consistent with past practices. As of the Closing Date, the Company is not in default with respect to any Indebtedness. that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. None of the Subsidiary Guarantors have any Indebtedness.
(j)Material Changes. Since the date of the latest financial statements made available to Lender prior to the date hereof: (A) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; (B) the Loan Parties have not incurred any liabilities (contingent or otherwise) other than (i) those liabilities described in clause (b) of Section 3.01(i), and (ii) liabilities not required to be reflected in the Company’s consolidated financial statements pursuant to GAAP; (C) the Company has not altered its method of accounting; (D) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock except; and (E) the Company has not issued any equity securities except in favor of an officer, director or consultant pursuant to an existing Company equity incentive plans.
(k)Litigation. Except as set forth on Schedule 3.01(k), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened in writing against or affecting the Company, any of its Subsidiary Guarantors or any of their respective properties or assets before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which: (A) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents; or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. None of the Loan Parties or any current director or officer thereof, is or has been the subject of any Action involving: (x) a claim of violation of or liability under the Securities Act, the Exchange Act, FINRA rules or any State Securities Laws; (y) breach of fiduciary duty; or (z) fraud (statutory or common law), embezzlement, misappropriation or conversion of property or rights, or any other crime involving deceit.
(l)Labor Relations. No labor dispute exists or, to the knowledge of the Company, threatened (in writing) with respect to any of the employees of the Company or any of its Subsidiary Guarantors which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or any of its Subsidiary Guarantors’ employees is a member of a union that relates to such employee’s relationship with the Company or its Subsidiary Guarantors, and the Company and each of its Subsidiary Guarantors is not a party to any collective bargaining agreement. No executive officer, to the knowledge of the Company, is, or is now expected to be, in material violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non- competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party. To the best of the Company’s knowledge, it is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not reasonably be expected to have a Material Adverse Effect.
(m)Compliance. Except as disclosed set forth in Section 3.01(m) of the Company Disclosure Schedule, as of the Closing Date, the Company and each of its Subsidiary Guarantors: (i) is neither in default under nor in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or its Subsidiary Guarantors under), nor has the Company or any of its Subsidiary Guarantors received a written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), in any case, that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect; (ii) is not in violation of any order of any court, arbitrator or governmental body; and (iii) is not in material violation of any statute, law, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment in any case, that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect, other than possible violations of Federal Cannabis Laws. Neither the Company nor any Subsidiary Guarantor is aware or has received written notification that any violation of Federal Cannabis Laws or any laws or regulations in California regulating the sale of cannabis or cannabis related products currently exists and is continuing.
(n)Regulatory Permits. The Company and each of its Subsidiary Guarantors possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the the Loan Parties have not received any written notice of proceedings relating to the revocation or modification of any Material Permit.
(o)Title to Assets. The Company and its Subsidiary Guarantors have good and marketable title in fee simple to all real property and good and marketable title in all personal property owned by it that, in each case, is material to the business of the Company and its Subsidiary Guarantors, in each case free and clear of all Liens, except for Permitted Liens. Any real property and facilities held under lease by the Company or a Subsidiary Guarantor is held by it under valid, subsisting and enforceable leases with which the Company or such Subsidiary Guarantor (as applicable) are in compliance in all material respects.
(p)Intellectual Property. (i) The Company and each Subsidiary Guarantor thereof has, or has rights to use and prosecute, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as necessary or material for use in connection with its business and which the failure to so have could reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”); (ii) the Loan Parties have not received a written notice that any of the Intellectual Property Rights violates or infringes upon the intellectual property rights of any other Person; (iii) all Intellectual Property Rights are enforceable by the Company or its Subsidiary Guarantor, as applicable, and to the knowledge of the Company, there is no existing infringement by any other Person of any of the Intellectual Property Rights, except where the failure to be so enforceable or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iv) the Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its Intellectual Property Rights, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q)Transactions with Officers, Directors and Employees. Except as set forth on Section 3.01(q) of the Company Disclosure Schedule, None of the officers or directors of the Company or any of its Subsidiary Guarantors and, to the knowledge of the Company, none of the employees of the Company or any of its Subsidiary Guarantors, is presently a party to any transaction with the Company (other than for services as employees, officers and directors and related party notes as identified in the SEC Reports), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any such officer, director or employee or, to the knowledge of the Company, any entity in which any such officer, director or employee has a substantial interest or is an officer, director, trustee, member or partner, in each case other than for: (x) payment of salary or fees for services rendered; (y) reimbursement for expenses incurred on behalf of the Company; and (z) other employee benefits, including stock option agreements under any stock option plan of the Company.
(r)Indebtedness and Liens All Indebtedness of the Company is listed on Section 3.01(r) to the Company Disclosure Schedule. None of the Subsidiary Guarantors has any Indebtedness (whether secured or unsecured) and, other than Permitted Liens, there are no other Liens on the Assets of the Subsidiary Guarantors.
(s)Private Placement. Assuming the accuracy of the Lender’s representations and warranties set forth in Section 3.02, no registration under the Securities Act is required for the offer and sale of the Note by the Company to the Lender as contemplated hereby.
(t)Investment Company. The Company is not and immediately after receipt of payment for the Note will not be an ‘investment company’ within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not be an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(u)Registration Rights. Other than as described in the SEC Reports and further modified by Section 3.01(u) of the Company Disclosure Schedule, no Person has any right to demand the Company to file a registration statement under the Securities Act covering the sale of any securities of the Company.
(v)Disclosure. Except with respect to: (i) the material terms and conditions of the transactions contemplated by the Transaction Documents; and (ii) information given to the Lender, if any, which the Company hereby confirms will not constitute material non-public information, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Lender or their agents or counsel with any information that it believes constitutes or might constitute material, nonpublic information. The Company understands and confirms that the Lender will rely on the foregoing representation in effecting transactions in securities of the Company. All disclosure furnished by or on behalf of the Company to the Lender regarding the Company, its business and the transactions contemplated hereby, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
(w)No Integrated Offering. Assuming the accuracy of the Lender’s representations and warranties set forth in Section 3.02, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Note to be integrated with prior offerings by the Company for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.
(x)Solvency. Based on the consolidated financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Initial Note hereunder: (i) the fair saleable value of the Loan Parties’ assets exceeds the amount that will be required to be paid on or in respect of the Loan Parties’ existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted; and (iii) the current cash flow of the Loan Parties, together with the proceeds the Loan Parties would receive, were they to liquidate all of their assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company will not, after the Closing Date, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Except as disclosed in Section 3.01(x) of the Company Disclosure Schedule, the Company has no knowledge of any facts or circumstances which lead it to believe that it or the other Loan Parties will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.
(y)Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, (i) the Company has filed all federal, state and foreign income and franchise tax returns and (ii) the Loan Parties have paid or accrued all taxes shown as due thereon, and (iii) the Company has no knowledge of a tax deficiency which has been asserted or threatened in writing against the Company or any of the other Loan Parties.
(z)No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Notes by any form of general solicitation or general advertising. The Company has offered the Note for sale only to the Lender and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(aa)Insurance. The Company and each of its Subsidiary Guarantors is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company is engaged. The Company has never been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will not be able to renew all existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers.
(ab)Acknowledgment Regarding Lender’s Purchase of the Note. The Company acknowledges and agrees that the Lender is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that Lender is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by Lender or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Lender’s purchase of the Notes. The Company further represents to the Lender that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ac)No Disqualification Events. With respect to the Notes to be offered and sold hereunder in reliance on Rule 506(b) under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of twenty percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the ‘Bad Actor’ disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Lender a copy of any disclosures provided thereunder.
(ad)Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities.
(ae)Notice of Disqualification Events. The Company will notify the Lender in writing, prior to the Closing Date of: (i) any Disqualification Event relating to any Issuer Covered Person; and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(af)Foreign Corrupt Practices. Neither the Company nor, to the knowledge of the Company, no agent or other person acting on behalf of the Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of applicable law; or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act.
(ag)Office of Foreign Assets Control. Neither the Company nor, to the Company's knowledge, any director, officer, agent, employee or Affiliate of the Company, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(ah)U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Lender’s request.
(ai)Bank Holding Company Act. Neither the Company nor any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”). Neither the Company nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(aj)Money Laundering. The operations of the Company are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened in writing.
(ak)Cboe Exchange Approval. The Company received approval of the Cboe Exchange for the issuance of the Notes and Conversion Shares (including the “true up” shares referred to in the definition of Conversion Shares) and, no further applications for approval will need to be submitted, except for the limitations and requirements imposed by the Cboe Exchange regarding: (i) limitations on the Maximum Conversion Percentage, (ii) the requirement to submit a Personal Information Form in the form prescribed by the Cboe Exchange upon the creation of a new Insider (as defined in the policies of the Cboe Exchange) and (iii) any requirements to obtain security holder approval. The Company hereby covenants and agrees that it shall notify the Cboe Exchange promptly and in any event within three (3) Business Days of notification by the Lender that it has acquired beneficial ownership of, or control or direction, directly or indirectly, greater than 10% of the issued and outstanding shares of Common Stock of the Company and becomes an Insider (as defined in the policies of the Cboe Exchange) of the Company.
(al)Representations. The representations and warranties of the Company contained in this Agreement, and the certificate(s) furnished or to be furnished to the Lender at the Closing, when taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Company acknowledges and agrees that the representations contained in section 3.02 shall not modify, amend or affect Lender’s right to rely on the Company’s representations
and warranties contained in this section 3.01 or elsewhere in this Agreement or any representations and warranties contained in any other Transaction Document, or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
Section 3.02 Representations and Warranties of the Lender.
The Lender, for itself and for no other Person, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a)Authority; Organization. The Lender has full power and authority to enter into this Agreement and to perform all obligations required to be performed by it hereunder. The Lender is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Lender of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on the part of the Lender. Each Transaction Document to which it is a party has been duly executed by the Lender, and when delivered by the Lender in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Lender, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b)Own Account. The Lender understands that the Notes and the Conversion Shares are “restricted securities”, have not been registered under the Securities Act or any applicable State Securities Law, and have not been qualified for distribution by prospectus in Canada. The Lender is and is acquiring the Note and Conversion Shares as principal for its own account and not with a view to or for distributing or reselling such the Note or Conversion Shares or any part thereof in violation of the Securities Act, any applicable State Securities Law, or Canadian securities laws, has no present intention of distributing any of the Notes or Conversion Shares in violation of the Securities Act, any applicable State Securities Law or Canadian securities laws and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the Notes (this representation and warranty not limiting the Lender’s right to sell the Notes, Conversion Shares in compliance with applicable federal and State Securities Laws or applicable Canadian securities laws) in violation of the Securities Act or any applicable State Securities Law or Canadian securities laws. The Lender is acquiring any Note hereunder in the ordinary course of its business. The Lender has made the investment decision to purchase the Notes and, if appliable, Conversion Shares outside Canada, has complied with the requirements applicable to the Lender in connection with the distribution under the applicable securities laws of the jurisdiction outside Canada and, has no direct or indirect arrangement or understanding with any other persons to distribute or regarding the distribution of such securities in Canada.
(c)Non-Transferrable. The Lender agrees: (i) that the Lender will not sell, assign, pledge, give, transfer or otherwise dispose of any Note or Conversion Shares or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of such Note and Conversion Shares under the Securities Act and all applicable State Securities Laws and Canadian securities laws, or in a transaction which is exempt from the registration provisions of the Securities Act
and all applicable State Securities Laws and Canadian securities laws, (ii) that the certificates representing each Note will bear a legend making reference to the foregoing restrictions, and (iii) that the Company and its Affiliates shall not be required to give effect to any purported transfer of any Note and Conversion Shares except upon compliance with the foregoing restrictions.
(d)Lender Status. The Lender is an “accredited investor” as defined in Rule 501(a) under Regulation D of the Securities Act. The undersigned agrees to furnish any additional information requested by the Company or any of its Affiliates to assure compliance with applicable U.S. federal and state securities laws in connection with the purchase and sale of the Note. Any information that has been furnished or that will be furnished by the undersigned to evidence its status as an accredited investor is accurate and complete, and does not contain any misrepresentation or material omission.
(e)Experience of The Lender. The Lender, either alone or together with its representatives, has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Notes, and has so evaluated the merits and risks of such investment. The Lender is able to bear the economic risk of an investment in the Note and, at the present time, is able to afford a complete loss of such investment.
(f)No Trading Market. The Lender acknowledges that there is currently no trading market for the Notes and that none is expected to develop for the Notes.
(g)General Solicitation. The Lender acknowledges that neither the Company nor any other person offered to sell the Notes to it by means of any form of general solicitation or advertising, including, but not limited to: (i) any advertisement, article, notice, or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees were invited by any general solicitation or general advertising.
(h)Confidentiality. Other than to other Persons party to this Agreement and its advisors who have agreed to keep information confidential or have a fiduciary obligation to keep such information confidential, the Lender has maintained the confidentiality of all disclosures made to it in connection with the transaction (including the existence and terms of this transaction).
(i)Foreign Lender. If the Lender is not a United States person, the Lender represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Note or any use of this Agreement, including: (i) the legal requirements within its jurisdiction for the purchase of any Note, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of any Note. The Lender further represents that its payment for, and its continued beneficial ownership of any Note, will not violate any applicable securities or other laws of its jurisdiction. If required under Canadian securities legislation, the information provided by the Lender in Section 5.04 identifying among other things, the name, address, telephone number and email address of the Lender, the securities issued or issuable hereunder, the Loan, the Closing Date and the exemption that the Lender is relying on in connection with the issuance hereunder will be disclosed to the Canadian securities regulatory authorities, and such information is being indirectly collected by the Canadian securities regulatory authorities under the authority granted to it under Canadian securities legislation. This information is being collected for the purposes of the administration and enforcement of Canadian securities legislation. If required under Canadian securities legislation, the Lender hereby authorizes the indirect collection of such information by the Canadian securities regulatory authorities. In the event the Lender has any questions with respect to the indirect collection of such information, the Lender should contact:
Ontario Securities Commission
20 Queen Street West, 22nd Floor
Toronto, Ontario M5H 3S8
Telephone: (416) 593-8314
Toll free in Canada: 1-877-785-1555
Facsimile: (416) 593-8122
Email: exemptmarketfilings@osc.gov.on.ca
Public official contact regarding indirect collection of information:
Inquiries Officer
(j) Information from Company. The Lender and its investment managers, if any, have been afforded the opportunity to obtain any information necessary to verify the accuracy of any representations or information presented by the Company in this Agreement and have had all inquiries to the Company answered, and have been furnished all requested materials, relating to the Company and the Offering and sale of the Notes and anything set forth in the Transaction Documents. Neither the Lender nor the Lender’s investment managers, if any, have been furnished any offering literature by the Company or any of its Affiliates, associates, or agents other than the Transaction Documents, and the agreements referenced therein.
(k) Speculative Nature of Investment; Risk Factors. THE LENDER UNDERSTANDS THAT AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. The Lender acknowledges that: (i) any projections, forecasts or estimates as may have been provided to the Lender are purely speculative and cannot be relied upon to indicate actual results that may be obtained through this investment; any such projections, forecasts and estimates are based upon assumptions which are subject to change and which are beyond the control of the Company or its management, (ii) the tax effects which may be expected by this investment are not susceptible to absolute prediction, and new developments and rules of the Internal Revenue Service, audit adjustment, court decisions or legislative changes may have an adverse effect on one or more of the tax consequences of this investment, and (iii) the Lender has been advised to consult with his own advisor regarding legal matters and tax consequences involving this investment. The Lender represents that the Lender’s investment objective is speculative in that the Lender seeks the maximum total return through an investment in a broad spectrum of securities, which involves a higher degree of risk than other investment styles and therefore the Lender’s risk exposure is also speculative. The Notes offered hereby are highly speculative and involve a high degree of risk and Lender should only purchase these securities if Lender can afford to lose their entire investment.
(l) Money Laundering. The operations of the Lender are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Lender with respect to the Money Laundering Laws is pending or, to the knowledge of the Lender, threatened.
(m) Personal Information Form. Subject to the Company’s compliance with its covenant set forth in Section 3.01(kk), the Lender hereby covenants and agrees to provide a duly completed Personal
Information Form if required by the Cboe Exchange within 10 Business Days of becoming an Insider (as defined in the policies of the Cboe Exchange) of the Company.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.01 Conversion Procedures. In connection with any full or partial conversion of the Notes resulting in the issuance of Conversion Shares, or a legend removal in accordance with Section 4.02(c) below, as applicable, the following procedures shall apply:
(a)For so long as the Company shall have available one of the five (5) Grace Periods set forth in the Notes in which to make a required installment payment under any of the Notes in order to avoid an Event of Default thereunder, the Lender shall provide the Company during such Grace Periods with not less than three (3) Business Days prior notice of Lender's intent to convert all or any portion of the Notices; and
(b)within one (1) trading day following the Company’s receipt of a Conversion Notice following an Acceleration Event, the Company shall provide written instructions to its transfer agent substantially in the form of Exhibit G attached hereto (the “Transfer Agent Instructions”) to issue and deliver electronically to Depositary Trust Company by DWAC the applicable number of Conversion Shares registered in the name of the Lender, representing such number of Conversion Shares as calculated in accordance with the Conversion Price formula.
The Company acknowledges that a breach by it of its obligations under this Section 4.01 will cause irreparable harm to the Lender. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 4.01 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 4.01, that the Lender shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.
Section 4.02 Transfer Restrictions.
(a)The Notes and Conversion Shares may only be disposed of in compliance with applicable state, provincial and federal securities laws in the United States and Canada, and the policies of the Exchange. In connection with any transfer of any Note other than pursuant to an effective registration statement or Rule 144, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Note and Conversion Shares under the Securities Act. As a condition of such sale or transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of Lender under this Agreement. In the event that any transfer of any Note is pursuant to an effective registration statement or in compliance with Rule 144 or Regulation S, the transfer agent shall issue such shares to the Lender, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 4.02(c) below.
(b)The Lender agrees to the imprinting, so long as is required by this Section 4.01, of a legend on any of the Note, Conversion Shares in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION. THESE SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR PROSPECTUS REQUIREMENTS AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND CANADIAN SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS SECURITY.
(c) The Company agrees that following such time as such legend is no longer required under this Section 4.02, the Company will, no later than one (1) trading day following the delivery by the Lender to the Company of a certificate representing the Conversion Shares issued with a restrictive legend, deliver or cause to be delivered to the Lender a book entry or DWAC statement representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the transfer agent that enlarge the restrictions on transfer set forth in this Section 4.02. Conversion Shares subject to legend removal hereunder shall be transmitted by the transfer agent to the Lender by crediting the account of the Purchaser’s prime broker with the DTC or CDS, as applicable, as directed by such Purchaser.
Section 4.03 Use of Proceeds; Restrictions on Certain Payments. The Company shall use the net proceeds from the sale of the Notes hereunder only to: (a) pay the fees and expenses related to the sale of the Notes, (b) for general working capital purposes, and (c) for general corporate purposes (other than the payment of dividends or distributions). Until all obligations owed to the Lender under the Notes shall have been paid in full, except for the payment of the weekly installments under any of the Notes and the payment of trade payables in the ordinary course of the Company’s business and prior practices the Company may not use such proceeds: (i) for the satisfaction of any other portion of the Company’s Indebtedness, (ii) for the redemption of any Common Stock or Common Stock Equivalents; (iii) for the settlement of any outstanding litigation; (iv) in violation of FCPA or OFAC regulations; (v) to pay any dividends or distributions to any stockholder or other Person, or (v) to lend, give credit or make advances to any officers, directors, employees or Affiliates of the Company, including Gold Flora Acquisition Fund 1, LLC, a California limited liability company and its subsidiary entities that are not wholly owned by the Company.
Section 4.04 Material Non-Public Information. In the event and to the extent that either the Company or the Lender shall deem the Lender is possessing material non-public information, within not later than four (4) tradings after notice by either the Company or the Lender, the Company shall file a Form 8-K with the Commission disclosure such information.
Section 4.05 [Intentionally Omitted.]
Section 4.06 Integration. The Company shall not sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of any Note to the Lender in a manner that would require the registration under the Securities Act of the sale of any Note to the Lender.
Section 4.07 Publicity. The Company and the Lender shall consult with each other in issuing any other press releases and SEC Reports with respect to the transactions contemplated hereby, and neither the Company nor the Lender shall issue any such press release or SEC Report nor otherwise make
any such public statement without the prior consent of the Company with respect to any press release of the Lender, or without the prior consent of the Lender with respect to any press release or SEC Report of the Company mentioning the Lender, which consent shall not unreasonably be withheld, conditioned or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, SEC Report or communication.
Section 4.08 Indemnification of Lender. The Company shall indemnify, reimburse and hold harmless the Lender and its partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from: (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents and (ii) any action instituted against such Indemnitee in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Indemnitee, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Indemnitee’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Indemnitee may have with any such stockholder or any violations by such Indemnitee of state or federal securities laws or any conduct by such Indemnitee which results from the gross negligence or willful misconduct of the Indemnitee as determined by a final, non-appealable decision of a court of competent jurisdiction).
Section 4.09 Reservation of Conversion Shares. The Company shall within 90 days of the Closing Date, call a special meeting of its stockholders and use its commercially reasonable efforts to (a) obtain stockholder approval for an increase in authorized shares of Common Stock of the Company or a reverse stock split sufficient to allow the Company to maintain a reserve from its duly authorized shares of its Common Stock for issuance pursuant to the Notes in such amount, as shall be 200% of the Maximum Conversion Shares, as may then be required to fulfill its obligations in full under the Notes, and (b) to obtain the approvals contemplated by Section 4.10 below. In each case, the board of directors shall recommend that the stockholders vote FOR such proposals. For the avoidance of doubt, if on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock of the Company is less than 200% of the Maximum Conversion Shares on such date, then the Board of Directors of the Company shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of its Common Stock to at least the Maximum Conversion Shares at such time, as soon as possible and in any event not later than the 90th day after such date.
Section 4.10 Limitations on Conversion. No conversion of the Notes, whether in whole or in part, shall be permitted where the number of securities of the Company issuable upon such conversion (calculated on a fully diluted basis) is equal to more than 24.9% of the total number of shares of Common Stock of the Company then issued and outstanding at the time of conversion (calculated on a non-diluted basis) (the “Maximum Conversion Percentage”). If stockholder approval of any conversion in excess of the Maximum Conversion Percentage is required by the rules of any Exchange, the Company shall not later than sixty (60) day following receipt of a written request from the Lender call a special meeting of its stockholders and the board of directors shall recommend that the stockholders vote FOR such additional conversion. No conversion of the Notes, whether in whole or in part, shall be permitted unless such conversion is in compliance with the requirements of the Exchange and applicable securities laws. Any outstanding principal amount not converted into Common Stock, including by reason of this Section 4.10, shall continue to be repayable in accordance with the terms of the applicable Transaction Documents.
ARTICLE V
MISCELLANEOUS
Section 5.01 Termination. This Agreement may be terminated by the Lender by written notice to the Company if the Closing has not been consummated on or before 3rd Business Day after the date of the execution and delivery of this Agreement by both parties; provided that such termination will not affect the right of any party to sue for any breach by the other party.
Section 5.02 Fees and Expenses. The Company shall bear its own expenses incurred in connection with its negotiation, preparation, execution, delivery and performance of the Transaction Documents, including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Transaction Documents or any consents or waivers of provisions in the Transaction Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Transaction Documents. When possible, the Company must pay these fees directly, including, but not limited to, any and all wire fees, otherwise the Company must make prompt payment for reimbursement to the Lender for all fees and expenses upon written notice by the Lender or the submission of an invoice by the Lender. In addition, the Company shall pay (i) to the Lender’s counsel in respect of their fees and expenses in connection with the negotiation, preparation, execution, delivery and performance of the Transaction Documents and (ii) the origination fee of $286,000 to the Lender; and (iii) the Monitoring Fee, as specified hereinabove.
Section 5.03 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
Section 5.04 Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by or email:
if to Lender:
J.J. Astor & Co.
26 S Rio Grande Street, #2072
Salt Lake City, Utah 84101
Attn: Michael Pope
Email: Michael.p@jjastor.com
with a copy to:
Barton, LLP
711 Third Avenue
New York, NY 10017
Attn: Stephen A.. Weiss, Esq.
Email: sweiss@bartonesq.com
if to the Company:
Gold Flora Corporation
3165 Red Hill Avenue
Costa Mesa, CA 92626
Attn: Laurie Holcomb, Chief Executive Officer
Email: laurie@goldflora.com
with a copy to:
Blank Rome LLP
125 High Street
Boston, MA 02110
Attention: Frank Segall, Esq.
Email: frank.segall@blankrome.com
or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above.
Section 5.05 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented, or amended except in a written instrument signed, in the case of an amendment, by the Company and the Lender or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
Section 5.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Lender (other than by merger). The Lender may (i) assign any or all of its rights under this Agreement to any Person to whom the Lender assigns or transfers the Notes upon the prior written consent of the Company (such consent not to be unreasonably withheld, conditioned, or delayed, provided that such consent shall not be required during the continuation of any Event of Default (as defined in the Notes) or with respect to any assignment to an Affiliate of Lender), and/or (ii) participate any of such rights in connection with granting of any participation of the Notes, provided that such transfer or participation complies with all applicable federal and State Securities Laws and that any such transferee or participant agrees in writing by the provisions of the Transaction Documents that apply to the Lender.
Section 5.07 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
Section 5.08 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the federal and state courts sitting in the County of Salt Lake, Utah (the “Utah Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, Action or
Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to the Transaction Documents or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.
Section 5.09 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Note.
Section 5.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.
Section 5.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
Section 5.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever the Lender exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Lender may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
Section 5.13 Reserved.
Section 5.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Lender and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
Section 5.15 Payment Set Aside. To the extent that the Company makes a payment or payments to the Lender pursuant to any Transaction Document or the Lender enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
Section 5.16 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement; provided, that the foregoing shall not apply after the conversion of any Common Stock into Conversion Shares.
Section 5.17 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
Section 5.18 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
Section 5.19 Confidentiality. Lender agrees to use commercially reasonable efforts (equivalent to the efforts Lender applies to maintain the confidentiality of its own confidential information) to maintain as confidential all information provided to it by any Loan Party and designated as confidential, except that Lender may disclose such information on a confidential basis (a) to Persons employed or engaged by Lender in evaluating, approving, structuring or administering the Loans; (b) to any assignee or participant or potential assignee or participant that has agreed to agree to be bound by provisions substantially similar to the provisions of this Section 5.19 (and any such assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any federal or state regulatory authority or examiner, or any insurance industry association, or as reasonably believed by Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Lender’s counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Transaction Documents or in connection with any litigation to which Lender is a party; (f) to any nationally recognized rating agency that requires access to information about Lender’s investment portfolio in connection with ratings issued with respect to Lender; (g) to any Affiliate of Lender; (h) to Lender’s independent auditors and other professional advisors as to which such information has been identified as confidential; or (i) that ceases to be confidential through no fault of Lender. If any provision of any confidentiality agreement, non-disclosure agreement or other similar agreement between any Loan
Party and Lender conflicts with or contradicts this Section 5.19 with respect to the treatment of confidential information, this section shall supersede all such prior or contemporaneous agreements and understandings between the parties.
Section 5.20 Cannabis Laws. The Company and Lender acknowledge (x) that the cultivation, production, sale, manufacture, distribution, possession, and use of cannabis is illegal under Federal Cannabis Laws and other U.S. federal laws, rules, and regulations, including (without limitation) (i) the investment in a company engaging in such activities, (ii) making a loan to a Person affiliated to such activities, and (iii) entering into a transaction, contract, or other agreement with a Person affiliated with such activities, and (y) that some or all of the Transaction Documents and some or all of the transactions contemplated thereby may violate or be in violation of Federal Cannabis Laws or other U.S. federal laws, rules, or regulations concerning cannabis or the cannabis industry. Given the foregoing and notwithstanding Federal Cannabis Laws and any other U.S. federal laws, rules, and regulations, the Company and the Lender hereby (A) EXPRESSLY WAIVES any defense to the enforcement of the terms and conditions of this Agreement and any other Transaction Document based upon non-conformance with, or violation of, any Federal Cannabis Laws or any other applicable laws, rules, or regulations relating to cannabis or the cannabis industry, and (B) agrees, acknowledges, and affirms that no such non-conformance with, or violation of, any Federal Cannabis Law or any other applicable laws, rules, or regulations relating to cannabis or the cannabis industry shall render this Agreement, the other Transaction Documents, or any of the terms and conditions hereof or thereof null, void, or otherwise unenforceable, to the extent permitted by applicable laws, rules, and regulations.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed by their respective authorized signatories as of the date below.
Company:
GOLD FLORA CORPORATION
By:/s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
Lender:
J.J. ASTOR & CO.
By:/s/ Michael Pope
Name: Michael Pope
Title: Chief Executive Officer
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of August 27, 2024 is executed by Gold Flora, LLC, a California limited liability company (“Gold Flora”), Coastal MergerSub 2, LLC, a California limited liability company (“Coastal”), TPCO US Holding LLC, a Delaware limited liability company (“TPCO”), CMG Partners, Inc., a Delaware corporation (“CMG” and together with Gold Flora, Coastal, and TPCO, individually and collectively, the “Pledgor”), in favor of J.J. ASTOR & CO., a Utah corporation (and together with its successors and assigns, the “Lender”), as administrative, payment and collateral agent for itself, as Lender.
W I T N E S S E T H:
WHEREAS, Pledgor owns 100% of the equity securities in the limited liability companies and corporations more particularly described on Schedule I attached hereto;
WHEREAS, Gold Flora Corporation, in its capacity as borrower (the “Borrower”), and Lender have entered into that certain Loan Agreement, dated as of the date hereof, pursuant to which the Lender will make certain Loans to the Borrower (as amended, modified, amended or restated, supplemented, or otherwise modified from time to time the “Loan Agreement”); and
NOW, THEREFORE, in consideration of the agreements made by the Lender for the benefit of Borrower in the Loan Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. When used herein, capitalized terms which are not otherwise defined have the meanings assigned thereto in the Loan Agreement or (as applicable) the Notes.
2. Effectiveness of Agreement. Notwithstanding anything to the contrary express or implied contained in this Agreement, it is expressly understood and agreed by the Pledgor and the Lender that this Agreement shall only be deemed to be effective and constitute a Lien and security interest in the equity of the Subsidiary Guarantors if the Lender elects to accelerate the Loans for payment after the occurrence and during the continuation of an Event of Default (as defined in the Notes) beyond the applicable grace period for cure as set forth in the Notes. The Pledgor has executed this Agreement which is being held in escrow by counsel to the Lender as escrow agent pursuant to the escrow agreement annexed hereto as Exhibit A (the “Escrow Agreement”); it being understood that this Agreement shall not be deemed effective or delivered unless and until the Lender shall provide the Pledgor with three (3) business days prior written notice that Lender has elected to accelerate the Loans for payment after the occurrence and during the continuation of an Event of Default (as defined in the Notes) beyond the applicable grace period for cure (an “Acceleration Event”) and intends to deliver a Written Direction (as defined in the Escrow Agreement) to the escrow agent directing the Escrow Agent to release the Escrow Property (as defined in the Escrow Agreement) to Lender.
3. Pledge. As security for the payment and performance of all of the Borrower’s obligations under the Loan Agreement or any other Transaction Document and Pledgor’s obligations hereunder (the “Obligations”), Pledgor hereby pledges and grants to Lender, for the benefit of itself, a continuing first priority security interest in, all of the following, whether now existing or hereafter owned, existing or arising (the “Subject Collateral”):
(a) All capital stock and membership equity interests, as applicable, in the specific Subsidiary Guarantors of the Pledgor who are listed across from such Pledgor’s name and set forth on Schedule I hereto (the “Pledged Subsidiaries”) and, in addition to such capital stock and membership equity interests, as applicable, any investment property and general intangibles evidenced by or relating to such capital stock and membership equity interests, as applicable (collectively, the “Subject Securities”), and all other property hereafter delivered to the Lender in substitution for or in addition to any of the foregoing;
(b) all documents, certificates and/or instruments representing any of the foregoing, if any, and all cash, securities, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing, except for any distributions with respect to the Subject Securities that would be permitted under the Loan Agreement and other Transactions Documents; and
(c) all products and proceeds of all of the foregoing.
Pledgor agrees to cause all Pledged Subsidiaries (x) not to elect to treat its equity interests as securities as contemplated by the definition of "security" in Sections 8-102(15) and 8-103 of Article 8 of the Uniform Commercial Code and (y) not to certificate its Subject Securities, provided, that if, notwithstanding the provisions of this Agreement, any or all of the Subject Securities are evidenced by a certificate, Pledgor agrees to promptly deliver to Lender, for the benefit of itself, any and all certificates evidencing the Subject Securities; and prior to the delivery thereof to Lender, such Subject Securities shall be held by Pledgor pursuant to the Escrow Agreement separate and apart from its other property and in express trust for Lender. Subject to Section 5 hereof, Pledgor hereby agrees to promptly deliver to Lender, for the benefit of itself, any other Subject Collateral which may at any time or from time to time come into the possession or control of Pledgor; provided, that prior to the delivery thereof to Lender, such Subject Collateral shall be held by Pledgor separate and apart from its other property and in express trust for Lender. For purposes of this Agreement, unless and until an Acceleration Event has occurred, “deliveries” to the Lender shall mean deliveries to the escrow agent under the Escrow Agreement.
If an Acceleration Event shall occur, Pledgor further agrees to obtain the written acknowledgment of any custodian of the Subject Collateral that (i) all rights of Pledgor in the Subject Collateral are subject to security interest created hereunder, (ii) such custodian is authorized and instructed to comply with any instruction of Lender with respect to disposition or transfer of the Subject Collateral, including any instruction to cease accepting instructions from Pledgor, and (iii) in the event of a conflict between instructions given by Lender and instructions given by Pledgor, Lender’s instructions shall control. It is Pledgor’s intent that, if Acceleration Event shall occur, by virtue of this Agreement and such acknowledgments, Lender is granted “control” within the meaning of Sections 9-104 and 9-106 of the Uniform Commercial Code as in effect in the State of California (the “UCC”) with respect to the Subject Collateral and any deposit account to which the Subject Collateral is credited. Pledgor hereby agrees that it will not grant “control” (within the meaning of such sections of the UCC) to any Person other than Lender with respect to the Subject Collateral or any deposit account to which the Subject Collateral is credited.
4. Warranties; Further Assurances. Pledgor warrants to Lender that: (a) Pledgor is (or at the time of any future delivery, pledge, assignment or transfer thereof will be) the legal and equitable owner of the Subject Collateral owned by it free and clear of all liens, security interests and encumbrances of every description whatsoever other than the security interest created hereunder; and (b) the pledge and delivery of the Subject Collateral owned by it pursuant to this Agreement will create a valid first priority, perfected security interest in the Subject Collateral in favor of the Lender.
So long as any of the Obligations shall be outstanding, Pledgor (i) shall not, without the express prior written consent of Lender, sell, assign, exchange, pledge or otherwise transfer, encumber, or grant any option, warrant or other right to purchase any Subject Securities pledged hereunder, or otherwise diminish or impair any of its rights in, to or under any of the Subject Collateral; (ii) hereby consents to the filing of such Uniform Commercial Code financing statements and other documents (and to pay the costs of filing and recording or re-filing and rerecording the same in all public offices reasonably deemed necessary or appropriate by Lender) and do such other acts and things, all as Lender may from time to time reasonably request, to establish and maintain a valid, first priority perfected security interest in the Subject Collateral (free of all other liens, claims and rights of third parties whatsoever) to secure the performance and payment of the Obligations; (iii) will execute and deliver to Lender such allonges, endorsements and similar documents relating to the Subject Collateral, reasonably satisfactory in form and substance to Lender, as Lender may reasonably request; and (iv) will furnish Lender such information concerning the Subject Collateral as Lender may from time to time reasonably request, and will permit Lender or any designee of Lender, from time to time upon reasonable notice and during normal business hours to inspect, audit and make copies of and extracts from all records and all other papers in the possession of Pledgor which pertain to the Subject Collateral, and will, upon request of Lender at any time after the occurrence of an Acceleration Event, deliver to Lender all of such records and papers.
5. Holding in Name of Lender, etc. Lender may from time to time after the occurrence of an Acceleration Event, without notice to Pledgor, take all or any of the following actions: (a) transfer all or any part of the Subject Collateral into the name of Lender or any nominee or sub-agent for Lender, with or without disclosing that such Subject Collateral is subject to the lien, pledge and security interest hereunder, (b) appoint one or more sub-agents or nominees for the purpose of retaining physical possession of the Subject Collateral, (c) notify the parties obligated on any of the Subject Collateral to make payment directly to Lender of any amounts due or to become due thereunder, (d) endorse any checks, drafts or other writings in the name of Pledgor to allow collection of the Subject Collateral, (e) enforce collection of any of the Subject Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and (f) take control of any proceeds of the Subject Collateral.
6. Voting Rights, Dividends, etc. Notwithstanding any other provisions contained in this Agreement, so long as the Obligations shall be outstanding, and so long as Lender has not given the notice referred to in clause (c) below:
(a) Pledgor shall be entitled to exercise any and all voting or consensual rights and powers and purchase or subscription rights (provided that any exercise by Pledgor of such purchase or subscription rights may be made only from funds of Pledgor not comprising the
Subject Collateral) relating or pertaining to the Subject Collateral or any part thereof for any purpose; provided, further, that Pledgor agrees that it will not exercise any such rights or powers in any manner which would have a Material Adverse Effect on the value of the Subject Collateral or any part thereof or any other material adverse effect in relation to the Subject Collateral or the Obligations;
(b) Pledgor shall be entitled to receive and retain any and all dividends, interest or other cash distributions payable on or in respect of the Subject Collateral if such dividends, interest or other distributions are permitted by the Loan Documents, but all dividends, interest and distributions in respect of the Subject Collateral or any part thereof made in Subject Securities, whether resulting from a subdivision, combination or reclassification of Subject Collateral or any part thereof or received in exchange for Subject Collateral or any part thereof or as a result of any merger, consolidation, acquisition or other exchange of assets to which any Person who issues a Subject Security may be a party or otherwise or as a result of any exercise of any purchase or subscription rights, shall be and become part of the Subject Collateral hereunder and, if evidenced by a certificate and received by Pledgor, shall be forthwith delivered to Lender in due form for transfer (i.e., endorsed in blank or accompanied by stock or bond powers executed in blank) to be held for the purposes of this Agreement; and
(c) Upon prior written notice delivered to Pledgor from Lender after the occurrence of an Acceleration Event, all rights and powers which Pledgor is entitled to exercise pursuant to this Section 5, and all rights of Pledgor to receive and retain dividends pursuant to clause (b) hereof, shall forthwith cease, and all such rights and powers shall thereupon become vested in Lender which shall have, following an Acceleration Event, the sole and exclusive authority to exercise such rights and powers and to receive such dividends, interest or other distributions. Any and all money and other property paid over to or received by Lender pursuant to this clause (c) shall be retained by Lender as additional Subject Collateral hereunder and applied in accordance with the provisions hereof.
7. Remedies. After the occurrence of an Acceleration Event, Lender may exercise from time to time any rights and remedies available to it under the UCC as in effect in the State of California or of any other jurisdiction whose laws may govern or otherwise available to it under the Transaction Documents. Without limiting the foregoing, after the occurrence of an Acceleration Event, Lender, to the extent necessary to satisfy the Obligations, (a) may, to the fullest extent permitted by applicable law, without notice, advertisement, hearing or process of law of any kind (except a notice specified below of time and place of public or private sale), (i) sell any or all of the Subject Collateral, free of all rights and claims of Pledgor therein and thereto, at any public or private sale and (ii) bid for and purchase any or all of the Subject Collateral at any such public sale and (b) shall have the right, for and in the name, place and stead of Pledgor, to execute endorsements, assignments and other instruments of conveyance or transfer with respect to all or any of the Subject Collateral. Pledgor hereby expressly waives, to the fullest extent permitted by applicable law, any and all notices, advertisements, hearings or process of law in connection with the exercise by Lender of any of its rights and remedies after the occurrence of an Acceleration Event. In the event of a private sale, Lender agrees to provide the applicable Pledgor with no less than ten (10) days prior written notice thereof and permit such Pledgor to participate in the sale of the applicable Subject Collateral. Pledgor agrees that, to the extent notification of sale shall be required by applicable law, at least ten (10) days notification by mail to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically such notification shall
constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the UCC. Any proceeds of any of the Subject Collateral may be applied by Lender to the payment of reasonable expenses in connection with the Subject Collateral, including, without limitation, reasonable attorneys’ fees and legal expenses, and any balance of such proceeds may be applied by Lender toward the payment of the Obligations, and in such order of application, as Lender may from time to time elect (and, after payment in full of all Obligations, any excess shall be delivered to Pledgor or as a court of competent jurisdiction shall direct).
Lender is hereby authorized to comply with any limitation or restriction in connection with any sale of Subject Collateral as it may be advised by counsel is necessary in order to (a) avoid any violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders or purchasers and/or further restrict such prospective bidders or purchasers to persons or entities who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of the Subject Collateral) or (b) obtain any required approval of the sale or of the purchase by any governmental authority, and Pledgor agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner and that Lender shall not be liable or accountable to Pledgor for any discount allowed by reason of the fact that such Subject Collateral is sold in compliance with any such limitation or restriction. Pledgor waives any right it may now or hereafter have to require Lender to marshal any of the collateral from time to time securing the Obligations.
Section 5(c) of the Notes is incorporated herein by reference, mutatis mutandis.
8. Waiver of Transfer Restrictions. Pledgor hereby consent to the terms and conditions contained in this Agreement and the transactions contemplated hereby, notwithstanding any limitations or restrictions on such transactions set forth in the governing documents of Pledgor or otherwise with respect to the pledge or transfer of any of the Subject Collateral. Without limiting the foregoing, Pledgor agrees that any rights of first refusal, options to purchase or other conditions or restrictions affecting the transfer of any of the Subject Collateral shall not be triggered by, or otherwise in any respect be applicable to, the execution and delivery of this Agreement or the exercise of Lender’s rights and remedies under this Agreement, as amended, restated, supplemented or otherwise modified from time to time, and upon Lender’s exercise of its rights and remedies under this Agreement (as amended, restated, supplemented or otherwise modified from time to time) after the occurrence of an Acceleration Event in accordance with the terms hereof, Lender, a purchaser at a foreclosure sale of the Subject Collateral or any such party’s designee shall be immediately and automatically admitted as an owner of such Pledged Subsidiaries with all ownership rights accruing to it (including, without limitation, all rights to distributions and voting) without the need to obtain the consent of any owner or such Pledged Subsidiaries or to provide or comply with a right of first refusal or option to purchase with respect to any of the Subject Collateral in favor of any owner, any Pledged Subsidiaries or any other Person, notwithstanding anything in the governing documents of any Pledged Subsidiaries, any agreement to which the Pledgor is now or hereafter a party with respect to any of the Subject Collateral or otherwise to the contrary or in conflict thereof.
9. Representations and Warranties of Pledgor. To induce Lender to enter into the Transaction Documents and extend credit to the Borrower, the Pledgor represents and warrants to Lender as follows:
(a) Benefit. Pledgor is the sole equity holder of the equity interests set forth opposite its name and described on Schedule I hereto, and has received, or will receive, direct benefit from the making of this Agreement with respect to the Obligations.
(b) Familiarity and Reliance. Pledgor is familiar with, and has independently reviewed the books and records regarding, the financial condition of the Pledged Subsidiaries and is familiar with the value of any and all Subject Collateral intended to be created as security for the payment of the Obligations; provided, however, that Pledgor is not relying on such financial condition or the collateral as an inducement to enter into this Agreement.
(c) No Representation By Lender. Neither Lender nor any other party has made any representation, warranty or statement to Pledgor in order to induce Pledgor to execute this Agreement.
(d) Due Execution and Authorization.
(1) Pledgor is a corporation or limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of its state of formation.
(2) The execution, delivery and performance by Pledgor of the Transaction Documents to which it is a party, and the consummation by Pledgor of the transactions contemplated thereby, (i) have been duly authorized by all requisite action of Pledgor and have been duly executed and delivered by Pledgor; (ii) do not violate any provisions of (A) any applicable law other than potential violations of Federal Cannabis Laws, (B) any order of any governmental authority binding on Pledgor or any of its properties, (C) the bylaws (or any other equivalent governing agreement or document) of Pledgor, (D) the organizational documents of any of the Pledged Subsidiaries, or (E) any agreement between Pledgor and its equity owners or among any such equity owners or any Pledged Subsidiaries; (iii) are not in conflict with, and do not result in a breach or default of or constitute an event of default, or an event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, any indenture or other material agreement to which Pledgor is a party, or by which the properties or assets of Pledgor are bound, the effect of which could reasonably be expected to be, have or result in a Material Adverse Effect; (iv) except as set forth herein or therein, will not result in the creation or imposition of any Lien of any nature upon any of the properties or assets of Pledgor, and (v) except for filings in connection with the perfection of Lender’s Liens, do not require the consent, approval or authorization of, or filing, registration or qualification with, any governmental authority or any other Person that has not been obtained, except where the failure to so obtain could not reasonably be expected to be, have or result in a Material Adverse Effect.
(3) This Agreement is a legal and binding obligation of Pledgor and is enforceable in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable laws.
(4) Pledgor has all requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Transaction
Documents, and is duly qualified to do business in all of the jurisdictions in which failure to so qualify could reasonably be likely to have or result in a Material Adverse Effect. Pledgor has all requisite power and authority to execute, deliver and perform the Transaction Documents to which it is a party and to consummate the transactions contemplated under the Transaction Documents to which it is a party.
(5) Pledgor is not an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor controlled by such an “investment company.”
(f) [Reserved].
(g) Litigation. There is no pending or, to the knowledge of Pledgor, threatened in writing action, suit, proceeding or investigation involving Pledgor or its business that could reasonably be expected to prevent or materially delay the consummation by Pledgor of the transactions contemplated herein or in the other Transaction Documents. Except as set forth on Schedule 9(g) hereto, (i) Pledgor is not a party or subject to any order, writ, injunction, judgment or decree of any governmental authority, and (ii) Pledgor does not have any existing accrued and/or unpaid indebtedness to any governmental authority or any other governmental payor beyond the delinquency date therefor for which the failure to pay could reasonably be expected to result in the imposition of a Lien on the Subject Collateral.
(i) Compliance with Law. Pledgor (a) is in compliance with all applicable laws other than potential violations of Federal Cannabis Laws, and (b) is not in violation of any order of any Governmental Authority or other board or tribunal, except, in the case of both clauses (a) and (b), where noncompliance or violation could not reasonably be expected to be, have or result in a Material Adverse Effect. Pledgor has not received any notice that Pledgor is not in material compliance in any respect with any of the requirements of any of the foregoing. Pledgor has not established or maintains or contributes to any “benefit plan” that is covered by Title IV of ERISA.
(j) Licenses and Permits; Labor. Pledgor is in compliance with and has all permits necessary or required by applicable law or any governmental authority for the operation of its business as presently conducted and as proposed to be conducted except where noncompliance, violation or lack thereof could not reasonably be expected to have or result in a Material Adverse Effect. All permits necessary or required by applicable law or governmental authority for the operation of Pledgor’s businesses are in full force and effect and not in known conflict with the rights of others, except where such conflict or lack of being in full force and effect could not reasonably be expected to have or result in a Material Adverse Effect. Pledgor has not been involved in any labor dispute, strike, walkout or union organization which could reasonably be expected to have or result in a Material Adverse Effect.
(k) Anti-Terrorism; OFAC.
(1) Neither Pledgor nor any Person controlling or controlled by Pledgor, nor, to its knowledge, any Person having a beneficial interest in Pledgor, nor any Person for whom Pledgor is acting as agent or nominee in connection with this transaction (“Transaction Persons”) (1) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (2) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of Section 2 of such executive order, or (3) is a Person on the list of specially designated nationals and blocked persons or is in violation of the limitations or prohibitions under any other OFAC regulation or executive order.
(2) To the knowledge of Pledgor, no part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
10. Attorney in Fact. If an Acceleration Event shall occur, Pledgor hereby irrevocably appoints Lender as its limited attorney in-fact in accordance with the powers granted in connection with this Agreement (without requiring Lender to act as such), with full power of substitution, which appointment as limited attorney-in-fact is irrevocable after the occurrence of an Acceleration Event, to take any action Lender deems necessary to perfect, protect and realize upon its Lien and first priority security interest in the Subject Collateral, including the execution and delivery of any and all documents or instruments related to the Subject Collateral in Pledgor’s name, or otherwise to effect fully the purpose, terms and conditions of this Agreement and the other Transaction Documents, and said appointment shall create in Lender a power coupled with an interest.
11. General.
(a) Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Subject Collateral if it takes such action for that purpose as Pledgor shall request in writing, but failure of Lender to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and no failure of Lender to preserve or protect any rights with respect to the Subject Collateral against prior parties, or to do any act with respect to preservation of the Subject Collateral not so requested by Pledgor, shall be deemed a failure to exercise reasonable care in the custody or preservation of any Subject Collateral.
(b) No delay on the part of Lender in exercising any right, power or remedy shall operate as a waiver thereof, and no single or partial exercise of any such right, power or remedy shall preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement shall be effective unless the same shall be in writing and signed and delivered by Lender and Pledgor, and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(c) All obligations of Pledgor and all rights, powers and remedies of Lender expressed herein are in addition to all other rights, powers and remedies possessed by them, including, without limitation, those provided by applicable law or in any other written instrument or agreement relating to any of the Obligations or any security therefor.
(d) Upon notice to Pledgor and otherwise in accordance with Section 5.06 of the Loan Agreement, Lender may assign, without Pledgor’s consent, its interests in this Agreement and the
other Transaction Documents to any other Person, including, without limitation, any of Lender’s Affiliates.
(e) This Agreement shall be binding upon Pledgor and Lender and their respective successors and assigns, and shall inure to the benefit of Pledgor and Lender and the successors and assigns of Lender.
(f) This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, and each such counterpart shall be deemed an original but all such counterparts shall together constitute but one and the same Agreement.
12. Governing Law; Jurisdiction; Service of Process; Venue.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW PROVISIONS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.
(b) BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN THE COUNTY OF SALT LAKE, UTAH , AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH UTAH STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL 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 SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST PLEDGOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN CLAUSE (B) OF THIS SECTION 12. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
12. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY
ANY RIGHT, POWER, REMEDY OR DEFENSE ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY; AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. PLEDGOR FURTHER WAIVES ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER, INCLUDING LENDER’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. PLEDGOR ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDERS’ ACCEPTANCE OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, AS APPLICABLE.
13. Termination; Release of Pledged Interests. When all the Obligations have been paid in full, the security interests created by this Agreement shall be automatically terminated and released without any further action by Lender or any other Person, and then this Agreement shall terminate and have no further force or effect. In connection with such termination, the Lender shall execute and deliver to Pledgor, at such Pledgor’s expense, all documents that Pledgor shall reasonably request to evidence such termination. In addition, upon payment in full of the Obligations, (i) all Subject Securities held in the possession of Lender shall be returned to Pledgor upon such termination, and (ii) to the extent any Subject Securities are held by the escrow agent under the Escrow Agreement, the Lender shall execute and deliver a Written Direction (as defined in the Escrow Agreement) to Escrow Agent directing the escrow agent to return the Subject Securities to the Borrower.
14. Modification. This Agreement shall not be modified, supplemented, or terminated, nor any provision hereof waived, except by a written instrument signed by the party against whom enforcement thereof is sought, and then only to the extent expressly set forth in such writing.
15. Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals, and each duplicate original shall be deemed to be an original. This Agreement (and each duplicate original) also may be executed in any number of counterparts, each of which shall be deemed an original and all of which together constitute a fully executed Agreement even though all signatures do not appear on the same document. Receipt of an executed signature page to this Agreement by facsimile, portable document format (.pdf) attachment to an email or other electronic transmission shall constitute effective delivery thereof.
16. Recitals. The recital and introductory paragraphs hereof are a part hereof, and form a basis for this Agreement and shall be considered prima facie evidence of the facts and documents referred to therein.
[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the day and year first written above.
BORROWER: PLEDGOR:
GOLD FLORA CORPORATION GOLD FLORA, LLC
By:/s/ Laurie Holcomb By: /s/ Laurie Holcomb
Name: Laurie Holcomb Name: Laurie Holcomb
Title: Chief Executive Officer Title: Manager
COASTAL MERGERSUB 2, LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
CALIVA CAREWH1, LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
CMG PARTNERS, INC.
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
LENDER:
J.J. ASTOR & CO.
By: /s/ Michael Pope
Name: Michael Pope
Title: Chief Executive Officer
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of the foregoing Pledge Agreement, agrees to the terms of, and agrees to be bound by, the Pledge Agreement and to promptly note on its books and records the security interests granted under such Pledge Agreement, and waives any rights or requirement at any time hereafter to receive a copy of such Pledge Agreement in connection with the registration of any of the Subject Collateral in the name of Lender or its nominee or the exercise of voting rights by Lender, and, after written notice from Lender that an Acceleration Event has occurred, each agrees, that in acting upon the instructions of Lender, it will not require the further consent of, or seek further instruction from, Pledgor at any time. The undersigned will not permit Pledgor or any other person to opt into Article 8 of the applicable Uniform Commercial Code with respect to its subject securities without the express, prior written consent of Lender.
Acknowledged and Agreed:
GOLD FLORA PARTNERS COSTA MESA LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
GOLD FLORA PARTNERS, LLC
d/b/a KING’S CREW
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
GOLD FLORA PARTNERS CORONA, LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
COASTAL DISPENSARY LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
COASTAL RETAIL LOMPOC LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
COASTAL RETAIL CONCORD LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
SOUTHERN CALIFORNIA COLLECTIVE
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
VARDA INC.
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
RELEAF ALTERNATIVE INC.
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
CALMA WEHO, LLC
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Manager
NC3 SYSTEMS
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
NC6 SYSTEMS, INC.
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
CALIVA CAMISJ2, INC.
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
SCHEDULE I
SUBJECT SECURITIES
| | | | | | | | | | | | | | | | | |
Name of Pledged Entity | Pledgor | Class | Stock/Units | Certificate Number | Percentage of Ownership |
Gold Flora Partners Costa Mesa LLC | Gold Flora, LLC | Membership Interests | Membership Interests | n/a | 100% |
Gold Flora Partners, LLC dba King’s Crew | Gold Flora, LLC | Membership Interests | Membership Interests | n/a | 100% |
Gold Flora Partners Corona, LLC | Gold Flora, LLC | Membership Interests | Membership Interests | n/a | 100% |
Coastal Dispensary LLC | Coastal MergerSub 2, LLC | Membership Interests | Membership Interests | n/a | 100% |
Coastal Retail LOMPOC LLC | Coastal MergerSub 2, LLC | Membership Interests | Membership Interests | n/a | 100% |
Coastal Retail Concord LLC | Coastal MergerSub 2, LLC | Membership Interests | Membership Interests | n/a | 100% |
Southern California Collective | Coastal MergerSub 2, LLC | Common shares | Common shares | n/a | 100% |
Varda Inc. | Coastal MergerSub 2, LLC | Common shares | Common shares | n/a | 100% |
Releaf Alternative Inc. | Coastal MergerSub 2, LLC | Common shares | Common shares | n/a | 100% |
Calma WEHO, LLC | Caliva CareWH1, LLC | Units | Units | n/a | 100% |
NC3 Systems | CMG Partners, Inc. | Common shares | Common shares | n/a | 100% |
| | | | | | | | | | | | | | | | | |
NC6 Systems, Inc. | CMG Partners, Inc. | Common shares | Common shares | n/a | 100% |
Caliva CAMISJ2, Inc. | CMG Partners, Inc. | Common shares | Common shares | n/a | 100% |
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of August 27, 2024 (the “Agreement Date”) by and between Gold Flora Corporation, a Delaware corporation (the “Company”), and J.J. Astor & Co., a Utah corporation (“Investor”).
This Agreement is made pursuant to the Loan Agreement, dated as of the date hereof, between the Company and the Investor (the “Loan Agreement”).
The Company and each Investor hereby agrees as follows:
1.Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the Loan Agreement shall have the meanings given such terms in the Loan Agreement. As used in this Agreement, the following terms shall have the following meanings:
“Agreement Date” means August 27, 2024.
“Allowable Grace Period” shall have the meaning set forth in Section 3(n).
“Cboe Exchange” means the Cboe Canada Inc.
“Commission Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Common Stock” means the common stock, par value $0.001 per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed.
“Conversion Price” shall mean 90% of the average of the four (4) lowest volume weighted average closing prices of the Common Stock on the Exchange over the twenty (20) trading days immediately prior to each permitted conversion of the Notes (the “Conversion Price Formula”); provided, however, that (a) in the event that after the date hereof and prior to any conversion of any Note, the Company issues any securities, including convertible notes or debentures, Common Stock or Common Stock Equivalents at a conversion price, exercise price or per share price that is less such Conversion Price Formula, the Conversion Price shall be reduced to the lowest conversion price, exercise price or per share price issued by the Company; and (b) for so long as the Common Stock is listed for trading on the Cboe Exchange, the Conversion Price shall not be less than the greater of (x) the Discounted Market Price, and (y) $0.10.
“Conversion Shares”shall have the same meaning as that term is defined in the Loan Agreement and shall include the “true up” shares referred to in such definition. The
number of Conversion Shares shall be calculated as follows up to the Maximum Conversion Shares (as defined in the Loan Agreement):
(a) the aggregate principal amount of all then outstanding Notes shall increase to 110% of such aggregate outstanding Principal Amount (the “Increased Note Balances”),
(b) the number of shares Common Stock of the Company constituting Registrable Securities to be registered for resale under this Agreement shall be in an amount equal in value to 200% of the Increased Note Balances, and
(c) such Registrable Securities shall convert into Common Stock of the Company at the Conversion Price.
“Discounted Market Price” means the closing market price of the Common Stock on the Cboe Exchange on the trading day preceding the date that a conversion is announced or a price reservation form is filed with the Cboe Exchange, less a discount of 10%.
“Effectiveness Date” means, with respect to the Initial Registration Statement, the 90th calendar day following the Agreement Date (or, in the event of a “review” by the Commission, the 120th calendar day following the Agreement Date and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 60th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “review” by the Commission, the 90th calendar day following the date such additional Registration Statement is required to be filed hereunder); provided, however, that in the event the Company is notified by the Commission that the one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to the Registration Statement shall be the fifth (5th) calendar day following the Filing Date, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the first Trading Day following such fifth calandar day.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Event” shall have the meaning set forth in Section 2(d).
“Event Date” shall have the meaning set forth in Section 2(d).
“Exchange” means the CboeExchange; provided, however, if the Common Stock is listed or trades on (a) any recognized United States or Canadian securities exchange, including the Toronto Stock Exchange, the Nasdaq Capital Market or the NYSE:American Exchange, or (b) the OTCQX Market or over-the-counter pink sheets, the term “Exchange” shall also include any one of the foregoing as well as the Cboe Exchange .
“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 60th calendar day following the Agreement Date, and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the no later than the 15th calendar after the need for such additional Registration Statement arises or, if later, the earliest practical date on which the Company is permitted by Commission Guidance to file such additional Registration Statement related to the Registrable Securities.
“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement which shall mean and include an amendment to any Resale Shelf Registration Statement contemplated by Section 2 of this Agreement that is effective on the Filing Date and on file with the Commission in order to include the Registrable Securities in such Resale Shelf Registration.
“Losses” shall have the meaning set forth in Section 5(a).
“Notes” shall have the meaning set forth in the Loan Agreement.
“Plan of Distribution” shall have the meaning set forth in Section 2(a).
“Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“Registrable Securities” means, as of any date of determination, (a) 100% of the Conversion Shares (as calculated in accordance with it definition set forth herein and in the Loan Agreement, inclusive of the True Up Shares calculated based on the Conversion Price Formula) issuable upon the full conversion of the unpaid amount of the Notes at the applicable Conversion Price as of the date of determination, and (c) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration
Statement hereunder with respect thereto) for so long as (i) the Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (ii) such Registrable Securities have been previously sold in accordance with Rule 144, or (iii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.
“Registration Statement” means the Initial Registration Statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any the Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any the Registration Statement.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).
“Commission Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.
2.Resale Shelf Registration.
(a)On or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the provisions of Section 2(e)) and shall contain (unless otherwise directed by at least 85% in interest of the Holders) substantially the “Plan of Distribution” attached hereto as Annex A and substantially the “Selling Stockholder” section attached hereto as Annex B; provided, however, that no Holder shall be required to be named as an “underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use its reasonable best efforts to cause any Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date, and shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall promptly notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Failure to so notify the Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section 2(d).
(b)Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the operation of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or on such other form available to register for resale the Registrable Securities as a secondary offering; with respect
to filing on Form S-3 or on such other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the Commission Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.
Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any Commission Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced by reducing or eliminating any securities to be included other than Registrable Securities. In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or Commission Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or on such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.
(c)If: (i) a Registration Statement is not filed on or prior to the Filing Date, or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of the Registration Statement within fifteen (15) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for the Registration Statement to be declared effective (unless such comments include a request for additional information concerning a Holder whose shares are registered for resale in the Registration Statement
and the Holder fails to supply information in response to such comments(s) in sufficient time to enable the Company to respond within the prescribed time frame), or (iv) the Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Registration Statement, (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, subject to any Allowable Grace Period; or (vi) if the Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirement under Rule 144(c), or (y) the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) as a result of which any of the Investors are unable to sell Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions) (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i), (iv) and (vi), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such fifteen (15) calendar day period is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the aggregate Conversion Amount (as defined in the Notes) of the such Holder’s Notes. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 12% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.
(d)If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as the Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.
(e)Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as any Underwriter without the prior written consent of such Holder.
3.Registration Procedures.
In connection with the Company’s registration obligations hereunder, the Company shall:
(a)Not less than three (3) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than two (2) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex C (a “Selling Stockholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the second (2nd) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.
(b)(i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.
(c)If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of common stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.
(d)Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of clause (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a
Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.
(e)Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
(f)Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
(g)Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving of any notice pursuant to Section 3(d).
(h)Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or “Blue Sky” laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.
(i)If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.
(j)Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be
entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.
(k)Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.
(l)The Company shall maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.
(m)The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of common stock of the Company beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.
(n)Notwithstanding anything to the contrary contained herein (but subject to the last sentence of this Section 3(n)), at any time after the Effective Date of a particular Registration Statement, the Company may, upon written notice to the Holder’s, suspend the Holders’ use of any prospectus that is a part of any Registration Statement (in which event the Holders shall discontinue sales of the Registrable Securities pursuant to such Registration Statement contemplated by this Agreement, but shall settle any previously made sales of Registrable Securities) if the Company (x) is pursuing an acquisition, merger, tender offer, reorganization, disposition
or other similar transaction and the Company determines in good faith that (A) the Company’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in such Registration Statement or other registration statement or (B) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause any Registration Statement (or such filings) to be used by Holder or to promptly amend or supplement any Registration Statement contemplated by this Agreement on a post effective basis, as applicable, or (y) has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Company, would materially adversely affect the Company (each, an “Allowable Grace Period”); provided, however, that in no event shall the Holders be suspended from selling Registrable Securities pursuant to any Registration Statement for a period that exceeds ten (10) consecutive Trading Days or an aggregate of thirty (30) Trading Days in any 365-day period; and provided, further, the Company shall not effect any such suspension during the first ten (10) consecutive Trading Days after the Effective Date of the particular Registration Statement. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice, but in any event within one Business Day of such disclosure or termination, to the Holders and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement. Notwithstanding anything to the contrary contained in this Section 3(n), the Company shall cause its transfer agent to deliver shares of common stock free of restrictive legends to a transferee of a Holder in connection with any sale of Registrable Securities with respect to which such Holder has entered into a contract for sale, and delivered a copy of the Prospectus included as part of the particular Registration Statement to the extent applicable, in each case prior to such Holder’s receipt of the notice of an Allowable Grace Period and for which the Holder has not yet settled.
4.Registration Expenses.
All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Eligible Market on which shares of common stock of the Company are then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws
reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.
5.Indemnification.
(a)Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of shares of common stock of the Company), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities
law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)–(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of notice of an Allowable Grace Period. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(f).
(b)Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in a Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing
by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in a Registration Statement giving rise to such indemnification obligation.
(c)Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
(d)Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately
preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
6.Miscellaneous.
(a)Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(b)No Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statements other than the Registrable Securities. The Company shall not file any other registration statements until all Registrable Securities are registered pursuant to the Registration Statement that is declared effective by the CommissionCommission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement.
(c)Piggy-Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration tatement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(c) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement that is available for resales or other dispositions by such Holder.
(d)Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 50.1% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security), provided that, if any amendment, modification or waiver disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group of Holders) shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(d). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.
(e)Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.
(f)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.6 of the Purchase Agreement.
(g)No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.
(h)Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a PDF format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or PDF signature page were an original thereof.
(i)Reserved.
(j)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the applicable provisions of the Purchase Agreement.
(k)Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(l)Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(m)Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.
(n)Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.
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[Signature pages follow.]
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
GOLD FLORA CORPORATION
By: /s/ Laurie Holcomb
Name: Laurie Holcomb
Title: Chief Executive Officer
[Signature page of Holders follows.]
[Signature page of Holders to GOLD FLORA CORP RRA]
Name of Holder: J.J. Astor & Co.
Signature of Authorized Signatory of Holder: /s/ Michael Pope
Name of Authorized Signatory: Michael Pope
Title of Authorized Signatory: Chief Executive Officer
Gold Flora Closes $7.15M Initial Draw of
$13.15 Million Senior Loan Facility
Strengthens Balance Sheet with Capital to Support Expanding California Brand Presence
Costa Mesa, CA – August 28, 2024 - Gold Flora Corporation, ("Gold Flora" or the "Company") (Cboe Canada:GRAM) a leading vertically-integrated California cannabis company, today announced the closing of a Senior Loan Facility (the “Loan Facility”) with J.J. Astor & Co. (“JJ Astor” or “Lender”) for up to $13.15 million, with an initial draw (“Initial Draw”) of $7.15 million and the potential for up to three additional $2.0 million draws (“Additional Draws”). The proceeds of the Loan Facility will be used primarily for working capital and other corporate purposes.
“We are pleased to have successfully completed this financing to strengthen our balance sheet as we rapidly grow our CPG brand presence and enhance our premier indoor cultivation footprint to meet the rising demand for our products,” said Laurie Holcomb, Chief Executive Officer of Gold Flora. “This capital infusion will enable us to continue to expand our position as a leading consumer cannabis company in California as we work toward achieving our goal of positive cash flow generation and profitability.”
The Loan Facility allows potential gross proceeds of approximately $12.6 million, provided that each Additional Draw is exercised by the Company and the applicable conditions precedent are satisfied, with each Additional Draw available in sixty day increments from the closing of the Loan Facility. The Initial Draw will be repaid within 53 weeks with total payments of approximately $9.3 million. Each Additional Draw will be repaid within 40 weeks with total payments of approximately $2.8 million. Upon any event of default, the lender may elect to accelerate payment subject to a default premium and/or convert into shares of Gold Flora common stock, subject to certain limitations and cure periods, including applicable pricing and dilution limitations of the Cboe Canada Inc.
A.G.P./Alliance Global Partners acted as sole placement agent in the transaction.
About Gold Flora Corporation
Gold Flora Corporation is a female-led, vertically-integrated cannabis leader that owns and operates multiple premium indoor cannabis cultivation facilities, 16 retail dispensaries in strategic geographies, a distribution business selling first party and third party brands into hundreds of dispensaries across California, and a robust portfolio of 8 cannabis brands, including Gramlin, one of the fastest growing brands in the state. The Company’s retail operations include Airfield Supply Company, Caliva, Coastal, Calma, King's Crew, Varda, Deli, and Higher Level dispensaries, and its distribution company operates under the name Stately Distribution.
Gold Flora Corporation’s indoor cultivation canopy currently comprises approximately 107,000 square feet across three facilities in its Desert Hot Springs campus and two San Jose cultivation facilities. In addition, the Company has entered into leases for two state-of-the-art indoor cultivation facilities in Palm Springs, with 53,000 square feet of canopy to start operation once licensing is complete. The Company also has the option to expand further in the future depending on market demand, with already entitled acreage providing approximately 240,000 square feet of canopy. The Desert Hot Springs campus also houses the Company's manufacturing and extraction facilities and Stately Distribution. This centralized location provides for optimal security and logistics benefits and protects the product as it moves though the Company's larger pipeline.
With hubs throughout the state, the Company distributes many prominent brands, including its own premium lines of Gramlin, Gold Flora, Cruisers, Roll Bleezy, Aviation Cannabis, Jetfuel Cannabis, Mirayo by Santana, and Monogram. Third party brands are increasingly contacting the Company in search of reliable input sources and established distribution.
References to information included on, or accessible through, websites and social media platforms do not constitute incorporation herein by reference of the information contained at or available through such websites or social media platforms, and the reader should not consider such information to be part of this press release.
For the latest news, activities, and media coverage, please visit www.goldflora.com.
About J.J. Astor & Co.
J.J. Astor & Co. is a lending platform providing short-term bridge lending to growth-oriented companies in the lower middle market. Loan facilities range from $500 thousand to $30 million for growth events including mergers and acquisitions, equipment and asset acquisition, strategic investments, listings on public markets and more. For more information, visit www.jjastor.com.
Forward Looking Statements
This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation and the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to the expectations or forecasts of business, operations, financial performance, prospects, and other plans, intentions, estimates and beliefs, and may include statements regarding the expected repayment timeline for the Loan Facility, Gold Flora's expected financial condition and performance, expectations related to the potential for future positive cash flow and profitability, the current and projected market, licensing status, expansion expectations, and growth opportunities for the company. Words such as "expects," "continue," "will," "anticipates," and "intends," or similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward–looking statements are based on Gold Flora's current projections and expectations about future events and financial trends that it believes might affect its financial condition, results of operations, prospects,
business strategy and financial needs, and on certain assumptions and analysis made by it in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. Forward-looking information and statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements to be materially different from future events, results, performance, and achievements expressed or implied by forward looking information and statements herein. Although Gold Flora believes that any forward-looking information and statements herein are reasonable, in light of the use of assumptions and the significant risks and uncertainties inherent in such information and statements, there can be no assurance that any such forward-looking information and statements will prove to be accurate, and accordingly readers are advised to rely on their own evaluation of such risks and uncertainties and should not place undue reliance upon such forward-looking information and statements. Any forward-looking information and statements herein are made as of the date hereof and, except as required by applicable laws, Gold Flora does not assume any obligation to update or revise any forward-looking information or statements contained herein or to update the reasons that actual events or results could or do differ from those projected in any forward-looking information and statements herein, whether as a result of new information, future events or results, or otherwise.
Gold Flora Corporation Inc.
Laurie Holcomb, Chairman & CEO
+1 (949) 252-1908 ext.300
Investor Contact
ir@goldflora.com
