Form 425 Schultze Special Purpose Filed by: Schultze Special Purpose Acquisition Corp.

 

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): November 9, 2020

 

Schultze Special Purpose Acquisition Corp.
(Exact name of registrant as specified in its charter)

 

Delaware		001-38760		83-0891815
(State or other jurisdiction		(Commission		(I.R.S. Employer
of incorporation)		File Number)		Identification No.)

 

800 Westchester Avenue, Suite 632
Rye Brook, NY		10573
(Address of principal executive offices)		(Zip Code)

 

(914) 701-5260
(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 is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☒

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

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:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Units, each consisting of one share of Common Stock and one Warrant		SAMAU		The Nasdaq Stock Market LLC
Common Stock, par value $0.0001 per share		SAMA		The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one share of Common Stock at an exercise price of $11.50		SAMAW		The Nasdaq Stock Market LLC

 

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

 

General

 

As previously disclosed, on July 25, 2020, Schultze Special Purpose Acquisition Corp., a Delaware corporation (“SAMA”), Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada (“Clever Leaves”), Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada and a wholly-owned subsidiary of Clever Leaves (“Holdco”), and Novel Merger Sub Inc., a Delaware corporation (“Merger Sub”) and a direct wholly-owned subsidiary of Holdco, entered into a Business Combination Agreement (the “Original Agreement”).

 

On November 9, 2020, the parties to the Original Agreement entered into an Amended and Restated Business Combination Agreement (the “Business Combination Agreement”), pursuant to which SAMA agreed to combine with Clever Leaves in a business combination (the “Business Combination”) that will result in both Clever Leaves and SAMA becoming wholly-owned subsidiaries of Holdco. Capitalized terms used in this Current Report on Form 8-K but not otherwise defined herein have the meanings given to them in the Business Combination Agreement.

 

Business Combination Agreement

 

The Business Combination Agreement amends and restates the Original Agreement in its entirety to, among other things, (a) change the definition of Cash Arrangement Consideration to an aggregate amount up to $2,000,000 in cash in the aggregate payable to certain Clever Leaves shareholders, with such amount increasing to (i) $3,000,000 if after giving effect to the exercise of redemption rights and payments related thereto, the funds in the Trust Account plus proceeds from the Agreed PIPE (defined below) are greater than or equal to $60,000,000, and (ii) $4,000,000 if after giving effect to the exercise of redemption rights and payments related thereto, the funds in the Trust Account plus proceeds from the Agreed PIPE are greater than or equal to $90,000,000, (b) amend the formula for calculating the Arrangement Consideration such that the amount will be derived from $183,600,000 and (c) reduce the minimum cash amount required to be held by SAMA either in or outside the Trust Account at Closing, including the aggregate amount of the PIPEs (including for the avoidance of doubt, the aggregate amount of the Agreed PIPE), to $26,000,000.

 

A copy of the Business Combination Agreement is filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the Business Combination Agreement is qualified in its entirety by reference to the full text of the Business Combination Agreement filed with this Current Report on Form 8-K. The Business Combination Agreement is included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about SAMA, Clever Leaves or the other parties thereto. In particular, the assertions embodied in representations and warranties by SAMA, Clever Leaves, Holdco and Merger Sub contained in the Business Combination Agreement are qualified by information in the disclosure schedules provided by the parties in connection with the signing of the Business Combination Agreement. These disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Business Combination Agreement. Moreover, certain representations and warranties in the Business Combination Agreement were used for the purpose of allocating risk between the parties, rather than establishing matters as facts. Accordingly, investors and security holders should not rely on the representations and warranties in the Business Combination Agreement as characterizations of the actual state of facts about SAMA, Clever Leaves, Holdco and Merger Sub.

 

Transaction Support Agreement Amendment

 

On November 9, 2020, SAMA, Clever Leaves, Holdco and Schultze Special Purpose Acquisition Sponsor, LLC (“Sponsor”) entered into Amendment No. 1 (the “TSA Amendment”) to the Transaction Support Agreement, dated as of July 25, 2020 (the “Transaction Support Agreement”), by and among SAMA, Clever Leaves, Holdco and Sponsor.

 

The TSA Amendment amends the Transaction Support Agreement to provide for, among other things:

 

(i) the agreement of the Sponsor, at or prior to the Closing, subject to and conditioned upon the occurrence of the Closing and effective as of immediately prior to the Merger Effective Time, to forfeit for no consideration all warrants in its possession other than (a) (A) a number of Holdco warrants (rounded down to the nearest whole warrant) equal to (B) 1,245,000 plus (C) the quantity of (1) 2,905,000 multiplied by (2) the quotient obtained by dividing (I) the quantity of (x) the aggregate amount of cash held either in or outside the Trust Account, including the aggregate amount of the PIPEs, including, for the avoidance of doubt, the aggregate amount of the Agreed PIPE (other than any accrued payment-in-kind interest on the Secured Convertible Notes, which will be invested into the Agreed PIPE (the “PIK Amount”)), after giving effect to the exercise of redemption rights and payments related thereto minus (y) $25,000,000 by (II) $20,000,000 (the “Sponsor Warrant Amount”) (provided that in no event shall the Sponsor Warrant Amount be less than 1,245,000 warrants or greater than 4,150,000 warrants) and (b) the Working Capital Warrants (as defined in the Warrant Amendment (defined below)), if any, issued to Sponsor in full satisfaction of loans made by Sponsor to SAMA pursuant to a promissory note or notes;

 

 

(ii) the amendment of certain definitions related to the number of Holdco Common Shares that will be held in escrow for the benefit of Sponsor as follows: (1) “Sponsor Upfront Escrow Shares” was reduced from 1,565,000 Holdco Common Shares to a number of Holdco Common Shares (rounded down to the nearest whole share) equal to (x) (i) an aggregate amount equal to (A) the aggregate amount of cash held either in or outside the Trust Account, including the aggregate amount of the PIPEs, including, for the avoidance of doubt, the aggregate amount of the Agreed PIPE (other than any PIK Amount), consummated prior to, or as of, the Closing, after giving effect to the exercise of redemption rights and payments related thereto minus (B) SAMA’s good faith estimate of its transaction expenses, multiplied by (ii) twenty percent (20%) (such amount in this subsection (x), the “Sponsor Value”) divided by (y) $10.00; provided that the number of Sponsor Upfront Escrow Shares shall not be less than 460,000 Holdco Common Shares or more than 1,168,421 Holdco Common Shares; and (2) “Sponsor Earn-Out Shares” was reduced from 1,625,000 Holdco Common Shares to a number of Holdco Common Shares (rounded down to the nearest whole share) equal to (x) an amount equal to (i) the Sponsor Value minus (ii) (A) the Sponsor Upfront Escrow Shares multiplied by (B) $10.00, divided by (y) $5.00; provided, that the number of Sponsor Earn-Out Shares shall not be less than 0 or greater than 1,300,000; and

 

(iii) the reduction of the number of shares that certain service providers of Holdco and its subsidiaries at the direction of the Holdco Board or any committee thereof are eligible to receive in accordance with the Transaction Support Agreement from up to 1,800,000 Holdco Common Shares to up to 1,440,000 Holdco Common Shares.

 

A copy of the TSA Amendment is filed with this Current Report on Form 8-K as Exhibit 10.2 and is incorporated herein by reference. The foregoing description of the TSA Amendment is qualified in its entirety by reference to the full text of the TSA Amendment filed with this Current Report on Form 8-K. For a detailed discussion of the Transaction Support Agreement, see SAMA’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on July 29, 2020 (the “July 8-K”). For the full text of the Transaction Support Agreement, see Exhibit 10.2 to the July 8-K, which is incorporated by reference as Exhibit 10.1 hereto.

 

Investors’ Rights Agreement

 

In connection with, and as a condition to the consummation of, the Business Combination, Holdco and certain SAMA stockholders will enter into the Investors’ Rights Agreement. Pursuant to the Business Combination Agreement, the form of Investors’ Rights Agreement attached to the Original Agreement was amended to remove the right of Sponsor to nominate one individual to the compensation committee of Holdco.

 

The foregoing description of the Investors’ Rights Agreement is qualified in its entirety by reference to the full text of the form of Investors’ Rights Agreement, a copy of which is included as Exhibit A to the Business Combination Agreement, filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference. For a detailed discussion of the Investors’ Rights Agreement, see the July 8-K.

 

Warrant Amendment

 

In connection with, and as a condition to the consummation of, the Business Combination, SAMA, Holdco and Continental Stock and Transfer & Trust Company, as warrant agent, will enter into an Assignment, Assumption and Amendment Agreement (the “Warrant Amendment”). Pursuant to the Business Combination Agreement, the form of Warrant Amendment attached to the Original Agreement was amended to (i) allow for any Company Common Share (as defined in the Warrant Amendment) issued upon the exercise of a Warrant (as defined in the Warrant Amendment) to be issued by Holdco in uncertified or book-entry form and (ii) specify that if a holder of any Warrant, by reason of any adjustment, would be entitled to receive a fractional interest in a share upon the exercise of such Warrant, Holdco will, upon such exercise, round down to the nearest whole number of Company Common Shares to be issued to the Warrant holder.

 

The foregoing description of the Warrant Amendment is qualified in its entirety by reference to the full text of the form of Warrant Amendment, a copy of which is included as Exhibit E to the Business Combination Agreement, filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference. For a detailed discussion of the Warrant Amendment, see the July 8-K.

 

 

Subscription Agreements

 

In connection with the Business Combination, SAMA has obtained commitments from interested investors (the “Subscribers”) to purchase (a) shares of SAMA common stock for a purchase price of $9.50 per share or (b) Holdco Common Shares or securities or indebtedness exercisable or exchangeable for, or convertible into, Holdco Common Shares, in each case, which will be converted into Holdco Common Shares in connection with the Closing (the “PIPE Shares”), in a private placement to close immediately prior to the Closing of the Business Combination (the “Agreed PIPE”). The Subscribers have committed an aggregate of $8.9 million to participate in the Business Combination through the Agreed PIPE, of which $6.0 million is to be paid in cash and $2.9 million is to be paid via the cancellation of accrued and outstanding interest on the Secured Convertible Notes. Such commitments are being made by way of the subscription agreements, by and among each Subscriber, SAMA and Holdco (the “Subscription Agreements”). The purpose of the Agreed PIPE is to raise additional capital for use in connection with the Business Combination and to meet the minimum cash requirements provided in the Business Combination Agreement. The Subscription Agreements were entered into on November 9, 2020.

 

The closing of the Agreed PIPE (the “PIPE Closing”) is contingent upon the substantially concurrent consummation of the Business Combination. The PIPE Closing will occur on the date of, and immediately prior to, the consummation of the Business Combination. The PIPE Closing will be subject to customary conditions, including:

 

●

all representations and warranties of SAMA, Holdco and the Subscriber contained in the relevant Subscription Agreement shall be true and correct in all material respects (other than representations and warranties that are qualified as to materiality or Company Material Adverse Effect or Holdco Material Adverse Effect (each as defined in the Subscription Agreements), which representations and warranties shall be true in all respects) at, and as of, the PIPE Closing (or, with respect to any representations and warranties made as of a specific date, as of such specific date);

 

●

as of the Closing Date, there has been no amendment, modification or waiver of (a) any provision of the Business Combination Agreement that would reasonably be expected to materially and adversely affect the rights, obligations and/or economic benefits that the Subscribers would reasonably expect to receive under the Subscription Agreements, (b) the $26 million minimum cash requirement under the Business Combination Agreement or (c) Section 3.1(e) of the Plan of Arrangement or Article 28 of the Amended and Restated Holdco Articles;

 

●

all conditions precedent to the Closing of the Business Combination, including the approval by SAMA’s stockholders, shall have been satisfied or waived; and

 

●

with respect to the purchase of PIPE Shares by those Subscribers who are holders of the Secured Convertible Notes, all conditions precedent to the concurrent amendment of the Secured Convertible Notes, to provide for, among other things, the exchange of the accrued interest for the PIPE Shares shall have been satisfied or waived.

 

Pursuant to the Subscription Agreements, Holdco agreed that, if the Holdco Common Shares issuable to the Subscribers in exchange for their PIPE Shares are not registered in connection with the Business Combination, within 30 calendar days after the Closing, Holdco will file with the SEC (at Holdco’s sole cost and expense) a registration statement registering the resale of the PIPE Shares received by the Subscribers in connection with the Business Combination (the “Resale Registration Statement”), and Holdco shall use its commercially reasonable efforts to have the Resale Registration Statement declared effective no later than 90 days (or 45 days if the SEC notifies Holdco that it will not review the Resale Registration Statement) after the Closing; provided, however, that Holdco’s obligations to include the PIPE Shares held by a Subscriber in the Resale Registration Statement will be contingent upon the respective Subscriber furnishing in writing, to Holdco, such information regarding the Subscriber, the securities of Holdco held by such Subscriber and the intended method of disposition of the shares, as shall be reasonably requested by Holdco to effect the registration of such shares, and will execute such documents in connection with such registration, as Holdco may reasonably request, which will be what is customary of a selling stockholder in similar situations.

 

Holdco will also be required to use its commercially reasonable efforts to cause the Resale Registration Statement to become effective and to maintain the effectiveness of the Resale Registration Statement until the earliest of (a) the date on which all of the PIPE Shares may be sold without restriction under Rule 144, (b) the date on which the Subscribers cease to hold any PIPE Shares acquired pursuant to the Business Combination, and (c) the second anniversary of the Closing; provided that the period under this clause (c) may be extended by the same number of days that the Resale Registration Statement is entitled to be suspended under the Subscription Agreements.

 

 

Holdco is entitled to delay, postpone or suspend the effectiveness of the Resale Registration Statement if an event has occurred that the Holdco Board reasonably believes would require additional disclosure by Holdco in the Resale Registration Statement of material non-public information. However, Holdco may not delay or suspend the Resale Registration Statement on more than two occasions in any 12-month period or for more than 60 consecutive days, or more than 90 total days, in each case during any 12-month period.

 

Each Subscription Agreement will terminate upon the earlier to occur of (w) such date and time as the Business Combination Agreement is terminated in accordance with its terms, (x) upon the mutual written agreement of each of the parties to the Subscription Agreement, (y) any of the conditions to the PIPE Closing are not satisfied or waived on or prior to the PIPE Closing and, as a result thereof, the transactions contemplated by the Subscription Agreement are not consummated at the PIPE Closing or (z) December 31, 2020.

 

The foregoing description of the Subscription Agreements is qualified in its entirety by reference to the full text of the forms of the Subscription Agreements, copies of which are included as Exhibits 10.3 and 10.4 to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 7.01. Regulation FD Disclosure

 

On November 9, 2020, SAMA and Clever Leaves issued a joint press release announcing the execution of the Business Combination Agreement and the Agreed PIPE. A copy of the press release is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Such exhibit and the information set forth therein is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

 

Additional Information and Where to Find It

 

In connection with the proposed Business Combination, Holdco has filed a Registration Statement on Form S-4 (the “Registration Statement”) with the SEC which includes a prospectus with respect to Holdco’s securities to be issued in connection with the Business Combination and a proxy statement with respect to SAMA’s stockholder meeting at which SAMA’s stockholders will be asked to vote on the proposed Business Combination. The Registration Statement has not yet become effective. SAMA, Clever Leaves and Holdco urge investors, stockholders and other interested persons to read the Registration Statement, including the proxy statement/prospectus, as well as other documents filed with the SEC, because these documents will contain important information about the Business Combination. Following the Registration Statement having been declared effective by the SEC, a definitive proxy statement/prospectus will be mailed to stockholders of SAMA as of a record date to be established for voting on the Business Combination. SAMA’s stockholders will also be able to obtain a copy of such documents, without charge, by directing a request to: Schultze Special Purpose Acquisition Corp, 800 Westchester Avenue, Suite 632, Rye Brook, New York 10573; e-mail: [email protected]. These documents, once available, can also be obtained, without charge, at the SEC’s web site (http://www.sec.gov).

 

Participants in Solicitation

 

SAMA, Clever Leaves, Holdco and their respective directors, executive officers and other members of their management and employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of SAMA stockholders in connection with the Business Combination. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies to SAMA’s stockholders in connection with the Business Combination is set forth in the preliminary proxy statement/prospectus contained in the Registration Statement, and will also be included in the definitive proxy statement/prospectus for the Business Combination when available. Information concerning the interests of SAMA’s and Clever Leaves’ participants in the solicitation, which may, in some cases, be different than those of SAMA’s and Clever Leaves’ equity holders generally, is also set forth in the proxy statement/prospectus contained in the Registration Statement, and will also be included in the definitive proxy statement/prospectus for the Business Combination when available.

 

Non-Solicitation

 

This Current Report on Form 8-K is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any securities or in respect of the proposed Business Combination and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of SAMA, Holdco or Clever Leaves, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.

 

 

Forward Looking Statements

 

This Current Report on Form 8-K includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts and may be identified by the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions). Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Factors that may cause such differences include, without limitation, SAMA’s and Clever Leaves’ inability to complete the transactions contemplated by the Business Combination; matters discovered by the parties as they complete their respective due diligence investigation of the other; the inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the amount of cash available following any redemptions by SAMA stockholders and the ability to close the Agreed PIPE; the ability to meet NASDAQ’s listing standards following the consummation of the Business Combination; costs related to the Business Combination; expectations with respect to future operating and financial performance and growth, including when Clever Leaves or Holdco will become cash flow positive; the timing of the completion of the Business Combination; Clever Leaves’ ability to execute its business plans and strategy and to receive regulatory approvals; potential litigation involving the parties; global economic conditions; geopolitical events, natural disasters, acts of God and pandemics, including, but not limited to, the economic and operational disruptions and other effects of COVID-19; regulatory requirements and changes thereto; access to additional financing; and other risks and uncertainties indicated from time to time in filings with the SEC. Other factors include the possibility that the proposed transaction does not close, including due to the failure to receive required security holder approvals or the failure to satisfy other closing conditions. The foregoing list of factors is not exclusive. Additional information concerning certain of these and other risk factors is contained in SAMA’s most recent filings with the SEC and is contained in the Registration Statement, including the proxy statement/prospectus. All subsequent written and oral forward-looking statements concerning SAMA, Clever Leaves or Holdco, the transactions described herein or other matters and attributable to SAMA, Clever Leaves, Holdco or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Each of SAMA, Clever Leaves and Holdco expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit No.		Description
2.1†		Amended and Restated Business Combination Agreement, dated as of November 9, 2020, by and among Schultze Special Purpose Acquisition Corp., Clever Leaves Holdings Inc., Novel Merger Sub Inc. and Clever Leaves International Inc.
10.1		Transaction Support Agreement, dated as of July 25, 2020, by and among Schultze Special Purpose Acquisition Sponsor, LLC, Clever Leaves International Inc., Clever Leaves Holdings Inc. and Schultze Special Purpose Acquisition Corp. (incorporated by reference to Exhibit 10.2 to SAMA’s Current Report on Form 8-K (File No. 001-38760), filed with the Securities and Exchange Commission on July 29, 2020).
10.2†		Amendment No. 1 to Transaction Support Agreement, dated as of November 9, 2020, by and among Schultze Special Purpose Acquisition Sponsor, LLC, Clever Leaves International Inc., Clever Leaves Holdings Inc. and Schultze Special Purpose Acquisition Corp.
10.3		Form of Subscription Agreement for cash investors.
10.4		Form of Subscription Agreement for holders of Secured Convertible Notes.
99.1		Press Release, dated November 9, 2020.

 

†

Certain exhibits and schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby agrees to furnish a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

 

 

SIGNATURE

 

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.

 

	SCHULTZE SPECIAL PURPOSE ACQUISITION CORP.
	By	/s/ George J. Schultze
	Name:	George J. Schultze
	Title:	Chief Executive Officer

 

Date: November 9, 2020

 

 

6

 

Exhibit 2.1

 

Execution Version

 

 

 

 

 

 

 

AMENDED AND RESTATED

BUSINESS COMBINATION AGREEMENT

by and among

SCHULTZE SPECIAL PURPOSE ACQUISITION cORP.,

 

Clever Leaves Holdings Inc.,

NOVEL Merger Sub INC.

and

CLEVER LEAVES INTERNATIONAL INC.

 

Dated as of November 9, 2020

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

		Page
Article I DEFINITIONS		3
SECTION 1.01	Certain Definitions	3
SECTION 1.02	Further Definitions	17
SECTION 1.03	Construction	20
Article II THE ARRANGEMENT; AGREEMENT AND PLAN OF MERGER		21
SECTION 2.01	The Arrangement.	21
SECTION 2.02	The Interim Order.	21
SECTION 2.03	The Company Meeting	22
SECTION 2.04	The Canadian Information Circular	22
SECTION 2.05	The Final Order	23
SECTION 2.06	Court Proceedings.	23
SECTION 2.07	Arrangement Effective Time; Document Closing	25
SECTION 2.08	Tax Treatment of the Arrangement and the Merger	25
SECTION 2.09	The Merger	25
SECTION 2.10	Merger Effective Time	25
SECTION 2.11	Effect of the Merger	26
SECTION 2.12	Certificate of Incorporation; By-laws; Holdco Organizational Documents	26
SECTION 2.13	Directors and Officers	27
Article III CONVERSION OF SECURITIES; ARRANGEMENT CONSIDERATION		27
SECTION 3.01	Calculation of Arrangement Consideration; Company Certificate	27
SECTION 3.02	Conversion of Securities	28
SECTION 3.03	Exchange of Certificates	30
SECTION 3.04	Treatment of Company Equity Awards	32
SECTION 3.05	Stock Transfer Books	33
SECTION 3.06	SPAC Warrants.	33
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY		34
SECTION 4.01	Organization and Qualification; Subsidiaries	34
SECTION 4.02	Governance Documents	34
SECTION 4.03	Capitalization	35
SECTION 4.04	Authority Relative to this Agreement	37
SECTION 4.05	No Conflict; Required Filings and Consents.	37
SECTION 4.06	Permits; Compliance	38
SECTION 4.07	Financial Statements	39
SECTION 4.08	Absence of Certain Changes or Events	40
SECTION 4.09	Absence of Litigation	41
SECTION 4.10	Employee Benefit Plans	41
SECTION 4.11	Labor and Employment Matters	44

 

 

Table of Contents

 

		Page
SECTION 4.12	Real Property; Title to Assets and Rights	46
SECTION 4.13	Intellectual Property	46
SECTION 4.14	Taxes	49
SECTION 4.15	Environmental Matters	52
SECTION 4.16	Material Contracts.	52
SECTION 4.17	Insurance	54
SECTION 4.18	Board Approval; Vote Required	54
SECTION 4.19	Customers and Suppliers	54
SECTION 4.20	Inventories	54
SECTION 4.21	Fixtures and Equipment	55
SECTION 4.22	Certain Business Practices	55
SECTION 4.23	Registration Statement; Canadian Information Circular	56
SECTION 4.24	Interested Party Transactions	56
SECTION 4.25	Exchange Act	57
SECTION 4.26	Brokers	57
Article V REPRESENTATIONS AND WARRANTIES OF SPAC		57
SECTION 5.01	Corporate Organization	57
SECTION 5.02	Certificate of Incorporation and By-laws	57
SECTION 5.03	Capitalization	58
SECTION 5.04	Authority Relative to This Agreement	58
SECTION 5.05	No Conflict; Required Filings and Consents.	59
SECTION 5.06	Compliance.	59
SECTION 5.07	SEC Filings; Financial Statements	60
SECTION 5.08	Absence of Certain Changes or Events	61
SECTION 5.09	Absence of Litigation	61
SECTION 5.10	Board Approval; Vote Required	62
SECTION 5.11	Post-Closing Operations	62
SECTION 5.12	SPAC Material Contracts.	62
SECTION 5.13	Employees	62
SECTION 5.14	Taxes.	63
SECTION 5.15	Listing.	65
SECTION 5.16	Brokers.	65
SECTION 5.17	Investment Company Act.	65
SECTION 5.18	SPAC Trust Fund	65
SECTION 5.19	Prior Business Operations	66
SECTION 5.20	SPAC’s Investigation and Reliance	66
Article VI REPRESENTATIONS AND WARRANTIES OF HOLDCO AND MERGER SUB		67
SECTION 6.01	Corporate Organization	67
SECTION 6.02	Organizational Documents	67
SECTION 6.03	Capitalization	67

 

 

Table of Contents

 

		Page
SECTION 6.04	Authority Relative to This Agreement	68
SECTION 6.05	No Conflict; Required Filings and Consents.	69
SECTION 6.06	Compliance.	69
SECTION 6.07	Board Approval; Vote Required	69
SECTION 6.08	Post-Closing Operations; No Prior Operations of Holdco or Merger Sub	70
SECTION 6.09	Brokers.	71
SECTION 6.10	Proxy Statement/Prospectus and Registration Statement	71
Article VII CONDUCT OF BUSINESS PENDING THE TRANSACTIONS		71
SECTION 7.01	Conduct of Business by the Company, Holdco and Merger Sub Pending the Merger and the Arrangement	71
SECTION 7.02	Conduct of Business by SPAC Pending the Merger and the Arrangement	74
SECTION 7.03	Claims Against Trust Account	76
SECTION 7.04	SPAC Public Filings	76
Article VIII ADDITIONAL AGREEMENTS		77
SECTION 8.01	Preparation of SEC Documents	77
SECTION 8.02	SPAC Stockholders’ Meetings	79
SECTION 8.03	Access to Information; Confidentiality	79
SECTION 8.04	Company Solicitation	80
SECTION 8.05	Employee Benefits Matters	81
SECTION 8.06	Directors’ and Officers’ Indemnification	83
SECTION 8.07	Notification of Certain Matters	84
SECTION 8.08	Further Action; Reasonable Best Efforts.	84
SECTION 8.09	Public Announcements	85
SECTION 8.10	Tax Matters	86
SECTION 8.11	Nasdaq Listing	87
SECTION 8.12	Delisting and Deregistration	87
SECTION 8.13	Antitrust	87
SECTION 8.14	Contributions and Restructuring After the Merger Effective Time.	88
SECTION 8.15	PCAOB Financials	88
SECTION 8.16	Eagle Share Exchange	89
SECTION 8.17	PIPEs	89
SECTION 8.18	SPAC Extension	89
SECTION 8.19	Indebtedness Covenants	89
SECTION 8.20	Disclosure Schedules	90
Article IX CONDITIONS TO THE TRANSACTIONS		90
SECTION 9.01	Conditions to the Obligations of Each Party	90

 

 

Table of Contents

 

		Page
SECTION 9.02	Conditions to the Obligations of SPAC	91
SECTION 9.03	Conditions to the Obligations of the Company, Holdco and Merger Sub	92
Article X TERMINATION, AMENDMENT AND WAIVER		94
SECTION 10.01	Termination	94
SECTION 10.02	Effect of Termination	95
SECTION 10.03	Transaction Expenses	95
SECTION 10.04	Amendment	95
SECTION 10.05	Waiver	96
Article XI GENERAL PROVISIONS		96
SECTION 11.01	Non-Survival of Representations, Warranties and Agreements	96
SECTION 11.02	Notices	96
SECTION 11.03	Severability	97
SECTION 11.04	Entire Agreement; Assignment	97
SECTION 11.05	Parties in Interest	97
SECTION 11.06	Governing Law	98
SECTION 11.07	WAIVER OF JURY TRIAL	98
SECTION 11.08	Headings	98
SECTION 11.09	Counterparts	99
SECTION 11.10	Specific Performance	99

 

 

EXHIBITS:

 

EXHIBIT A	Investors’ Rights Agreement
EXHIBIT B	Company Arrangement Resolution
EXHIBIT C	Plan of Arrangement
EXHIBIT D	Directors and Officers of Holdco
EXHIBIT E	SPAC Warrant Amendment
EXHIBIT F	Sample Calculation of Arrangement Consideration, Exchange Ratio and Option and Warrant Value
EXHIBIT G	Amended and Restated Holdco Articles

 

SCHEDULES:

 

SCHEDULE A	Company Knowledge Parties
SCHEDULE B	Key Company Shareholders
SCHEDULE C	Eagle Minority Shareholders

 

 

AMENDED AND RESTATED BUSINESS COMBINATION AGREEMENT, dated as of November 9, 2020 (this “Agreement”), by and among SCHULTZE SPECIAL PURPOSE ACQUISITION CORP., a Delaware corporation (“SPAC”), CLEVER LEAVES HOLDINGS INC., a corporation organized under the laws of British Columbia, Canada, and a wholly-owned subsidiary of the Company (“Holdco”), NOVEL MERGER SUB INC., a Delaware corporation and a direct wholly-owned subsidiary of Holdco (“Merger Sub”), and CLEVER LEAVES INTERNATIONAL INC., a corporation organized under the laws of British Columbia, Canada (the “Company”).

 

WHEREAS, the Company, SPAC, Holdco and Merger Sub entered into that certain Business Combination Agreement (the “Original Agreement”), dated as of July 25, 2020 (the “Original Agreement Date”), and, in accordance with Section 10.04 of the Original Agreement, the Company, SPAC, Holdco and Merger Sub desire to amend and restate the Original Agreement (the “Amendment and Restatement”);

 

WHEREAS, each of Holdco and Merger Sub is an entity newly formed for the purposes of the transactions proposed herein;

 

WHEREAS, Holdco is a wholly-owned subsidiary of the Company and Merger Sub is a direct wholly-owned subsidiary of Holdco;

 

WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the Business Corporations Act (British Columbia) (the “BCBCA”) and the General Corporation Law of the State of Delaware (the “DGCL”), SPAC, Holdco, Merger Sub and the Company will enter into a business combination transaction pursuant to which, among other things, (a) by means of an Arrangement under the BCBCA, the Company Shareholders will exchange their respective Company Shares for common shares of Holdco (“Holdco Common Shares”) and certain Company Shareholders will receive non-voting common shares of Holdco (the “Holdco Non-Voting Common Shares”) and the Company will become a wholly-owned subsidiary of Holdco, upon the terms and subject to the conditions of the Plan of Arrangement, effective as of the Arrangement Effective Time, (b) at 12:01 a.m. Vancouver, British Columbia time, on the calendar day immediately following the consummation of the Arrangement, Merger Sub will merge with and into SPAC, with SPAC surviving such merger as a direct wholly-owned subsidiary of Holdco (the “Merger”) and, as a result of the Merger, all shares of SPAC Common Stock shall be converted into the right to receive the consideration set forth in this Agreement, (c) immediately following the consummation of the Merger, Holdco will contribute to the Company, and the Company will acquire, one hundred percent (100%) of the issued and outstanding shares of the Surviving Corporation (the “SPAC Contribution”) such that, following the SPAC Contribution, the Surviving Corporation will be a direct wholly-owned subsidiary of the Company and (d) immediately following the consummation of the SPAC Contribution, the Company will contribute to the Surviving Corporation, and the Surviving Corporation will acquire, one hundred percent (100%) of the issued and outstanding shares of NS US Holdings, Inc., a Delaware corporation (the “US Subsidiary”, such contribution being, the “US Subsidiary Contribution”);

 

 

WHEREAS, the Board of Directors of the Company (the “Company Board”) has unanimously (a) determined that the Transactions are in the best interests of the Company and fair to the Company Shareholders, (b) approved this Agreement and the Transactions, and (c) resolved, subject to the terms of this Agreement, to recommend that the Company Shareholders vote in favor of the Company Arrangement Resolution;

 

WHEREAS, the Board of Directors of SPAC (the “SPAC Board”) has unanimously (a) determined that the Merger and the other Transactions are fair to, and in the best interests, of SPAC and the SPAC Stockholders, (b) adopted a resolution approving this Agreement and declaring its advisability and approving the Merger and the other Transactions, and (c) recommended the approval and adoption of this Agreement, the Merger and the other Transactions by the SPAC Stockholders;

 

WHEREAS, the Board of Directors of Holdco (the “Holdco Board”) has determined that the Transactions are in the best interests of Holdco, and has approved this Agreement and the Transactions, including the issuance of (a) the Arrangement Consideration to the Company Shareholders and (b) the SPAC Merger Consideration to the SPAC Stockholders;

 

WHEREAS, the Board of Directors of Merger Sub (the “Merger Sub Board”) has (a) determined that the Merger and the other Transactions are fair to, and in the best interests, of Merger Sub and Holdco (as the sole stockholder of Merger Sub), (b) has adopted a resolution approving this Agreement and declaring its advisability and approving the Merger and the other Transactions, and (c) recommended the approval and adoption of this Agreement and the Merger and the other Transactions by Holdco (as the sole stockholder of Merger Sub);

 

WHEREAS, SPAC, Holdco and the Key Company Shareholders have entered Shareholder Support Agreements (the “Shareholder Support Agreements”) providing that, among other things, the Key Company Shareholders will vote their Company Shares in favor of this Agreement, the Plan of Arrangement, the Arrangement, the Company Arrangement Resolutions and the Transactions;

 

WHEREAS, in connection with the Closing, Holdco and certain SPAC Stockholders will enter into an Investors’ Rights Agreement (the “Investors’ Rights Agreement”) in substantially the form attached hereto as Exhibit A, providing that, among other things, (a) the right of Schultze Special Purpose Acquisition Sponsor, LLC (“Sponsor”) to nominate one director to the Holdco Board and (b) that certain SPAC Stockholders shall be entitled to registration rights for, and shall be bound by restrictions on sale and transfer applicable to, their Holdco Common Shares;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, Sponsor, Holdco, SPAC and the Company are entering into Amendment No. 1 to that certain Transaction Support Agreement, dated as of the Original Agreement Date (as amended, the “Transaction Support Agreement”), pursuant to which Sponsor, SPAC and the Company have agreed to take certain actions to support the Transactions;

 

 

WHEREAS, concurrently with the execution and delivery of this Agreement, SPAC and the Company are entering into subscription agreements (the “Subscription Agreements”) with certain investors, pursuant to which such investors, upon the terms and subject to the conditions set forth therein, shall purchase in a private placement or placements of (a) Holdco Common Shares or securities or indebtedness exercisable or exchangeable for, or convertible into, Holdco Common Shares or (b) SPAC Common Stock, which, in the cases of (a) and (b), shall become Holdco Common Shares (the “Agreed PIPE”), to be consummated immediately prior to the consummation of the Transactions; and

 

WHEREAS, for United States federal income tax purposes, the Arrangement and the Merger are intended to qualify as exchanges described in Section 351 of the Code and the Treasury Regulations promulgated thereunder.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby amend and restate the Original Agreement as follows:

 

Article I

DEFINITIONS

 

SECTION 1.01 Certain Definitions. For purposes of this Agreement:

 

“affiliate” of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person.

 

“Ancillary Agreements” means the Shareholder Support Agreements, the Transaction Support Agreement, the Investors’ Rights Agreement, the SPAC Warrant Amendment, and all other agreements, certificates and instruments executed and delivered by SPAC, Holdco, Merger Sub, or the Company in connection with the Transactions and specifically contemplated by this Agreement.

 

“Arrangement” means an arrangement under Part 9, Division 5 of the BCBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations to the Plan of Arrangement made in accordance with the terms of this Agreement and the Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of SPAC and the Company, such consent not to be unreasonably withheld, conditioned or delayed.

 

“Arrangement Dissent Rights” means the rights of dissent in respect of the Arrangement described in the Plan of Arrangement.

 

 

“Arrangement Effective Date” means the calendar day immediately preceding the Closing Date.

 

“Arrangement Effective Time” means 11:59 p.m. Vancouver, British Columbia time, on the Arrangement Effective Date (as defined in the Plan of Arrangement), or such other time on the Arrangement Effective Date as the parties to the Arrangement agree in writing (but in any event not later than on the calendar day immediately preceding the Closing Date).

 

“Benefits Pool” means the total number of Holdco Common Shares and Holdco Non-Voting Common Shares issued and outstanding immediately following the Closing, calculated on a Fully-Diluted Benefits Basis.

 

“Business Data” means all business information and data, including Personal Information material to the operation of and used in the course of the conduct of the business of the Company and any Company Subsidiaries.

 

“Business Day” means a day, except a Saturday, a Sunday or any other day on which the SEC in Washington, D.C. or banks in New York, New York or Vancouver, British Columbia, Canada are authorized or required by Law to be closed.

 

“Business Systems” means all Software, computer hardware (whether general or special purpose), networks, servers, and computer systems, including any material outsourced systems, that are owned or used in the conduct of the business of the Company or any Company Subsidiaries.

 

“Calculation Methodology” means the methodology, assumptions, formulas and techniques used to calculate the Exchange Ratio, Class D Preferred Conversion Ratio and Option and Warrant Value as set forth on Exhibit F.

 

“Canadian Information Circular” means the notice of the Company Meeting to be sent to the Company Shareholders, and the accompanying management information circular to be prepared in connection with the Company Meeting, together with any amendments thereto or supplements thereof in accordance with the terms of this Agreement.

 

“CARES Act” means the Coronavirus Aid, Relief and Economic Security Act, as signed into law by the President of the United States on March 27, 2020.

 

“Cash Arrangement Consideration” means an aggregate amount up to two million dollars ($2,000,000), which aggregate final amount shall be set forth on the Payment Spreadsheet; provided that, if after giving effect to the exercise of the Redemption Rights and payments related thereto, the funds in the Trust Account plus the aggregate amount of the Agreed PIPE, are, in the aggregate, greater than or equal to $60,000,000, then the Cash Arrangement Consideration shall be $3,000,000 and (ii) the funds in the Trust Account plus the aggregate amount of the Agreed PIPE, are, in the aggregate, greater than or equal to $90,000,000, then the Cash Arrangement Consideration shall be $4,000,000.

 

 

“Class D Preferred Conversion Ratio” means the ratio for which each Company Class D Preferred Share shall, at the Arrangement Effective Time, convert into the right to receive that number of Company Common Shares, as determined in accordance with the Company Articles as set forth in the Calculation Methodology.

 

“Closing Company Net Debt” means, on a consolidated basis and calculated as of the open of business on the Closing Date, without duplication and without giving effect to the Transactions to be effected on the Closing Date, an amount (that may be positive or negative) equal to: (a)(i) the aggregate consolidated amount of indebtedness for borrowed money (including the current portion of any such indebtedness, including the indebtedness set forth on Section 1.01 of the Company Disclosure Schedule, but subject to the conditions set forth therein, and excluding any convertible indebtedness to the extent converted pursuant to the Transactions), (ii) bank overdrafts and (iii) capital lease obligations in excess of $250,000 (including the current portion of any such obligations) of the Company and the Company Subsidiaries plus (b) the aggregate consolidated amount of accrued but unpaid interest (calculated as of the open of business on the Closing Date) on debt for borrowed money and prepayment penalties, minus (c) the sum of (i) the aggregate consolidated amount of cash and cash equivalents, including marketable securities and brokerage accounts, short-term investments, demand deposits, certificates of deposit, time deposits, the Security Deposit and, negotiable instruments on hand or in accounts of the Company and the Company Subsidiaries (net of outstanding checks) (not including (A) prepaid deposits or other similar restricted cash and (B) cash subject to any forbearance agreements) and (ii) the Company Transaction Expenses that shall have been paid by the Company or any of its affiliates after the date hereof and prior to Closing. For the avoidance of doubt, Closing Company Net Debt shall (x) include the outstanding principal and interest amounts (calculated as of the open of business on the Closing Date), if any, on each of the Secured Convertible Notes, the Herbal Brands Debt and the Neem Holdings Convertible Note and (y) exclude the Company Transaction Expenses that shall remain unpaid as of the Closing.

 

“Code” means the United States Internal Revenue Code of 1986, as amended.

 

“Company Acquisition Proposal” means any proposal or offer from any person or group of persons (other than Holdco, SPAC or their respective affiliates) relating to, in a single transaction or a series of related transactions, any direct or indirect acquisition or purchase of a business that constitutes twenty percent (20%) or more of the assets of the Company and the Company Subsidiaries, taken as a whole, or twenty percent (20%) or more of the total voting power of the equity securities of the Company, whether by way of merger, amalgamation, arrangement, take-over bid, asset purchase, equity purchase or otherwise.

 

“Company Arrangement Resolution” means a special resolution of the Company Shareholders in respect of the Arrangement to be considered at the Company Meeting, in substantially the form attached hereto as Exhibit B.

 

“Company Articles” means the articles of the Company, dated as of March 11, 2020, as amended, supplemented or modified from time to time.

 

 

“Company Class B Common Shares” means the Company’s Class B voting common shares.

 

“Company Class C Common Shares” means the Company’s Class C non-voting common shares.

 

“Company Class C Preferred Shares” means the Company’s Class C preferred shares.

 

“Company Class D Preferred Shares” means the Company’s Class D preferred shares.

 

“Company Common Shares” means the Company’s Class A voting common shares.

 

“Company Earn-Out Shares” means the One Million Four Hundred Forty Thousand (1,440,000) Holdco Common Shares issuable pursuant to Section 2 of the Transaction Support Agreement.

 

“Company Equity Plan” means the Company’s 2018 Omnibus Incentive Compensation Plan, as such may have been amended, supplemented or modified from time to time.

 

“Company Governance Documents” means the Company Articles and Company Notice of Articles, each as may be amended from time to time, and the Shareholders Agreement.

 

“Company IP” means, collectively, all Company-Owned IP and Company-Licensed IP.

 

“Company-Licensed IP” means all Intellectual Property rights licensed by a third party to the Company or any Company Subsidiary or to which the Company or any Company Subsidiary otherwise has a right to use pursuant to an agreement.

 

 

“Company Material Adverse Effect” means any event, change or effect (collectively, “Effects”) that, individually or in the aggregate with all other events, changes and effects, (a) is or is reasonably likely to be materially adverse to the business, financial condition, assets, liabilities or operations of the Company and the Company Subsidiaries, taken as a whole, or (b) does or would prevent, materially delay or materially impede the performance by the Company of its obligations under this Agreement or the consummation of the Transactions; provided, however, that none of the following shall be taken into account in the determination of whether a Company Material Adverse Effect has occurred: (i) any enactment of, change or proposed change in, or change in interpretation of, any Law or GAAP; (ii) Effects generally affecting the industries in which the Company and the Company Subsidiaries operate; (iii) any downturn in general economic conditions, including changes in the credit, debt, securities, financial or capital markets; (iv) acts of war (whether or not declared), sabotage, civil unrest, terrorism, curfews, riots, demonstrations or public disorders, or any escalation or worsening of any such acts of war, sabotage, civil unrest, terrorism, curfews, riots, demonstrations or public disorders, or changes in global, national, regional, state or local political or social conditions; (v) Effects arising from or relating to epidemics, pandemics, or disease outbreaks, including COVID-19 or any COVID-19 Measures; (vi) any hurricane, tornado, flood, earthquake, natural disaster, or other acts of God; (vii) any failure by the Company and the Company Subsidiaries to meet internal, analysts’ or other earnings estimates or financial projections or forecasts for any period (it being understood that Effects giving rise or contributing to such failure may be taken into account in determining whether or not a Company Material Adverse Effect has occurred); (viii) the announcement, performance, pendency or consummation of the Transactions, including the impact of any of the foregoing on any relationships, contractual or otherwise, with customers, suppliers, employees or regulators; (ix) the taking of any action required or permitted by the terms of this Agreement or any Ancillary Agreements; (x) any actions taken or omitted to be taken by the Company or the Company Subsidiaries upon the written request or with the prior written consent of SPAC; (xi) any pending, initiated, or threatened Action against the Company, any of the Company Subsidiaries or any of their respective officers or directors, in each case, arising out of or relating to the execution of this Agreement or the Transactions; (xii) any action taken or omitted to be taken by SPAC; or (xiii) the bankruptcy or insolvency of GNC Holdings, Inc. and the likelihood of the Company receiving payment for any receivables owed to the Company by GNC Holdings, Inc.; except in the cases of clauses (i) through (vi) to the extent that the Company and the Company Subsidiaries, taken as a whole, are disproportionately affected thereby as compared with other participants in the industries in which the Company and the Company Subsidiaries operate.

 

“Company Meeting” means the meeting of the Company Shareholders, including any adjournment or postponement thereof in accordance with the terms of this Agreement, that is to be convened as provided by the Interim Order to consider, and if deemed advisable approve, the Company Arrangement Resolution.

 

“Company Notice of Articles” means the notice of articles of the Company, dated June 29, 2020, as amended, supplemented or modified from time to time.

 

“Company Options” means all options to purchase Company Common Shares, whether or not exercisable and whether or not vested, granted under the Company Equity Plan or otherwise that are outstanding immediately prior to the Closing.

 

“Company Preferred Shares” means the Company Class C Preferred Shares and the Company Class D Preferred Shares.

 

“Company Required Approval” means the approval of not less than two-thirds of the Company Shareholders, voting together as a single class, present in person or by proxy at the Company Meeting.

 

 

“Company Restricted Shares” means all unvested shares of restricted Company Common Shares granted under the Company Equity Plan or otherwise that are outstanding immediately prior to the Closing.

 

“Company RSUs” means all restricted stock units granted under the Company Equity Plan or otherwise with respect to Company Common Shares that are outstanding immediately prior to the Closing.

 

“Company Shareholders” means the holders of Company Shares.

 

“Company Shares” means the Company Common Shares and the Company Preferred Shares.

 

“Company Subsidiary” means any subsidiary of the Company other than the Excluded Investments.

 

“Company Transaction Expenses” means (a) the reasonable and documented Transaction Expenses of the Company or any of its affiliates, including (i) the premiums, commissions and other fees paid or payable in connection with obtaining the Company’s D&O Tail Policy, (ii) Transaction Expenses incurred in obtaining an audit of the Company’s assets in Colombia and any tax appraisals and (iii) Transaction Expenses incurred in preparing and obtaining the PCAOB Financials, and (b) the amount of any Taxes paid or payable to a Tax authority in Colombia or any other jurisdiction in connection with the Transactions by the Company or any of its affiliates, whether as a primary or secondary, direct or indirect, obligation, including, the Colombian Tax, but, in the cases of (a) and (b), excluding the Shared Transaction Expenses.

 

“Company Transaction Expenses Cap” means four million dollars ($4,000,000), plus any amounts paid or payable with respect to the Company’s D&O Tail Policy.

 

“Company Warrants” means all warrants to purchase or acquire Company Shares, including the Neem Holdings Warrants, whether or not exercisable, that are outstanding immediately prior to the Closing.

 

“Company-Owned IP” means all Intellectual Property owned by the Company or any of the Company Subsidiaries.

 

“Confidential Information” means confidential and secret information, knowledge or data concerning the businesses and affairs of the Company, the Company Subsidiaries, or any suppliers or customers of the Company or any Company Subsidiaries or SPAC or its subsidiaries (as applicable) that is not already generally available to the public.

 

“control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

 

 

“Court” means the Supreme Court of British Columbia.

 

“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions or mutations thereof or related or associated epidemics, pandemic or disease outbreaks.

 

“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, delay, shut down (including, the shutdown of air cargo routes), closure, sequester, safety or similar Law, directive, guidelines or recommendations promulgated by any Governmental Authority, including with respect to Colombia, the Ministry of Health, the National Food and Drug Surveillance Institute, the Fondo Nacional de Estupefacientes, with respect to Portugal, the National Authority of Medicines and Health Products, I.P., with respect to Croatia, the Agency for Medicinal Products and Medical Devices, with respect to Germany, the Federal Institute for Drugs and Medical Devices, and with respect to the United States, the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including the CARES Act and Families First Act.

 

“Customs & International Trade Laws” means any Law, directive, ruling, order, decree, ordinance, award, or other decision or requirement, including any amendments, having the force or effect of law, of any arbitrator, court, government or government agency or instrumentality or other Governmental Authority, concerning the importation, exportation, re-exportation, or deemed exportation of products, technical data, technology and/or services, and the terms and conduct of transactions and making or receiving of payment related to such importation, exportation, re-exportation or deemed exportation.

 

“Designated Holders” means, collectively, Neem Holdings and its Affiliates.

 

“Disabling Devices” means undisclosed Software viruses, time bombs, logic bombs, trojan horses, trap doors, back doors, or other computer instructions, intentional devices or techniques that are designed to threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, maliciously encumber, hack into, incapacitate, infiltrate or slow or shut down a computer system or any component of such computer system, including any such device affecting system security or compromising or disclosing user data in an unauthorized manner.

 

“Eagle” means Eagle Canada Holdings, Inc., a corporation organized under the laws of British Columbia, Canada.

 

“Eagle Exchangeable Class A Shares” means the exchangeable class A common shares of Eagle.

 

“Eagle Minority Shareholders” means each of the shareholders of Eagle set forth on Schedule C.

 

 

“Eagle Share Exchange” means the exchange of the Eagle Exchangeable Class A Shares into Company Common Shares in accordance with the Put Call Agreement.

 

“Earn-Out Shares” means the Company Earn-Out Shares and SPAC Earn-Out Shares.

 

“Ecomedics” means Ecomedics SAS, a sociedad por acciones simplificada organized under the laws of the Republic of Colombia.

 

“Environmental Laws” means any Colombia, Portugal, United States federal, state or local or other non-United States Laws relating to: (a) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (b) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (c) pollution, protection, use or management of the environment or natural resources or employees.

 

“Excess Shares” means any shares that would be delivered pursuant to the Arrangement to the Designated Holders that would, after taking into account the Holdco Common Shares that the Designated Holders will have the right to receive as part of the SPAC Merger Consideration, result in such Designated Holders owning beneficially or of record more than 9.99% of the issued and outstanding Holdco Common Shares immediately following the Merger Effective Time.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange Ratio” means the ratio for which each Company Common Share receiving the Arrangement Share Consideration Amount shall, at the Arrangement Effective Time, convert into the right to receive that number of Holdco Common Shares (or, subject to Section 3.01, Holdco Non-Voting Common Shares) determined in accordance with the Calculation Methodology. For example, an Exchange Ratio of 0.500 means that each Company Common Share shall, at the Arrangement Effective Time, convert into the right to receive 0.500 of a Holdco Common Share.

 

“Excluded Investments” means, collectively, Lift Cannabis Co. Ltd. and Cansativa GmbH.

 

“Families First Act” means the Families First Coronavirus Response Act, as signed into law by the President of the United States on March 18, 2020.

 

“Final Order” means the final order of the Court pursuant to Section 291 of the BCBCA, in a form reasonably acceptable to each of SPAC and the Company, approving the Arrangement, as such order may be amended by the Court with the consent of SPAC and the Company, such consent to not be unreasonably withheld, conditioned or delayed, at any time prior to the Arrangement Effective Time or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended, on appeal, provided that any such amendment is reasonably acceptable to each of SPAC and the Company.

 

 

“Fully-Diluted Benefits Basis” means the total number of issued and outstanding Holdco Common Shares and Holdco Non-Voting Common Shares immediately following the Closing calculated by applying the treasury share method in accordance with the Calculation Methodology, excluding (a) the Earn-Out Shares, (b) the Converted Company Warrants and (c) the Converted Restricted Shares.

 

“GAAP” means United States generally accepted accounting principles.

 

“Hazardous Substances” means: (a) those substances defined in or regulated under the following United States federal statutes and their state and Canada, Colombia, Portugal or other foreign counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (b) petroleum and petroleum products, including crude oil and any fractions thereof; (c) natural gas, synthetic gas, and any mixtures thereof; (d) herbicides, pesticides, rodenticides, lead, radioactive substances, polychlorinated biphenyls, asbestos and radon; and (e) any substance, material or waste regulated by any Governmental Authority pursuant to any Environmental Law.

 

“Herbal Brands Debt” means the indebtedness of the Company pursuant to that certain Loan and Security Agreement, dated as of May 3, 2019, by and among Rock Cliff Capital LLC, Herbal Brands, Inc. and certain guarantors party thereto.

 

“Holdco Organizational Documents” means the notice of articles and articles of Holdco, as amended, amended and restated, modified or supplemented from time to time.

 

“Intellectual Property” means: (a) patents and patent applications, together with all reissues, continuations, continuations-in-part, divisionals, revisions, extensions or reexaminations thereof; (b) trademarks and service marks, trade dress, logos, trade names, corporate names, brands, slogans, and other source identifiers, and all applications, registrations, and renewals in connection therewith, together with all of the goodwill associated with the foregoing; (c) copyrights, and other works of authorship (including Software), and registrations and applications for registration, renewals and extensions thereof; (d) trade secrets and know-how (including ideas, formulas, compositions, inventions (whether or not patentable or reduced to practice)), and rights in data and databases; (e) Internet domain names; and (f) other similar intellectual property rights.

 

“Interim Order” means the interim order of the Court contemplated by Section 2.02 of this Agreement and made pursuant to Section 291 of the BCBCA, in a form reasonably acceptable to each of SPAC and the Company, providing for, among other things, the calling and holding of the Company Meeting, as the same may be amended by the Court with the consent of SPAC and the Company, such consent not to be unreasonably withheld, conditioned or delayed, provided that any such amendment is reasonably acceptable to each of the Company and SPAC.

 

 

“Inventories” means all inventories, merchandise, goods, raw materials, packaging, labels, supplies and other personal property that are maintained, held or stored by or for the Company or any Company Subsidiary, and any prepaid deposits for any of the same.

 

“Key Company Shareholders” means the Company Shareholders set forth on Schedule B.

 

“knowledge” or “to the knowledge” of a person means (a) in the case of the Company, the actual knowledge of the persons set forth on Schedule A after due and reasonable inquiry, and (b) in the case of SPAC, the actual knowledge of George Schultze, Gary Julien, Jeffrey Glick and Scarlett Du after due and reasonable inquiry.

 

“Lien” means any lien, security interest, mortgage, pledge, adverse claim or other encumbrance of any kind that secures the payment or performance of an obligation (other than those created under applicable securities Laws, and not including any license of Intellectual Property).

 

“Merger Sub Organizational Documents” means the certificate of incorporation and by-laws of Merger Sub, as amended, modified or supplemented from time to time.

 

“Misrepresentation” means an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

 

“Nasdaq” means the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market, as may be applicable.

 

“Neem Holdings” means Neem Holdings, LLC, a Delaware limited liability company.

 

“Neem Holdings Convertible Note” means that certain unsecured subordinated convertible note dated as of November 9, 2020 issued by the Company in favor of Neem Holdings in the principal amount of $3,000,000.

 

“Neem Holdings Warrant Agreement” means that certain warrant agreement, dated as of November 9, 2020, by and between the Company and Neem Holdings.

 

“Neem Holdings Warrants” means warrants to purchase Company Common Shares pursuant to the Neem Holdings Warrant Agreement.

 

 

“Option and Warrant Value” means the aggregate value of the issued and outstanding Company Options and Company Warrants calculated in accordance with the Calculation Methodology.

 

“Payment Spreadsheet” means a spreadsheet that shall be delivered by the Company to SPAC pursuant to Section 3.01(b) at least five (5) Business Days prior to the Closing, which shall set forth, in accordance with the Calculation Methodology, the allocation of the Arrangement Consideration among each of the Company Shareholders, including (a) the number of Holdco Common Shares and Holdco Non-Voting Common Shares, as applicable, issuable to each Company Shareholder and (b) the amount of Cash Arrangement Consideration payable to certain Company Shareholders.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Permitted Liens” means: (a) such imperfections of title, easements, encumbrances, Liens or restrictions that do not materially impair the current use of the Company’s or any Company Subsidiary’s assets that are subject thereto; (b) materialmen’s, mechanics’, carriers’, workmen’s, warehousemen’s, repairmen’s, landlord’s and other similar Liens arising or incurred in the ordinary course of business, or deposits to obtain the release of such Liens; (c) Liens for Taxes not yet due and payable, or being contested in good faith; (d)  licenses, sublicenses or other rights to Intellectual Property owned by or licensed to the Company or the Company Subsidiaries granted to any licensee in the ordinary course of business; (e) purchase money Liens securing rental payments under capital lease arrangements; (f) Liens expressly disclosed on the latest balance sheet and those Liens arising out of, under or in connection with (i) the Secured Convertible Notes, (ii) the Herbal Brands Debt, and (iii) indebtedness incurred not in violation of Section 7.01(b)(vi), (g) with respect to real property (i) easements, declarations, covenants, rights-of-way, restrictions and other charges, instruments or encumbrances affecting title to real estate; (ii) zoning ordinances, variances, conditional use permits and similar regulations, permits, approvals and conditions; and (iii) Liens not created by the Company that affect the underlying fee interest of any leased real property, including master leases or ground leases and any set of facts that an accurate up-to-date survey would show, in each case, to the extent that such Liens are not material to the Company and the Company Subsidiaries, taken as a whole; (h) Liens deemed to be created by this Agreement or any other agreement providing for the Transactions; and (i) such other imperfections of title or Liens, if any, arising in the ordinary course of business or that would not be material to the Company and the Company Subsidiaries, taken as a whole.

 

“person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

“Personal Information” means (a) information related to an identified or identifiable individual (e.g., name, address telephone number, email address, financial account number, government-issued identifier), (b) any other data which allows one to identify, contact, or precisely locate an individual and (c) any other, similar information or data regulated by Privacy/Data Security Laws applicable to the business. “PIPE” means any private placement or placements of SPAC Common Stock or securities or indebtedness exercisable or exchangeable for, or convertible into, shares of SPAC Common Stock, in each case, which shall become Holdco Common Shares in connection with the consummation of the Transactions.

 

 

“Plan of Arrangement” means the Plan of Arrangement in substantially the form attached hereto as Exhibit C.

 

“Privacy/Data Security Laws” means all laws governing the receipt, collection, use, storage, processing, sharing, security, disclosure, or transfer of Personal Information.

 

“Products” mean any products or services currently or previously researched, designed, developed, manufactured, performed, licensed, sold, distributed other otherwise made available by or on behalf of the Company or any Company Subsidiary, from which the Company or any Company Subsidiary has derived previously, is currently deriving or is scheduled to derive, revenue from the sale or provision thereof.

 

“Put Call Agreement” means that certain Put Call Agreement, dated October 31, 2019, by and among the Company, Eagle and the Eagle Minority Shareholders.

 

“Redemption Rights” means the redemption rights provided for in Section 9.2 of Article IX of SPAC’s Certificate of Incorporation.

 

“Rollover Spreadsheet” means a spreadsheet that shall be delivered by the Company to SPAC pursuant to Section 3.01(b) at least five (5) Business Days prior to the Closing, which shall set forth, in accordance with the Calculation Methodology, (i) the number of Holdco Common Shares subject to each Company Option (including the exercisable portion as of the date of Closing) after the conversion of such Company Option in accordance with Section 3.04(a) and the applicable exercise price, (ii) the number of Holdco Common Shares subject to Company RSUs after conversion of such Company RSUs in accordance with Section 3.04(b), (iii) the number of Holdco Common Shares subject to Company Restricted Shares after conversion of such Company Restricted Shares in accordance with Section 3.04(c), and (iv) the number of Holdco Common Shares for which each Company Warrant held by a particular holder of Company Warrants thereof is exercisable after the conversion of such Company Warrant in accordance with Section 3.04(d) and the applicable exercise price.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Secured Convertible Notes” means collectively, (a) that certain Secured Convertible Note No. 1A dated as of March 30, 2019 in the principal amount of $20,000,000, (b) that certain Secured Convertible Note No. 1B dated as of March 30, 2019 in the principal amount of $3,000,000, (c) that certain Secured Convertible Note No. 1C dated as of March 30, 2019 in the principal amount of $2,500,000, (d) that certain Secured Convertible Note No. 1D dated as of March 30, 2019 in the principal amount of $2,000,000, and (e) that certain Secured Convertible Promissory Note No. 1E in the principal amount of $250,000.

 

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Deposit” means the prepaid security deposit under that certain Tenancy Agreement, by and between the Company and Segro Neunzehnte Grundbesitz GmbH.

 

“Shared Transaction Expenses” means (a) any Transaction Expenses (other than audit, legal, accounting, financial or other advisory costs, fees and expenses) incurred in (i) the preparation, printing and mailing of the Proxy Statement/Prospectus and the Canadian Information Circular and (ii) the solicitation of the SPAC Stockholders and Company Shareholders and (b) SEC registration fees and fees payable to other securities regulators.

 

“Shareholders Agreement” means that certain Amended and Restated Shareholders Agreement, dated March 30, 2019, by and among the Company and the shareholders of the Company set forth on Schedule A thereto.

 

“Software” means all computer software (in object code or source code format), data and databases, and related documentation and materials.

 

“SPAC Certificate of Incorporation” means that certain Amended and Restated SPAC Certificate of Incorporation, dated December 10, 2018.

 

“SPAC Common Stock” means the shares of SPAC’s common stock, par value $0.0001 per share.

 

“SPAC Earn-Out Shares” means the number of Holdco Common Shares equal to the number of Sponsor Earn-Out Shares (as defined in Exhibit A to the Transaction Support Agreement) subject to forfeiture pursuant to Section 1 of the Transaction Support Agreement and the Escrow Agreement Amendment (as defined in the Transaction Support Agreement).

 

“SPAC Material Adverse Effect” means any Effects that, individually or in the aggregate with all other events, changes and effects, (a) is or is reasonably likely to be materially adverse to the business, financial condition, assets, liabilities or operations of SPAC or (b) does or would prevent, materially delay or materially impede the performance by SPAC of its obligations under this Agreement or the consummation of the Transactions.

 

“SPAC Organizational Documents” means the SPAC Certificate of Incorporation, by-laws, and Trust Agreement of SPAC, in each case as amended, modified or supplemented from time to time.

 

“SPAC Proposals” means the approval and adoption of (a) this Agreement and the Transactions, including the Merger, and (b) any other proposals the parties deem necessary or desirable to effect the Transactions.

 

“SPAC Stockholder Meeting” means the meeting of the SPAC Stockholders to approve the SPAC Proposals.

 

 

“SPAC Stockholders” means the holders of shares of SPAC Common Stock.

 

“SPAC Transaction Expenses” means the reasonable and documented Transaction Expenses of SPAC or any of its affiliates, including (a) premiums, commissions and other fees paid in connection with obtaining SPAC’s D&O Tail Policy, (b) any and all Transaction Expenses incurred in the negotiation or consummation of a PIPE, including advisory fees and placement fees, and (c) the preparation, printing and mailing of the Extension Proxy Statement, but, in each case, excluding any Shared Transaction Expenses.

 

“SPAC Transaction Expenses Cap” means eight million dollars ($8,000,000); provided that, if after giving effect to the exercise of Redemption Rights and payments related thereto, SPAC shall have at least one hundred thirty million dollars ($130,000,000) of cash either in or outside of the Trust Account as of the Closing, including the aggregate amount of the PIPEs consummated prior to, or concurrently with, the Closing, then the SPAC Transaction Expenses Cap means twelve million dollars ($12,000,000).

 

“SPAC Units” means units of SPAC consisting of one (1) share of SPAC Common Stock and one (1) SPAC Warrant.

 

“SPAC Warrant Agreement” means that certain warrant agreement, dated December 10, 2018, by and between SPAC and Continental Stock Transfer and Trust Company.

 

“SPAC Warrants” means warrants to purchase shares of SPAC Common Stock as contemplated under the SPAC Warrant Agreement, with each warrant exercisable for one (1) share of SPAC Common Stock at an exercise price of $11.50.

 

“subsidiary” or “subsidiaries” of the Company (other than the Excluded Investments), the Surviving Corporation, SPAC or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries.

 

“Tax” or “Taxes” means any federal, state, provincial, local and foreign income, profits, franchise, gross receipts, environmental, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, real property, personal property, unclaimed property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions

 

“Tax Return” means any returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns, as well as attachments thereto and amendments thereof) required to be supplied to a Tax authority relating to Taxes.

 

“Transaction Consideration” means, collectively, the Arrangement Consideration and the SPAC Merger Consideration and, each individually, as the context may require.

 

 

“Transaction Expenses” means all out-of-pocket fees, costs and expenses (including all fees, costs and expenses of outside counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates and all fees, costs and expenses in connection with newly issued equity and/or debt financing in connection with the Transactions) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and consummation of the Transactions, the preparation, printing and mailing of the Canadian Information Circular, the Proxy Statement/Prospectus, the Extension Proxy Statement (as applicable) and the solicitation of the SPAC Stockholders and Company Shareholders and the preparation of any required filings under applicable Antitrust Laws, if any.

 

“Transactions” means the transactions contemplated by this Agreement, the Plan of Arrangement and any of Ancillary Agreements, including the Merger, the Arrangement, the SPAC Contribution and the US Subsidiary Contribution.

 

“Transfer Tax” means any sales, use, value-added, business, goods and services, transfer (including any stamp duty or other similar Tax chargeable in respect of any instrument transferring property), documentary, conveyancing or similar Tax or expense or any recording fee, in each case that is imposed as a result of the Transactions, together with any penalty, interest and addition to any such item with respect to such item; provided, however, for the avoidance of doubt, the term Transfer Tax shall not include any Tax imposed by the Republic of Colombia in connection with the Transactions (such Tax imposed by the Republic of Colombia (the “Colombian Tax”)), or any income Tax or similar Tax imposed on any direct or indirect equity holder of the SPAC, the Company, any Company Subsidiary or Holdco.

 

“Treasury Regulations” means the United States Treasury regulations issued pursuant to the Code.

 

SECTION 1.02  Further Definitions. The following terms have the meaning set forth in the Sections set forth below:

 

Defined Term		Location of Definition
2020 Balance Sheet		§ 4.07(b)
Action		§ 4.09
Additional SEC Reports		§ 7.04(a)
Agreed PIPE		Recitals
Agreement		Preamble
Amended and Restated Holdco Articles		§ 2.12(c)
Anti-Money Laundering Laws		§ 4.22(c)
Antitrust Laws		§ 8.13(a)
Arrangement Consideration		§ 3.01(a)
Arrangement Share Consideration Amount		§ 3.01(a)
Audited Financial Statements		§ 4.07(a)
BCBCA		Recitals
Blue Sky Laws		§ 4.05(b)
Cash Exchange Fund		§ 3.03(a)

 

 

Defined Term		Location of Definition
Certificate of Merger		§ 2.10(a)
Certificates		§ 3.03(b)
Claims		§ 7.03
Closing		§ 2.10(b)
Closing Date		§ 2.10(b)
Colombian Tax		Definition of Transfer Tax
Company		Preamble
Company Acquisition Agreement		§ 8.04(a)
Company Board		Recitals
Company Certificate		§ 3.01(b)
Company Disclosure Schedule		Article IV
Company Permits		§ 4.06(a)
Company Preferred Share Conversion		§ 3.02(b)(i)
Company Share Award		§ 4.03(c)
Confidentiality Agreement		§ 8.03(b)
Continuing Employees		§ 8.05(a)
Converted Company Warrant		§ 3.04(d)
Converted Option Award		§ 3.04(a)
Converted Restricted Share		§ 3.04(c)
Converted RSU Award		§ 3.04(b)
Customers		§ 4.19
D&O Indemnified Party		§ 8.06(a)
D&O Tail Policy(ies)		§ 8.06(b)
Data Security Requirements		§ 4.13(h)
DGCL		Recitals
Environmental Permits		§ 4.15
ERISA		§ 4.10(a)
ERISA Affiliate		§ 4.10(c)
Exchange Agent		§ 3.03(a)
Exchange Fund		§ 3.03(a)
Extension Proxy Statement		§ 8.18
Fixtures and Equipment		§ 4.21
Governmental Authority		§ 4.05(b)
Health Plan		§ 4.10(h)
Holdco		Preamble
Holdco Board		Recitals
Holdco Common Shares		Recitals
Holdco D&O Policy		§ 8.06(c)
Holdco Non-Voting Common Shares		Recitals
Holdco Plan		§ 8.05(b)
Holdco Warrant		§ 3.06
Indebtedness Covenants		§ 8.19
Investors’ Rights Agreement		Recitals

 

 

Defined Term		Location of Definition
IRS		§ 4.10(b)
Law		§ 4.05(a)
Material Contracts		§ 4.16(a)
Merger		Recitals
Merger Effective Time		§ 2.10(a)
Merger Sub		Preamble
Merger Sub Board		Recitals
Merger Sub Common Stock		§ 3.02(c)(ii)
Original Agreement		Recitals
Original Agreement Date		Recitals
Outside Date		§ 10.01(b)
PCAOB Financials		§ 8.15
Plans		§ 4.10(a)
Post-Closing Equity Pool		§ 8.05(b)
Post-Signing Returns		§ 8.10(b)(i)
Post-Signing Schedules		§ 8.20
PPACA		§ 4.10(h)
Pre-Closing Conference Call		§ 2.07
Proxy Statement/Prospectus		§ 8.01(a)
Registration Statement		§ 8.01(a)
Remedies Exceptions		§ 4.04
Representatives		§ 8.03(a)
Securities Exchange Fund		§ 3.03(a)
Shareholder Support Agreements		Recitals
SPAC		Preamble
SPAC Board		Recitals
SPAC Contribution		Recitals
SPAC Disclosure Schedule		Article V
SPAC Extension		§ 8.18
SPAC Information		§ 2.04(d)
SPAC Material Contracts		§ 5.12(a)
SPAC Merger Consideration		§ 3.02(c)(ii)
SPAC Permits		§ 5.06
SPAC Preferred Stock		§ 5.03(a)
SPAC SEC Reports		§ 5.07(a)
SPAC Warrant Amendment		§ 3.06
Sponsor		Recitals
Sponsor Loans		§ 7.02(b)(vi)
Subscription Agreements		Recitals
Suppliers		§ 4.19
Surviving Corporation		§ 2.09
Tail Period		§ 8.06(b)
Terminating Company Breach		§ 10.01(g)
Terminating SPAC Breach		§ 10.01(h)
Transaction Support Agreement		Recitals

 

 

Defined Term		Location of Definition
Trust Account		§ 5.18
Trust Agreement		§ 5.18
Trust Fund		§ 5.18
Trustee		§ 5.18
US Subsidiary		Recitals
US Subsidiary Contribution		Recitals
Working Capital Warrants		§ 7.02(b)(vi)

 

SECTION 1.03  Construction.

 

(a)  Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this entire Agreement, (iv) the terms “Article,” “Section,” “Schedule” and “Exhibit” refer to the specified Article, Section, Schedule or Exhibit of or to this Agreement, (v) the word “including” means “including without limitation,” (vi) the word “or” shall be disjunctive but not exclusive, (vii) references to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto, (viii) references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation, (ix) the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”, (x) the word “will” shall be construed to have the same meaning and effect as the word “shall,” and (xi) the term “the date of this Agreement” or “the date hereof” means the Original Agreement Date.

 

(b)  The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction shall be applied against any party.

 

(c)  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. If any action is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day.

 

(d)  All accounting terms used in Section 4.07 and not expressly defined herein shall have the meanings given to them under GAAP.

 

(e)  Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean U.S. dollars (USD) and all payments hereunder shall be made in U.S. dollars (USD). In the event that any amounts due, payable or otherwise referenced in this Agreement are denominated in any currency other than U.S. dollars (USD), such amounts shall be converted into U.S. dollars (USD) based on the applicable foreign exchange rate for such foreign currency published by the Wall Street Journal on the date of this Agreement or on the date that such payment is due or payable, as the case may be.

 

 

Article II

THE ARRANGEMENT; AGREEMENT AND PLAN OF MERGER

 

SECTION 2.01  The Arrangement. On the terms and subject to the conditions hereof, the Company and Holdco shall proceed to effect the Arrangement under Part 9, Division 5 of the BCBCA at the Arrangement Effective Time, on the terms contained in the Plan of Arrangement.

 

SECTION 2.02  The Interim Order. As soon as reasonably practicable after the date of this Agreement, but in any event no later than five (5) Business Days after the effective date of the Registration Statement, the Company shall apply in a manner reasonably acceptable to SPAC pursuant to Part 9, Division 5 of the BCBCA and, in cooperation with SPAC, prepare, file and diligently pursue an application to the Court for the Interim Order in respect of the Arrangement, which shall provide, among other things:

 

(a)  for the class of persons to whom notice is to be provided in respect of the Arrangement and the Company Meeting and for the manner in which such notice is to be provided;

 

(b)  that the required level of approval for the Company Arrangement Resolution shall be the Company Required Approval;

 

(c)  that, in all other respects, the terms, restrictions and conditions of the Company Governance Documents, including quorum requirements and all other matters, shall apply in respect of the Company Meeting;

 

(d)  for the grant of the Arrangement Dissent Rights to those Company Shareholders who are registered Company Shareholders;

 

(e)  for the notice requirements with respect to the presentation of the application to the Court for the Final Order;

 

(f)  that the Company Meeting may be adjourned or postponed from time to time by the Company with the consent of SPAC (not to be unreasonably withheld, delayed or conditioned), in accordance with the terms of this Agreement without the need for additional approval of the Court;

 

(g)  that the record date for the Company Shareholders entitled to notice of and to vote at the Company Meeting will not change in respect of any adjournment(s) or postponement(s) of the Company Meeting; and

 

(h)  for such other matters as the parties may agree are reasonably necessary to complete the Transactions.

 

 

SECTION 2.03  The Company Meeting.

 

(a)  Subject to the terms of this Agreement, the Interim Order, and the provision of the SPAC Information, the Company shall convene and conduct the Company Meeting in accordance with the Company Governance Documents, applicable Laws and the Interim Order as soon as reasonably practicable, and shall not adjourn, postpone or cancel (or propose the adjournments, postponement or cancellation of) the Company Meeting without the prior written consent of SPAC (not to be unreasonably withheld, delayed or conditioned), except in the case of an adjournment as required for quorum purposes. The Company shall consult with SPAC in fixing the record date for the Company Meeting and the date of the Company Meeting, give notice to SPAC of the Company Meeting and allow SPAC’s representatives and legal counsel to attend the Company Meeting. The Company shall use its reasonable best efforts to obtain the Company Required Approval of the Company Arrangement Resolution, including instructing the management proxyholders named in the Canadian Information Circular to vote any discretionary or blank proxy submitted by shareholders in favor of such action, and shall take all other action reasonably necessary or advisable to secure the Company Required Approvals.

 

(b)  The Company shall provide SPAC with (i) updates with respect to the aggregate tally of the proxies received by the Company in respect of the Company Arrangement Resolution, (ii) updates with respect to any communication (written or oral) from any Company Shareholder in opposition to the Arrangement or any written notice of dissent, purported exercise or withdrawal of Arrangement Dissent Rights, (iii) the right to demand postponement or adjournment of the Company Meeting if, based on the tally of proxies, the Company will not receive the Company Required Approvals; provided, however, that the Company shall not be permitted to postpone the Company Meeting more than the earlier of (A) five (5) Business Days prior to the Outside Date and (B) ten (10) days from the date of the first Company Meeting without the prior written consent of SPAC (not to be unreasonably withheld, delayed or conditioned), and (iv) the right to review and comment on all communications sent to Company Shareholders. The Company shall not make any payment or settlement offer, or agree to any payment or settlement prior to the Arrangement Effective Time with respect to Arrangement Dissent Rights without the prior written consent of SPAC (not to be unreasonably withheld, conditioned or delayed).

 

SECTION 2.04  The Canadian Information Circular.

 

(a)  The Company shall promptly prepare and complete, in good faith consultation with SPAC, the Canadian Information Circular together with any other documents required by applicable Law in connection with the Company Meeting and the Arrangement, and the Company shall, as promptly as practicable after obtaining the Interim Order, cause the Canadian Information Circular and such other documents to be sent to each Company Shareholders and other person as required by the Interim Order and Law.

 

 

(b)  The Company shall ensure that the Canadian Information Circular (i) complies with the Company Governance Documents and applicable Law, (ii) does not contain any Misrepresentation, except with respect to the SPAC Information included in the Canadian Information Circular, which SPAC will ensure does not contain a Misrepresentation, (iii) provides the Company Shareholders with sufficient information (explained in sufficient detail) to permit them to form a reasoned judgement concerning the matters to be placed before the Company Meeting and (iv) states any material interest of each director and officer, whether as director, officer, securityholder or creditor of the Company, as and to the extent required by applicable Law.

 

(c)  The Company shall, subject to the terms of this Agreement, ensure that the Canadian Information Circular includes a statement that the Company Board has unanimously (i) determined that the Transactions are in the best interests of the Company and fair to the Company Shareholders and (ii) recommended that the Company Shareholders vote in favor of the Company Arrangement Resolution.

 

(d)  SPAC shall assist the Company in the preparation of the Canadian Information Circular, including obtaining and furnishing to the Company any information with respect to SPAC required to be included under applicable Laws in the Canadian Information Circular (the “SPAC Information”), and ensuring that the SPAC Information does not contain any Misrepresentation. The Company shall give SPAC and its legal counsel a reasonable opportunity to review and comment on drafts of the Canadian Information Circular and other related documents, and shall accept the reasonable comments made by SPAC and its counsel, and agrees that all information relating to SPAC included in the Canadian Information Circular must be in a form and content reasonably satisfactory to SPAC.

 

(e)  Each party shall promptly notify the other party if it becomes aware that the Canadian Information Circular contains a Misrepresentation, or otherwise requires an amendment or supplement. The parties shall co-operate in the preparation of any such amendment or supplement as required or appropriate, and the Company shall promptly deliver or otherwise disseminate any such amendment or supplement to the Company Shareholders as required by the Court or applicable Law.

 

SECTION 2.05 The Final Order. The Company shall take all steps necessary or desirable to submit the Arrangement to the Court and diligently pursue an application for the Final Order pursuant to Part 9, Division 5 of the BCBCA, as soon as reasonably practicable, but in any event not later than three (3) Business Days after the Company Arrangement Resolution is passed at the Company Meeting as provided for in the Interim Order.

 

SECTION 2.06  Court Proceedings.

 

(a)  In connection with all Court proceedings relating to obtaining the Interim Order and the Final Order, the Company shall:

 

(i)  diligently pursue, and cooperate with SPAC in diligently pursuing, the Interim Order and the Final Order;

 

 

(ii)  provide legal counsel to SPAC with a reasonable opportunity to review and comment upon drafts of all material to be filed with the Court in connection with the Arrangement, and will accept the reasonable comments of SPAC and its legal counsel;

 

(iii)  provide copies of any notice of appearance, evidence or other documents served on the Company or its legal counsel in respect of the application for the Interim Order or the Final Order or any appeal from them, and any notice, written or oral, indicating the intention of any person to appeal, or oppose the granting of, the Interim Order or the Final Order;

 

(iv)  ensure that all material filed with the Court in connection with the Arrangement is consistent with this Agreement and the Plan of Arrangement;

 

(v)  not file any material with the Court in connection with the Arrangement or serve any such material, and will not agree to modify or amend any materials so filed or served, except as contemplated by this Agreement or with SPAC’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed, provided SPAC is not required to agree or consent to any increase or variation in the form of the Arrangement Consideration or other modification or amendment to such filed or served materials that expands or increases SPAC’s obligations, or diminishes or limits SPAC’s rights, set forth in any such filed or served materials or under this Agreement or the Arrangement;

 

(vi)  subject to this Agreement, oppose any proposal from any person that the Final Order contain any provision inconsistent with the Arrangement or this Agreement, and if at any time after the issuance of the Final Order and prior to the Arrangement Effective Time, the Company is required by the terms of the Final Order or by applicable Law to return to Court with respect to the Final Order, it will do so only after notice to, and in good faith consultation and cooperation with, SPAC; and

 

(vii)  not object to legal counsel to SPAC making such submissions on the hearing of the motion for the Interim Order and the application for the Final Order as such counsel considers appropriate, provided SPAC advises the Company of the nature of any such submissions prior to the hearing and such submissions are consistent with this Agreement and the Plan of Arrangement.

 

(b)  Subject to the terms of this Agreement (including Section 10.04), SPAC will cooperate with, and assist the Company in, seeking the Interim Order and the Final Order, including by providing the Company on a timely basis any information reasonably required or requested to be supplied by SPAC in connection therewith.

 

 

SECTION 2.07  Arrangement Effective Time; Document Closing. As promptly as practicable, but in no event later than two (2) Business Days, after the satisfaction or, if permissible, waiver of the conditions set forth in Article IX (other than those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the satisfaction or, if permissible, waiver of such conditions at the Closing), or at such other time as SPAC and the Company may agree in writing, the parties hereto shall (a) convene a pre-closing conference call (the “Pre-Closing Conference Call”) to confirm such satisfaction or waiver, as the case may be, but with only the documents necessary to effect (i) the Eagle Share Exchange and (ii) the Arrangement being delivered or filed immediately following the Pre-Closing Conference Call and all other documents and agreements delivered in escrow for release on the Closing Date pending the Merger Effective Time and (b) immediately following such Pre-Closing Conference Call, cause consummation of the Eagle Share Exchange and the Arrangement to become effective at the Arrangement Effective Time in accordance with the Plan of Arrangement and file the Certificate of Merger in accordance with Section 2.10.

 

SECTION 2.08  Tax Treatment of the Arrangement and the Merger.

 

(a)  The Arrangement and Merger are intended to qualify as exchanges described in Section 351 of the Code and the Treasury Regulations promulgated thereunder, and for the Eagle Share Exchange and the Arrangement to be treated as completed before the Merger Effective Time. Each party agrees to treat the Arrangement and the Merger as a transaction subject to Section 351 of the Code for all United States federal income tax purposes, for the Eagle Share Exchange and the Arrangement to be treated as completed before the Merger Effective Time, and to not take any position on any Tax return or otherwise take any Tax reporting position inconsistent with such treatment, unless otherwise required by a “determination” within the meaning of Section 1313 of the Code that such treatment is not correct. Each party agrees to act in good faith, consistent with the intent of the parties and the intended treatment of the Arrangement and the Merger as set forth herein.

 

(b)  Where a Company Shareholder desires to so elect, Holdco shall make a joint election with such Company Shareholder in respect of its disposition of its Company Shares pursuant to Section 85 of the Income Tax Act (Canada) (and any similar provision of any applicable provincial Tax legislation) in accordance with the procedures and within the time limits set out in the Plan of Arrangement. The agreed amount under such joint elections shall be determined by each such Company Shareholder in its, his or her sole discretion within the limits set out in the Income Tax Act (Canada).

 

SECTION 2.09  The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Merger Effective Time, Merger Sub shall be merged with and into SPAC. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and SPAC shall continue as the surviving corporation of the Merger (the “Surviving Corporation”). The consummation of the Eagle Share Exchange and the Arrangement shall be a condition precedent to the consummation of the Merger.

 

SECTION 2.10  Merger Effective Time.

 

(a)  On the Arrangement Effective Date, immediately after causing the Arrangement to become effective in accordance with the Plan of Arrangement, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL and mutually agreed by the parties. The Certificate of Merger shall specify that the Merger shall become effective at 12:01 a.m. Vancouver, British Columbia time (or 3:01 a.m. Eastern Time) on the calendar day immediately following the day of the filing of such Certificate of Merger (the “Merger Effective Time”).

 

 

(b)  On the calendar day of the Merger Effective Time, a closing of the Transactions shall be effected remotely by the exchange of documents and signatures in PDF format by electronic mail. Only those documents and agreements not delivered or filed immediately following the Pre-Closing Conference Call to effect the Arrangement and necessary to effect the Closing (including any certificates and other Ancillary Agreements to be delivered at Closing) shall be delivered or filed at Closing. The date on which the Merger Effective Time occurs shall be the “Closing Date” and the closing of the Transactions that occur following the Merger Effective Time on the Closing Date shall be the referred to herein as the “Closing”.

 

SECTION 2.11  Effect of the Merger. At the Merger Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Merger Effective Time, all the property, rights, privileges, immunities, powers, franchises, licenses and authority of SPAC and Merger Sub shall vest in Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of SPAC and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of Surviving Corporation.

 

SECTION 2.12  Certificate of Incorporation; By-laws; Holdco Organizational Documents.

 

(a)  At the Merger Effective Time, the SPAC Certificate of Incorporation, as in effect immediately prior to the Merger Effective Time, shall be the certificate of incorporation of Surviving Corporation, until thereafter amended as provided by applicable Law; provided that the SPAC Certificate of Incorporation shall be amended and restated in its entirety to read like the Merger Sub Certificate of Incorporation.

 

(b)  At the Merger Effective Time, the by-laws of Merger Sub, as in effect immediately prior to the Merger Effective Time, shall be the by-laws of Surviving Corporation until thereafter amended as provided by law, the certificate of incorporation of Surviving Corporation and such by-laws, as applicable.

 

(c)  At or prior to the Arrangement Effective Time the parties shall cause Holdco to make such filings as are necessary under the BCBCA to amend and restate the Holdco Organizational Documents such that the articles of Holdco are in substantially the form attached hereto as Exhibit G (the “Amended and Restated Holdco Articles”), and the notice of articles of Holdco is amended to reflect the terms of the Amended and Restated Holdco Articles, including the creation of the preferred shares and the Holdco Non-Voting Common Shares.

 

 

SECTION 2.13  Directors and Officers.

 

(a)  The parties shall cause the initial directors of the Company Board and the initial officers of the Company as of immediately following the Arrangement Effective Time to be comprised of individuals to be determined by the Company on or prior to Closing, each to hold office in accordance with the Company Governance Documents.

 

(b)  At the Arrangement Effective Time, the Holdco Board shall be comprised of up to seven (7) directors, as determined in the sole discretion of the Company. The parties shall cause the initial directors of the Holdco Board and the initial officers of Holdco as of immediately following the Arrangement Effective Time to be comprised of (i) the individuals set forth on Exhibit D and (ii) the individuals to be determined by the Company (subject to (A) the right of SPAC with respect to the designation of one initial director, and (B) in the event that the Holdco Board consists of six (6) or seven (7) directors, the consent of SPAC (such consent not to be unreasonably withheld, conditioned or delayed) with respect to the designation of one additional initial director) on or prior to Closing, each to hold office in accordance with the Holdco Governance Documents.

 

(c)  The parties shall cause the initial directors of the Surviving Corporation and the officers of Surviving Corporation as of immediately following the Merger Effective Time to be comprised of individuals to be determined by the Company on or prior to Closing, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

 

Article III

CONVERSION OF SECURITIES; ARRANGEMENT CONSIDERATION

 

SECTION 3.01  Calculation of Arrangement Consideration; Company Certificate.

 

(a)  The aggregate Arrangement consideration (the “Arrangement Consideration”) shall be an amount equal to (i) $183,600,000, minus (ii) Closing Company Net Debt, minus (iii) the amount, if any, by which the Company Transaction Expenses exceed the Company Transaction Expenses Cap, plus (iv) the amount, if any, by which the SPAC Transaction Expenses exceed the SPAC Transaction Expenses Cap, minus (v) the Option and Warrant Value. The Arrangement Consideration minus an amount equal to the Cash Arrangement Consideration (such amount, the “Arrangement Share Consideration Amount”), shall be paid to the Company Shareholders in Holdco Common Shares, which shall be valued at ten dollars ($10.00) per share (provided that, in the event that the delivery of any Holdco Common Shares in the Arrangement would result in the Designated Holders holding any Excess Shares, then the Designated Holders shall receive one (1) Holdco Non-Voting Common Share in lieu of each Holdco Common Share that is an Excess Share), and the Cash Arrangement Consideration shall be paid to certain Company Shareholders in cash. The Arrangement Share Consideration Amount and the Cash Arrangement Consideration shall be allocated among the Company Shareholders pursuant to the Payment Spreadsheet and shall be calculated in accordance with the Calculation Methodology.

 

 

(b)  At least five (5) Business Days prior to the Closing Date, the Company shall cause the Chief Financial Officer of the Company, solely in his or her capacity as such, to deliver to SPAC a certificate (the “Company Certificate”) certified by such Chief Financial Officer (solely in his or her capacity as such) setting forth: (i) the Company’s good faith estimate of (A) the Closing Company Net Debt, which must include reasonable supporting materials for the amount of each item included in Closing Company Net Debt, including copies of payoff letters or other documentation from each creditor of the Company setting forth the outstanding principal and interest amount of each item included in Closing Company Net Debt, (B) the Company Transaction Expenses (including reasonable supporting materials for the amount of each item included in Company Transaction Expenses, including any Tax filings with respect to the amount of the Colombian Tax), and (C) the Option and Warrant Value; (ii) based upon the Closing Company Net Debt, Company Transaction Expenses and the Option and Warrant Value, (A) a calculation of the Arrangement Consideration, (B) a calculation of the Exchange Ratio, (C) the Payment Spreadsheet and (D) the Rollover Spreadsheet; and (iii) a list of, and invoices and payment instructions for, all unpaid Company Transaction Expenses to be paid at Closing. Absent manifest error, the final, binding and conclusive calculations of the Closing Company Net Debt, Company Transaction Expenses, Option and Warrant Value, Arrangement Consideration and Exchange Ratio set forth in the Company Certificate, based upon the delivery by the Company of its good faith estimates of such calculations and certified by the Chief Financial Officer of the Company in accordance with this Section 3.01(b), will be the Closing Company Net Debt, Company Transaction Expenses, Option and Warrant Value, Arrangement Consideration and Exchange Ratio for all purposes of this Agreement. At least five (5) Business Days prior to the Closing, SPAC shall cause the Chief Financial Officer of SPAC, solely in his capacity as such, to deliver to the Company a certificate certifying SPAC’s good faith estimate of the SPAC Transaction Expenses. Exhibit F attached hereto sets forth an illustrative statement setting forth a sample calculation of the Arrangement Consideration, Exchange Ratio and Option and Warrant Value, based on the good faith estimates of the Company, as if the Closing shall have occurred on the date hereof.

 

SECTION 3.02  Conversion of Securities.

 

(a)  In accordance with the Put Call Agreement, immediately prior to the Arrangement Effective Time, at 11:58p.m. Vancouver, British Columbia time, on the Arrangement Effective Date, the Company will convert the Eagle Exchangeable Class A Shares into Company Common Shares.

 

 

(b)  At the Arrangement Effective Time, by virtue of the Arrangement and as set forth in the Plan of Arrangement, and without any action on the part of SPAC, Merger Sub, Holdco or the Company or the holders of any of the following securities:

 

(i)  first, (A) each Company Class C Preferred Share issued and outstanding immediately prior to the Arrangement Effective Time shall automatically be converted into and exchanged for one (1) validly issued, fully paid and non-assessable Company Common Share and (B) each Company Class D Preferred Share issued and outstanding immediately prior to the Arrangement Effective Time shall automatically be converted into and exchanged for a number of validly issued, fully paid and non-assessable Company Common Shares equal to the Class D Preferred Conversion Ratio (collectively, the “Company Preferred Share Conversion”);

 

(ii)  then, immediately following the Company Preferred Share Conversion, each Company Common Share issued and outstanding immediately prior to the Arrangement Effective Time shall automatically be transferred to Holdco in consideration of the Arrangement Consideration payable to the holders thereof as set forth in the Payment Spreadsheet and pursuant to the Plan of Arrangement; and

 

(iii)  Company Shares, if any, held in the treasury of the Company shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto.

 

(c)  At the Merger Effective Time, by virtue of the Merger and without any action on the part of SPAC, Merger Sub, Holdco or the Company or the holders of any of the following securities:

 

(i)  each share of SPAC Common Stock issued and outstanding immediately prior to the Merger Effective Time shall automatically be converted into and exchanged for the right to receive one (1) validly issued, fully paid and nonassessable Holdco Common Share (the “SPAC Merger Consideration”);

 

(ii)  each share of common stock, par value $0.01 per share, of Merger Sub (“Merger Sub Common Stock”) issued and outstanding immediately prior to the Merger Effective Time shall be converted into and exchanged for one (1) validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation; and

 

(iii)  as consideration for Holdco issuing the SPAC Merger Consideration, for each common share of Merger Sub held by Holdco immediately prior to the Merger Effective Time, the Surviving Corporation shall issue to Holdco one validly issued, fully paid and nonassessable shares of common stock, par value $0.0001 per share, of the Surviving Corporation.

 

 

SECTION 3.03  Exchange of Certificates.

 

(a)  Exchange Agent. On the Closing Date (and after the Merger Effective Time), SPAC shall deposit, or cause to be deposited, with a bank or trust company that shall be designated by SPAC and is reasonably satisfactory to the Company (the “Exchange Agent”), the Cash Arrangement Consideration payable to certain Company Shareholders in cash (the “Cash Exchange Fund”). On the Closing Date (and after the Merger Effective Time), Holdco shall deposit, or shall cause Merger Sub to deposit with the Exchange Agent, for the benefit of the holders of SPAC Common Stock, for exchange in accordance with this Article III, the number of Holdco Common Shares (in either book-entry or certificated form, at Holdco’s election) sufficient to deliver the Holdco Common Shares included in the SPAC Merger Consideration payable pursuant to this Agreement (such Holdco Common Shares, the “Securities Exchange Fund”, together with the Cash Exchange Fund and any dividends or distributions with respect to the Securities Exchange Fund (pursuant to this Section 3.03), being hereinafter referred to, collectively, as the “Exchange Fund”). Holdco shall cause the Exchange Agent pursuant to irrevocable instructions, to deliver the Transaction Consideration out of the Exchange Fund in accordance with this Agreement, the Arrangement and the Payment Spreadsheet. Except as contemplated by this Section 3.03 hereof, the Exchange Fund shall not be used for any other purpose.

 

(b)  Exchange Procedures. As promptly as practicable after the Merger Effective Time, as the case may be, Holdco shall use its reasonable best efforts to cause the Exchange Agent to mail to each holder of SPAC Common Stock entitled to receive the SPAC Merger Consideration pursuant to Section 3.03 a letter of transmittal, which shall be in a form reasonably acceptable to SPAC and the Company (the “Letter of Transmittal”) and shall specify (i) that delivery shall be effected, and risk of loss and title to the certificates evidencing such SPAC Common Stock (collectively, the “Certificates”) shall pass, only upon proper delivery of the Certificates to the Exchange Agent; and (ii) instructions for use in effecting the surrender of the Certificates pursuant to the Letter of Transmittal. Within five (5) Business Days after the surrender to the Exchange Agent of all Certificates held by such holder for cancellation, together with a Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto and such other documents as may be required pursuant to such instructions, the holder of such Certificates shall be entitled to receive in exchange therefor, and Holdco shall cause the Exchange Agent to deliver the SPAC Merger Consideration in accordance with the provisions of Section 3.03, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 3.03, each Certificate entitled to receive a portion of the SPAC Merger Consideration in accordance with Section 3.02 shall be deemed at all times after the Merger Effective Time, as the case may be, to represent only the right to receive upon such surrender the SPAC Merger Consideration that such holder is entitled to receive in accordance with the provisions of Section 3.02.

 

 

(c)  Distributions with Respect to Unexchanged Shares of SPAC Common Stock. No dividends or other distributions declared or made after the Merger Effective Time with respect to the SPAC Common Stock with a record date after the Merger Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of SPAC Common Stock represented thereby until the holder of such Certificate shall surrender such Certificate in accordance with this Section 3.03. Subject to the effect of escheat, tax or other applicable Laws, following surrender of any such Certificate, SPAC shall pay or cause to be paid to the holder of the certificates representing shares of SPAC Common Stock issued in exchange therefor, without interest, (i) promptly, but in any event within five (5) Business Days of such surrender, the amount of dividends or other distributions with a record date after the Merger Effective Time and theretofore paid with respect to such shares of SPAC Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Merger Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such shares of SPAC Common Stock.

 

(d)  No Further Rights in Company Shares or SPAC Common Stock. The Transaction Consideration payable upon conversion of the Company Shares or SPAC Common Stock, as the case may be, in accordance with the terms hereof shall be deemed to have been paid and issued in full satisfaction of all rights pertaining to such Company Shares or SPAC Common Stock, as the case may be.

 

(e)  Adjustments to Transaction Consideration. The Transaction Consideration shall be adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Holdco Common Shares and Holdco Non-Voting Common Shares occurring on or after the date hereof and prior to the Arrangement Effective Time.

 

(f)  Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the holders of SPAC Common Stock with respect to the SPAC Merger Consideration for one (1) year after the Merger Effective Time shall be delivered to Holdco, upon demand, and any holders of SPAC Common Stock who have not theretofore complied with this Section 3.03 shall thereafter look only to Holdco for the SPAC Merger Consideration. Any portion of the Exchange Fund with respect to the SPAC Merger Consideration remaining unclaimed by holders of SPAC Common Stock, as may be applicable, as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Holdco free and clear of any claims or interest of any person previously entitled thereto.

 

(g)  No Liability. None of the Exchange Agent, Holdco or any of its affiliates shall be liable to any holder of Company Shares or SPAC Common Stock for any such Company Shares or SPAC Common Stock (or dividends or distributions with respect thereto) or cash delivered to a public official pursuant to any abandoned property, escheat or similar Law in accordance with this Section 3.03.

 

(h)  Withholding Rights. Each of the Surviving Corporation and Holdco shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Shares or SPAC Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax Law; provided that the parties shall cooperate and use reasonable best efforts to reduce, minimize or eliminate any applicable withholding to the extent reasonably permitted under applicable Laws. To the extent that amounts are so withheld by Holdco, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Shares or SPAC Common Stock (or intended recipients of compensatory payments) in respect of which such deduction and withholding was made by Holdco.

 

 

(i)  Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the Transaction Consideration, as the case may be, that such holder is otherwise entitled to receive pursuant to, and in accordance with, the provisions of Section 3.02.

 

SECTION 3.04  Treatment of Company Equity Awards. Pursuant to the terms of the Company Equity Plan or other terms and conditions governing each such award and as specified on the Rollover Spreadsheet:

 

(a)  each outstanding Company Option, whether vested or unvested, that is outstanding immediately prior to the Arrangement Effective Time shall, as of the Arrangement Effective Time, automatically and without any action on the part of the holder thereof, be converted (as converted, a “Converted Option Award”), in accordance with the Calculation Methodology, into an option award (x) exercisable for the aggregate number of Holdco Common Shares equal to the product (rounded down to the nearest whole number) of (i) the number of Company Common Shares exercisable under the Company Option immediately prior to the Arrangement Effective Time and (ii) the Exchange Ratio and (y) with a per share exercise price equal to the quotient (rounded up to the nearest cent) obtained by dividing (i) the per share exercise price under the Company Option immediately prior to the Arrangement Effective Time by (ii) the Exchange Ratio. Each Converted Option Award shall otherwise be subject to the same terms and conditions (including any vesting requirements) set forth under the applicable award agreement in effect immediately prior to the Arrangement Effective Time;

 

(b)  each outstanding Company RSU, whether vested or unvested, and whether settled in Company Common Shares or cash, that is outstanding immediately prior to the Arrangement Effective Time shall, as of the Arrangement Effective Time, automatically and without any action on the part of the holder thereof, be converted (as converted, a “Converted RSU Award”), in accordance with the Calculation Methodology, into a restricted stock unit award with respect to the aggregate number of Holdco Common Shares equal to the product (rounded down to the nearest whole number) of (i) the number of Company Common Shares subject to such Company RSU immediately prior to the Arrangement Effective Time and (ii) the Exchange Ratio. Each Converted RSU Award shall otherwise be subject to the same terms and conditions (including any vesting requirements and terms of settlement) set forth under the applicable award agreement in effect immediately prior to the Arrangement Effective Time;

 

 

(c)  each outstanding award of Company Restricted Shares that is outstanding immediately prior to the Arrangement Effective Time shall, as of the Arrangement Effective Time, automatically and without any action on the part of the holder thereof, be converted (as converted, a “Converted Restricted Share”), in accordance with the Calculation Methodology, into an award of restricted shares with respect to the aggregate number of Holdco Common Shares equal to the product (rounded down to the nearest whole number) of (i) the number of Company Common Shares subject to such award of Company Restricted Shares immediately prior to the Arrangement Effective Time and (ii) the Exchange Ratio. Each Converted Restricted Share shall otherwise be subject to the same terms and conditions (including any vesting requirements) set forth under the applicable award agreement in effect immediately prior to the Arrangement Effective Time; and

 

(d)  each outstanding Company Warrant, whether vested or unvested, that is outstanding immediately prior to the Arrangement Effective Time shall, as of the Arrangement Effective Time, automatically and without any action on the part of the holder thereof, be converted (as converted, a “Converted Company Warrant”), in accordance with the Calculation Methodology, into a warrant exercisable for the aggregate number of Holdco Common Shares set forth opposite the name of such holder on the Rollover Spreadsheet. Each Converted Company Warrant shall otherwise be subject to the same terms and conditions (including any vesting requirements) set forth under the applicable warrant agreement in effect immediately prior to the Arrangement Effective Time.

 

SECTION 3.05  Stock Transfer Books. At the Merger Effective Time, the stock transfer books of SPAC shall be closed and there shall be no further registration of transfers of SPAC Common Stock thereafter on the records of SPAC. From and after the Merger Effective Time, the holders of Certificates representing SPAC Common Stock outstanding immediately prior to the Merger Effective Time shall cease to have any rights with respect to such SPAC Common Stock, except as otherwise provided in this Agreement or by applicable Law. On or after the Merger Effective Time, any Certificates presented to the Exchange Agent or Holdco for any reason shall be converted into the SPAC Merger Consideration in accordance with the provisions of Section 3.02.

 

SECTION 3.06  SPAC Warrants. At the Merger Effective Time, each SPAC Warrant that is outstanding immediately prior to the Merger Effective Time shall, pursuant to the SPAC Warrant Agreement, cease to represent a right to acquire one (1) share of SPAC Common Stock and shall be converted in accordance with the terms of such SPAC Warrant Agreement, at the Merger Effective Time, into a right to acquire one (1) Holdco Common Share (a “Holdco Warrant” and collectively, the “Holdco Warrants”) on substantially the same terms as were in effect immediately prior to the Merger Effective Time under the terms of the SPAC Warrant Agreement. The parties hereof shall take all lawful action to effect the aforesaid provisions of this Section 3.06, including causing the SPAC Warrant Agreement to be amended or amended and restated to the extent necessary to give effect to this Section 3.06, including adding Holdco as a party thereto, such amendment to be in substantially the form attached hereto as Exhibit E (the “SPAC Warrant Amendment”).

 

 

Article IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Company’s disclosure schedule (it being understood and agreed that information disclosed in any section of the Company Disclosure Schedule shall be deemed to be disclosed with respect to any other section of the Company Disclosure Schedule to which such disclosure would reasonably pertain or if its relevance to such other section is reasonably apparent on the face of such disclosure) delivered by Company in connection with this Agreement (the “Company Disclosure Schedule”), the Company hereby represents and warrants to SPAC, Holdco and Merger Sub as follows:

 

SECTION 4.01  Organization and Qualification; Subsidiaries.

 

(a)  The Company is a corporation duly organized, validly existing and in good standing under the Laws of the Province of British Columbia. The Company has the requisite corporate or other organizational power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approval would not have a Company Material Adverse Effect. Each Company Subsidiary is a corporation or other organization duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has the requisite corporate or other organizational power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approval would not have a Company Material Adverse Effect. The Company and each Company Subsidiary is duly qualified or licensed as a foreign corporation or other organization to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not have a Company Material Adverse Effect.

 

(b)  A true and complete list of all the Company Subsidiaries, together with the jurisdiction of organization or incorporation of each Company Subsidiary and the percentage of the outstanding capital stock of each Company Subsidiary owned by the Company and each other Company Subsidiary, in each case, as of the date hereof, is set forth in Section 4.01(b) of the Company Disclosure Schedule. Except with respect to the Company Subsidiaries and the Excluded Investments, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or business association or other entity.

 

SECTION 4.02  Governance Documents. The Company has prior to the date of this Agreement made available to SPAC a true and complete copy of the articles and the notice of articles or equivalent organizational documents, each as amended to date, of the Company and each Company Subsidiary. Such articles, notice of articles or equivalent organizational documents are in full force and effect. Neither the Company nor any Company Subsidiary is in material violation of any of the provisions of its articles of incorporation, by-laws or equivalent organizational documents.

 

 

SECTION 4.03  Capitalization.

 

(a)  As of the date of this Agreement, the authorized share capital of the Company consists of an unlimited number of Company Common Shares, Company Class B Common Shares, Company Class C Common Shares, Company Class C Preferred Shares and Company Class D Preferred Shares. 19,411,398 Company Common Shares are issued and outstanding. No Company Class B Common Shares or Company Class C Common Shares are outstanding. 4,429,559 Company Class C Preferred Shares are issued and outstanding and 2,319,215 Company Class D Preferred Shares are issued and outstanding. 134,090 Company Restricted Shares are issued and outstanding. 102,273 Company Common Shares are reserved for issuance upon the settlement of the outstanding Company RSUs. As of the date of this Agreement, 2,852,431 Company Common Shares are reserved for issuance upon the exercise of the outstanding Company Options. 222,324 Company Warrants are issued and outstanding. 5,625,572 Company Common Shares have been reserved for issuance upon the Eagle Share Exchange.

 

(b)  Other than the Company Options, Company Restricted Shares, Company RSUs, Company Warrants and as set forth on Section 4.03(b) of the Company Disclosure Schedule, there are no options, warrants, preemptive rights, calls, convertible securities, conversion rights or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Company Subsidiary or obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary is a party to, or otherwise bound by, and neither the Company nor any Company Subsidiary has granted, any equity appreciation rights, participations, phantom equity or similar rights. Other than the Shareholders Agreement, and the Ancillary Agreements, there are no voting trusts, voting agreements, proxies, shareholder agreements or other agreements with respect to the voting or transfer of the Company Shares or any of the equity interests or other securities of the Company or any of the Company Subsidiaries.

 

(c)  As of the date of this Agreement, the Company has furnished or made available to SPAC the following information with respect to each Company Option, Company Restricted Share and Company RSU (each, a “Company Share Award”): (i) the name of the Company Share Award recipient; (ii) the number of Company Common Shares subject to such Company Share Award; (iii) the exercise or purchase price of such Company Share Award, if applicable; (iv) the date on which such Company Share Award was granted; (v) the vesting schedule applicable to such Company Share Award; and (vi) the date on which such Company Share Award expires, if applicable.  The Company has made available to SPAC accurate and complete copies of the Company Equity Plan pursuant to which Company has granted certain Company Share Awards that are currently outstanding and all forms of award agreements evidencing such Company Share Awards, including those Company Share Awards not granted under the Company Equity Plan.  No Company Option was granted to a United States employee with an exercise price per share less than the fair market value of the underlying Company Common Share as of the date such Company Option or has any feature for the deferral of compensation within the meaning of Section 409A of the Code.

 

 

(d)  Other than pursuant to the Shareholders Agreement or the Articles of the Company, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Company Shares or any capital stock of any Company Subsidiary or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any person other than a Company Subsidiary.

 

(e)  Each outstanding share of capital stock of each Company Subsidiary is duly authorized, validly issued, fully paid and nonassessable, and each such share is owned by the Company or another Company Subsidiary free and clear of all Liens other than Permitted Liens, options, rights of first refusal and limitations on the Company’s or any Company Subsidiary’s voting rights, other than transfer restrictions under applicable securities Laws and their respective organizational documents.

 

(f)  The Company has furnished or made available to SPAC the following information with respect to the Company Shareholders as of the date hereof: (i) the name of each Company Shareholder and (ii) the class and number of all Company Shares owned by such Company Shareholder. As of the date hereof, the Company Shareholders listed in Section 4.03(f) of the Company Disclosure Schedule collectively own, directly and beneficially and of record, all of the issued and outstanding Company Shares as of the date hereof. As of the date hereof, the Company Shares held by the Key Company Shareholders represent at least forty percent (40%) of the issued and outstanding voting Company Shares on a fully diluted and as-converted basis.

 

(g)  All outstanding Company Shares and all outstanding Company Share Awards, as well as outstanding shares of capital stock of each Company Subsidiary, have been issued and granted in compliance with (i) all applicable securities Laws and other applicable Laws and (ii) all pre-emptive rights and other requirements set forth in the organizational documents of the Company or any Company Subsidiary and in any applicable contracts to which the Company or any Company Subsidiary is a party.

 

(h)  The Company is not a reporting issuer (as such term is defined in the Securities Act (British Columbia)).

 

 

SECTION 4.04  Authority Relative to this Agreement. The Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action, including approval by the Company Board, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Transactions, the approval of the Company Arrangement Resolution, the Final Order, the Interim Order and the filing and recordation of appropriate documents as required by the DGCL or the BCBCA, as the case may be). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by SPAC, Holdco and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, by general equitable principles (the “Remedies Exceptions”). To the knowledge of the Company, no state, provincial, federal, domestic or foreign takeover statute is applicable to the Transactions, except as otherwise contemplated herein.

 

SECTION 4.05  No Conflict; Required Filings and Consents.

 

(a)  The execution and delivery of this Agreement by the Company does not, and subject to receipt of the filing and recordation of appropriate merger documents or other documents as required by the DGCL or the BCBCA, as the case may be; the Interim Order and any filings required in order to obtain, and approval required under, the Interim Order; the Final Order, and any filings required in order to obtain the Final Order; and of the consents, approvals, authorizations or permits, filings and notifications contemplated by Section 4.05(b), the performance of this Agreement by the Company will not (i) conflict with or violate the articles of incorporation or by-laws or any equivalent organizational documents of the Company or any Company Subsidiary, (ii) conflict with or violate any United States, Canadian, Colombian, Portuguese or other statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, administrative act, decree or other order (“Law”) applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (other than any Permitted Lien) on any material property or asset of the Company or any Company Subsidiary pursuant to, any Material Contract, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not have or reasonably be expected to have a Company Material Adverse Effect.

 

(b)  The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States, Colombian, Portuguese or Canadian federal, state, provincial, county or local or other national, regional or local government, governmental, regulatory or administrative authority, agency, board, bureau, ministry, institute, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a “Governmental Authority”), except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities or “blue sky” laws (“Blue Sky Laws”) and state takeover Laws, rules and regulations of Nasdaq, the notification requirements of applicable Antitrust Laws, if any, and filing and recordation of appropriate merger documents or other documents as required by the DGCL or the BCBCA, as the case may be, the Final Order, the Interim Order, and filings required pursuant to the Plan of Arrangement, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, which, in the aggregate, would not have a Company Material Adverse Effect.

 

 

SECTION 4.06  Permits; Compliance.

 

(a)  Since January 1, 2018, each of the Company and the Company Subsidiaries holds and has held and is and has been in possession of all franchises, grants, authorizations, licenses, permits (including imports and exports permits), quotas (cupos), registrations, good manufacturing practices certificates, easements, variances, exceptions, consents, concessions, certificates, approvals and orders of any Governmental Authority necessary and/or required pursuant to applicable Law for each of the Company or the Company Subsidiaries to own, lease and operate its properties or to carry on its business as it has been and is now being conducted, as applicable (the “Company Permits”), except where failure to have such Company Permits would not be material to the Company and the Company Subsidiaries, taken as a whole. Section 4.06(a) sets forth a complete and accurate list of all Company Permits material to the Company and the Company Subsidiaries taken as a whole that are currently in effect. All such Company Permits necessary and/or required pursuant to applicable Law for each of the Company or the Company Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted, are valid, updated as required by applicable Law and currently in-effect and no suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened in writing, except as would not be material to the Company and the Company Subsidiaries, taken as a whole. Neither the Company nor any Company Subsidiary is or has been, nor any event or circumstance has occurred that could reasonably be expected to result, in a conflict with, or in default, breach or violation of, (i) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (ii) Company Permit, except, in each case, for any such conflicts, defaults, breaches or violations that would not be material to the Company and the Company Subsidiaries, taken as a whole.

 

(b)  Since January 1, 2018, neither the Company nor any Company Subsidiary has received any inspection, report, notice of adverse finding, warning letter, resolution, writ, untitled letter or other correspondence with or from any Governmental Authority alleging or asserting noncompliance with applicable Laws or any Company Permit except as would not be material to the Company and the Company Subsidiaries, taken as a whole. The Company and each person acting on behalf of the Company has been in compliance with all applicable Laws relating to the regulation applicable to the Company and each Company Subsidiary in any country, including Privacy/Data Security Laws, health care, cannabis, environmental, corporate, customs, foreign exchange and foreign investment regulations and personal health information Laws, except where the failure to comply with such applicable Laws would not be material to the Company and the Company Subsidiaries, taken as a whole.

 

 

(c)  The execution and delivery of this Agreement by the Company and the consummation of the Transactions do not and will not result in any material breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give any Governmental Authority any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (other than any Permitted Lien) on, any Company Permit except as would not be material to the Company and the Company Subsidiaries, taken as a whole.

 

(d)  The Company and the Company Subsidiaries have timely filed the requests before the applicable Governmental Authority for the quotas (cupos) for fiscal year 2021 for cultivation, national use, production and/or export of cannabis and manufacture of cannabis products and all such requests have complied in all material respects with applicable Law except as would not be material to the Company and the Company Subsidiaries, taken as a whole. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, no event has occurred, and no condition or circumstance exists, other than any event, condition or circumstance that arises from or relates to COVID-19 and COVID-19 Measures, that could reasonably be expected to materially impede or preclude the Company or any Company Subsidiary from cultivating, using in Colombia, producing and/or exporting the quantity of cannabis and cannabis products assigned and/or conferred under any quota (cupo) that is currently in effect for fiscal year 2020 or any quota (cupo) to be granted for fiscal year 2021 in accordance with the respective quota requests that have been filed by the Company and the Company Subsidiaries before the relevant Governmental Authorities.

 

SECTION 4.07  Financial Statements.

 

(a)  The Company has made available to SPAC true and complete copies of the audited consolidated balance sheet of the Company and the Company Subsidiaries as of December 31, 2018 and December 31, 2019, and the related audited consolidated statements of income and cash flows of the Company and the Company Subsidiaries for each of the years ended December 31, 2018 and December 31, 2019 (collectively, the “Audited Financial Statements”), which are attached as Section 4.07(a) of the Company Disclosure Schedule, and which contain an unqualified report of the Company’s auditors. Each of the Audited Financial Statements (including the notes thereto) (i) was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (ii) fairly presents, in all material respects, the financial position, results of operations and cash flows of the Company and the Company Subsidiaries as at the date thereof and for the period indicated therein, except as otherwise noted therein.

 

 

(b)  The Company has made available to SPAC true and complete copies of the consolidated unaudited balance sheet of the Company and the Company Subsidiaries as of March 31, 2020, and the related unaudited consolidated statements of income and cash flows of the Company and the Company Subsidiaries for the three (3)-month period then ended, which are attached as Section 4.07(b) of the Company Disclosure Schedule. Such unaudited financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except for the omission of footnotes and subject to year-end adjustments) and fairly present, in all material respects, the financial position, results of operations and cash flows of the Company and the Company Subsidiaries as at the date thereof and for the period indicated therein, except as otherwise noted therein and subject to normal and recurring year-end adjustments and the absence of notes. As promptly as practicable after the date hereof, the Company shall make available to SPAC true and complete copies of the consolidated unaudited balance sheet of the Company and the Company Subsidiaries as of June 30, 2020, and the related unaudited consolidated statements of income and cash flows of the Company and the Company Subsidiaries for the six (6)-month period then ended. Such unaudited financial statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except for the omission of footnotes and subject to year-end adjustments) and fairly present, in all material respects, the financial position, results of operations and cash flows of the Company and the Company Subsidiaries as at the date thereof and for the period indicated therein, except as otherwise noted therein and subject to normal and recurring year-end adjustments and the absence of notes. The March 31, 2020 balance sheet as of the date of this Agreement and the June 30, 2020 balance sheet as of the Closing Date, as context may require, are each referred to herein as the “2020 Balance Sheet”.

 

(c)  Except as and to the extent set forth on the Audited Financial Statements, the 2020 Balance Sheet or Section 4.07(c) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has any liability or obligation of a nature (whether accrued, absolute, contingent or otherwise) required to be reflected on a balance sheet prepared in accordance with GAAP, except for: (i) liabilities that were incurred in the ordinary course of business or in connection with the Transactions since the date of the 2020 Balance Sheet, which are not, individually or in the aggregate, material to the Company and the Company Subsidiaries taken as a whole, (ii) obligations for future performance under any contract to which the Company or any Company Subsidiary is a party or (iii) any other liabilities and obligations which are not, individually or in the aggregate, material to the Company and the Company Subsidiaries taken as a whole.

 

(d)  The representations and warranties set forth in Section 4.07(d) of the Company Disclosure Schedule are true and correct as qualified therein.

 

SECTION 4.08  Absence of Certain Changes or Events. Since the date of the 2020 Balance Sheet and prior to the date of this Agreement, except as otherwise reflected in the Audited Financial Statements, actions or omissions taken as a result of COVID-19 and COVID-19 Measures or as expressly contemplated or permitted by this Agreement, (a) the Company and the Company Subsidiaries have conducted their respective businesses in the ordinary course and in a manner consistent with past practice in all material respects, (b) the Company and the Company Subsidiaries have not sold, assigned or otherwise transferred any right, title, or interest in or to any of their material assets (including Intellectual Property and Business Systems) other than non-exclusive licenses or assignments or transfers in the ordinary course of business and (c) there has not been any Company Material Adverse Effect.

 

 

SECTION 4.09  Absence of Litigation. As of the date hereof, except as would not have a Company Material Adverse Effect, there is no litigation, suit, claim, action, complaint, grievance, proceeding or investigation (an “Action”) pending or, to the knowledge of the Company, threatened in writing against the Company or any Company Subsidiary, or any property or asset of the Company or any Company Subsidiary, before any Governmental Authority. As of the date hereof, except as would not have a Company Material Adverse Effect, neither the Company nor any Company Subsidiary nor any property or asset of the Company or any Company Subsidiary is, subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority.

 

SECTION 4.10  Employee Benefit Plans.

 

(a)  Section 4.10(a) of the Company Disclosure Schedule lists, as of the date of this Agreement, (i) all material employment and consulting contracts or agreements to which the Company or any Company Subsidiary is a party, with respect to which the Company or any Company Subsidiary has any right or obligation, including all employment agreements with Colombian key executives, (ii) all material employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and (iii) all material bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance, change in control, fringe benefit (prestaciones sociales), paid leaves, legal and extra-legal benefits, indemnification payments, golden parachutes and vacation plans or arrangements or other employee benefit plans, programs or arrangements, in each case which are maintained, offered, contributed to or sponsored by the Company or any Company Subsidiary for the benefit of any current or former employee, officer, director and/or consultant of the Company or any Company Subsidiary, or under which the Company or any Company Subsidiary has or could incur any material liability (contingent or otherwise) (collectively, the “Plans”).

 

(b)  With respect to each Plan, the Company has made available to SPAC, if applicable (i) a true and complete copy of the plan document and all amendments thereto and each trust or other funding arrangement and (ii) any material non-routine correspondence from any Governmental Authority with respect to any Plan within the past three (3) years. With respect to each Plan governed by the Laws of the United States, the Company has made available to SPAC, if applicable, (w) copies of the most recent summary plan descriptions and summary of material modifications, (x) copies of the three (3) most recently filed Internal Revenue Service (“IRS”) Form 5500 annual report and accompanying schedules, (y) copies of the most recently received IRS determination letter for each such Plan and (z) copies of the non-discrimination testing results for the three (3) most recent Plan years. Neither the Company nor any Company Subsidiary has any express commitment to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by applicable Law.

 

 

(c)  None of the Plans governed by the Laws of the United States is or was within the past six (6) years, nor does the Company nor any ERISA Affiliate have or reasonably expect to have any liability or obligation under (i) a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA), (ii) a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) subject to Section 412 of the Code and/or Title IV of ERISA, (iii) a multiple employer plan subject to Section 413(c) of the Code or (iv) a multiple employer welfare arrangement under ERISA. For purposes of this Agreement, “ERISA Affiliate” shall mean any entity that together with the Company would be deemed a “single employer” for purposes of Section 4001(b)(1) of ERISA and/or Sections 414(b), (c) and/or (m) of the Code.

 

(d)  Neither the Company nor any Company Subsidiary is nor will be obligated, whether under any Plan or otherwise, to pay separation, severance, termination or similar benefits to any person directly as a result of the Transactions, nor will the Transactions accelerate the time of payment or vesting, or increase the amount, of any benefit or other compensation due to any individual. The Transactions shall not be the direct or indirect cause of any amount paid or payable by the Company or any Company Subsidiary being classified as an “excess parachute payment” under Section 280G of the Code.

 

(e)  None of the Plans governed by the Laws of the United States provides, nor does the Company nor any Company Subsidiary have or reasonably expect to have any obligation to provide, retiree medical, disability or life insurance benefits, or any other benefit to any current or former employee, officer, director or consultant of the Company or any Company Subsidiary after termination of employment or service except as may be required under Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA and the regulations thereunder or similar state or local Law. Each of the Plans is subject only to the Laws of the United States or a political subdivision thereof.

 

(f)  Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, each Plan is and has been within the past three (3) years in compliance, in all material respects, in accordance with its terms and the requirements of all applicable Laws. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company and the Company Subsidiaries have performed all obligations required to be performed by them under, are not in any respect in default under or in violation of, and have no knowledge of any default or violation by any party to, any Plan. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, no Action is pending or, to the knowledge of the Company, threatened with respect to any Plan (other than claims for benefits in the ordinary course) and, to the knowledge of the Company, no fact or event exists that could reasonably be expected to give rise to any such Action.

 

(g)  Each Plan governed by the Laws of the United States that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has (i) timely received a favorable determination letter from the IRS covering all of the provisions applicable to the Plan for which determination letters are currently available that the Plan is so qualified and each trust established in connection with such Plan is exempt from federal income taxation under Section 501(a) of the Code or (ii) is entitled to rely on a favorable opinion letter from the IRS, and to the knowledge of Company, no fact or event has occurred since the date of such determination or opinion letter or letters from the IRS to adversely affect the qualified status of any such Plan or the exempt status of any such trust.

 

 

(h)  With respect to Plans governed by the Laws of the United States: (i) there has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) nor any reportable events (within the meaning of Section 4043 of ERISA) with respect to any such Plan that could reasonably be expected to result in material liability to the Company or any of the Company Subsidiaries; (ii) there have been no acts or omissions by the Company or any ERISA Affiliate that have given or could reasonably be expected to give rise to any material fines, penalties, taxes or related charges under Sections 502 or 4071 of ERISA or Section 511 or Chapter 43 of the Code for which the Company or any ERISA Affiliate may be liable; (iii) the Company and each ERISA Affiliate have each complied, in all material respects, with the notice and continuation coverage requirements, and all other requirements, of Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA, and the regulations thereunder, with respect to each Plan that is, or was during any taxable year for which the statute of limitations on the assessment of federal income taxes remains open, by consent or otherwise, a group health plan within the meaning of Section 5000(b)(1) of the Code; (iv) the Company and each Plan that is a “group health plan” as defined in Section 733(a)(1) of ERISA (each, a “Health Plan”) is and has been in compliance, in all material respects, with the Patient Protection and Affordable Care Act of 2010 (“PPACA”); (v) no event has occurred, and no condition or circumstance exists, that could reasonably be expected to subject the Company, any ERISA Affiliate or any Health Plan to any material liability for penalties or excise taxes under Code Section 4980D or 4980H or any other provision of the PPACA; and (vi) each Plan that constitutes a nonqualified deferred compensation plan subject to Section 409A of the Code has been administered and operated, in all material respects, in compliance with the provisions of Section 409A of the Code and the Treasury Regulations thereunder, and no additional Tax under Section 409A(a)(1)(B) of the Code has been or could reasonably be expected to be incurred by a participant in any such Plan.

 

(i)  All contributions, premiums or payments required to be made with respect to any Plan have been timely made to the extent due or properly accrued on the consolidated financial statements of the Company and the Company Subsidiaries, except as would not result in material liability to the Company and the Company Subsidiaries. All such contributions have been fully deductible for social security contributions and income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority and, to the knowledge of the Company, no fact or event exists which could reasonably be expected to give rise to any such challenge or disallowance.

 

 

SECTION 4.11  Labor and Employment Matters.

 

(a)  To the extent permitted to be disclosed pursuant to applicable Law, the Company has furnished or made available to SPAC a true and complete list of all employees of the Company and any Company Subsidiary as of the date hereof, including any employee who is on a leave of absence of any nature, authorized or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) target commission, bonus or other incentive based compensation; and (vi) a description of any fringe benefits provided to each such individual as of the date hereof that cost $1,000 or more annually and are not provided to similarly situated employees.

 

(b)  Except as set forth on Section 4.11(b) of the Company Disclosure Schedule, as of the date hereof, all compensation, including wages (including overtime, night work or work on holidays/Sundays), commissions, bonuses, legal and extralegal-benefits and fringe benefits (prestaciones sociales), payable to all employees of the Company and any Company Subsidiary for services due and payable before or on the date hereof have been paid in full (or accrued in full in the Company’s financial statements).

 

(c)  (i) There are no Actions pending or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary by any of their respective current or former employees or by labor/employment authorities including social security entities, which Actions would be material to the Company and the Company Subsidiaries, taken as a whole; (ii) neither the Company nor any Company Subsidiary is, nor have been for the past five (5) years, a party to, bound by, or negotiating any collective bargaining agreement (convención colectiva), collective agreement (pacto colectivo) or arbitral award or other contract with a union applicable to persons employed by the Company or any Company Subsidiary, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees; (iii) neither the Company nor any Company Subsidiary has materially breached or otherwise failed to comply with any provision of any such agreement or contract, and there are no grievances outstanding against the Company or any Company Subsidiary under any such agreement or contract; (iv) there are no unfair labor practice complaints pending against the Company or any Company Subsidiary before the National Labor Relations Board or any Governmental Authority with similar functions in any other jurisdiction or any current union representation questions involving employees of the Company or any Company Subsidiary; and (v) there is not currently and has not been within the past five (5) years, nor, to the knowledge of the Company, has there been any threat of any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar material labor disruption or dispute affecting, or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any Company Subsidiary. Except as set forth in the contracts for employment and consulting services set forth in Section 4.10(a), all employees of the Company and the Company Subsidiaries are employed on an at-will basis.

 

 

(d)  Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company and the Company Subsidiaries are and have been in compliance with all employment agreements, contractual obligations and applicable Laws relating to the employment, employment practices, employment discrimination, labor intermediation (intermediación laboral), terms and conditions of employment, mass layoffs and plant closings (including the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar state or local Laws), immigration, permits, meal and rest breaks, pay equity, workers’ compensation, medical leave, occupational risks and occupational safety and health requirements, including those related to wages, hours, collective bargaining (convención colectiva), collective agreements (pacto colectivo), arbitral decisions, the payment of social security contributions and payroll taxes, withholding of taxes and other sums as required by the appropriate Governmental Authority under applicable Law or contractual obligations, and since July 20, 2017 have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Company or any Company Subsidiary under applicable Law and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing. The Company and the Company Subsidiaries have paid in full to all current and former employees or adequately accrued for in accordance with GAAP, all wages, salaries, commissions, bonuses, legal and extra-legal benefits, fringe benefits (prestaciones sociales) paid leaves, indemnification payments, surcharges for overtime, night work or work on holidays/Sundays, and other compensation due to or on behalf of Company or Company Subsidiary employees under applicable Law and there is no claim with respect to payment of wages, salary, social security contributions or overtime pay that has been asserted in writing since July 20, 2017, or is now pending or, to the knowledge of the Company, threatened in writing before any Governmental Authority with respect to any persons currently or formerly employed by the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices. There is no Action with respect to a violation of any occupational safety or health standards that has been asserted in writing since July 20, 2017, or is now pending, or, to the knowledge of the Company, threatened in writing with respect to the Company. There is no charge of discrimination in employment or employment practices, for any reason, including age, gender, race, religion or other legally protected category, which has been asserted since July 20, 2017 or is now pending or, to the knowledge of the Company, threatened in writing before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any Company Subsidiary has employed or employ any person.

 

(e)  Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, each natural person who is or has been rendering services through temporary service companies and/or outsourcing companies and/or profit or non-profit entities to the Company or the Company Subsidiaries has, at all times, been accurately classified in compliance in all material respects with applicable Laws by the Company and the Company Subsidiaries, as the case may be, with respect to such services as an employee or a non-employee.

 

 

SECTION 4.12  Real Property; Title to Assets and Rights.

 

(a)  Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company or one of the Company Subsidiaries has good and valid title in fee simple to each parcel of owned real property free and clear of all Liens other than Permitted Liens.

 

(b)  Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company or the Company Subsidiaries have a valid leasehold estate in all leased real property free and clear of all Liens other than Permitted Liens. All such current leases and subleases are in full force and effect, are valid and enforceable in accordance with their respective terms, subject to the Remedies Exceptions, and there is not, under any of such leases or subleases, any existing material default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) by the Company or any Company Subsidiary or, to the Company’s knowledge, by the other party to such lease or sublease, except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(c)  There are no contractual, legal restrictions or Actions that preclude or will preclude the ability of the Company or Company Subsidiary to use any real property owned or leased by such party for the purposes for which it is currently being used, except as would not, individually or in the aggregate, have a Company Material Adverse Effect. There are no latent defects or adverse physical conditions affecting the real property, and improvements thereon, owned or leased by the Company or any Company Subsidiary other than those that would not have a Company Material Adverse Effect.

 

(d)  Each of the Company and the Company Subsidiaries has legal and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of all Liens other than Permitted Liens, except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(e)  Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company and the Company Subsidiaries hold bank accounts in each jurisdiction where they operate and are permitted to hold banks accounts and that allow the Company and the Company Subsidiaries to carry out all banking transactions necessary to make and receive payments and investments in the ordinary course of business.

 

SECTION 4.13  Intellectual Property.

 

(a)  Section 4.13(a) of the Company Disclosure Schedule contains a true and complete list of all of the following: (i) registered Company-Owned IP and applications for registrations of Company-Owned IP (showing in each, as applicable, the filing date, date of issuance and registration or application number); and (ii) all contracts or agreements to use any Company-Licensed IP, including for the Software or Business Systems of any other person, in each case, that are material to the business of the Company and/or the Company Subsidiaries as currently conducted (other than commercially available “off-the-shelf” Software with aggregate license fees of less than $250,000); and (iii) any unregistered Company-Owned IP that is material to the business of the Company or any Company Subsidiary as currently conducted that would have a replacement cost of more than $250,000.

 

 

(b)  The Company or one of the Company Subsidiaries owns, free and clear of all Liens (other than Permitted Liens), the right, title and interest in the Company-Owned IP or otherwise duly licenses or otherwise has the right to use all material Intellectual Property rights used in the operation of the business of the Company and the Company Subsidiaries; provided however that the foregoing shall not be deemed to be a representation with respect to the non-infringement of any Intellectual Property rights of other persons, which representation shall be solely addressed in Section 4.13(d)(ii) below. All Company-Owned IP is subsisting and, to the knowledge of the Company, enforceable and valid, except as would not be material to the Company and the Company Subsidiaries, taken as a whole.

 

(c)  The Company and each of its applicable Company Subsidiaries have taken commercially reasonable actions to maintain, protect and enforce all Company-Owned IP, and to maintain the secrecy, confidentiality and value of its trade secrets and other material Confidential Information in its possession or control, except as would not be material to the Company and the Company Subsidiaries, taken as a whole. To the Company’s knowledge, neither the Company nor any Company Subsidiaries have disclosed any material trade secrets or other material Confidential Information to any other person other than pursuant to a confidentiality agreement or other similar arrangement.

 

(d)  (i) There have been no claims properly filed and served, or threatened in writing to be filed, against the Company or any Company Subsidiary in any court, by any person (A) contesting the validity, use, ownership, enforceability, patentability or registrability of any of the Company-Owned IP or (B) alleging any infringement or misappropriation of, or other conflict with, any Intellectual Property rights of other persons; (ii) to the Company’s knowledge, the operation of its business of the Company and the Company Subsidiaries (including the Company Products) has not and does not infringe, misappropriate or violate, any Intellectual Property rights of other persons; (iii) to the Company’s knowledge, no other person has infringed, misappropriated or violated any of the Company-Owned IP; and (iv) neither the Company nor any of the Company Subsidiaries has received any formal written opinions of counsel regarding any of the foregoing.

 

(e)  All employees and consultants who have contributed, developed or conceived any material Company-Owned IP have executed valid, written agreements with the Company or one of the Company Subsidiaries providing for the assignment to the Company or the applicable Company Subsidiary of the right, title and interest in any such Intellectual Property created, contributed, developed, or conceived by any such employees or consultants in the ordinary course of his, her, or its relationship with the Company or the applicable Company Subsidiary.

 

 

(f)  Neither the Company nor any of the Company Subsidiaries or, to the Company’s knowledge, any other person is in material breach or in material default of any agreement specified in Section 4.13(a) of the Company Disclosure Schedule.

 

(g)  The Company and/or one of the Company Subsidiaries owns, leases, licenses, or otherwise has the legal right to use the material Business Systems, and such Business Systems are sufficient for the needs of the business of the Company or any of the Company Subsidiaries as currently conducted by the Company and/or the Company Subsidiaries. The Company and each of the Company Subsidiaries maintain commercially reasonable disaster recovery and business continuity plans, procedures and facilities, and since July 20, 2017, to the Company’s knowledge, there has not been any material failure with respect to any of the material Business Systems that has not been remedied or replaced in all material respects.

 

(h)  The Company and each of the Company Subsidiaries have complied in all material respects with (i) all applicable Privacy/Data Security Laws, (ii) any applicable privacy or other policies of the Company and/or the Company Subsidiary, respectively, concerning the collection, dissemination, storage or use of Personal Information and (iii) all contractual commitments that the Company or any Company Subsidiary has entered into or is otherwise bound with respect to privacy and/or data security (collectively, the “Data Security Requirements”), except as would not be material to the Company and the Company Subsidiaries, taken as a whole. The Company and the Company Subsidiaries have each implemented reasonable data security safeguards designed to protect the security and integrity of its Business Systems, including implementing reasonable procedures and controls to prevent unauthorized to its Business Systems and the introduction of Disabling Devices. Since July 20, 2017, neither the Company nor any of the Company Subsidiaries has, to the Company’s knowledge, (x) experienced any data security breaches that were required to be reported under applicable Privacy/Data Security Laws or customer contracts; or (y) been subject to or received written notice of any audits, proceedings or investigations by any Governmental Authority or any customer, or received any claims or complaints regarding the collection, dissemination, storage or use of Personal Information, or the violation of any applicable Data Security Requirements.

 

(i)  The Company and/or one of the Company Subsidiaries owns or otherwise possesses rights to use all material Business Data for the purposes for which such Business Data is used, except as would not be material to the Company and the Company Subsidiaries, taken as a whole.

 

 

SECTION 4.14  Taxes.

 

(a)  The Company and each of its Company Subsidiaries: (i) have duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by any of them as of the date hereof and all such filed Tax Returns are complete and accurate in all material respects; (ii) have timely paid all Taxes that are shown as due on such filed Tax Returns and any other material Taxes that the Company or any of its Company Subsidiaries are otherwise obligated to pay (whether or not such Taxes have been reported on any Tax returns), except with respect to Taxes that are being contested in good faith and are disclosed in Section 4.14(a) of the Company Disclosure Schedule, and no material penalties or charges are due with respect to the late filing of any Tax Return required to be filed by or with respect to any of them on or before the Merger Effective Time; (iii) with respect to all material Tax Returns filed by or with respect to any of them, have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency; and (iv) do not have any deficiency, audit, examination, investigation or other proceeding in respect of Taxes or Tax matters pending or proposed or threatened in writing, for a Tax period which the statute of limitations for assessments remains open.

 

(b)  Neither the Company nor any Company Subsidiary is a party to, is bound by or has an obligation under any Tax sharing agreement, Tax indemnification agreement, Tax allocation agreement or similar contract or arrangement (including any agreement, contract or arrangement providing for the sharing or ceding of credits or losses).

 

(c)  None of the Company and its Company Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period or portion thereof ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law); (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; (iv) prepaid amount received or deferred revenue accrued on or prior to the Closing Date; (v) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local, or non-United States income Tax Law); (vi) any use of an improper method of accounting use for any tax period or portion thereof ending or ended on or prior to the Closing Date; or (vii) income arising or accruing prior to the Closing and includable after the Closing under Subchapter K, Sections 951, 951A, or 956 of the Code.

 

(d)  Each of the Company and its Company Subsidiaries has withheld and paid to the appropriate Tax authority all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any current or former employee, independent contractor, creditor, shareholder or other third party and has complied in all material respects with all applicable Law, rules and regulations relating to the payment and withholding of Taxes, including all reporting and record keeping requirements related thereto.

 

 

(e)  Neither the Company nor any of its Company Subsidiaries has been a member of an affiliated group filing a consolidated, combined or unitary United States federal, state, local or foreign income Tax Return (other than a group consisting only of the Company or Company Subsidiaries).

 

(f)  Neither the Company nor any of its Company Subsidiaries has any material liability for the Taxes of any person (other than the Company and its Company Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise.

 

(g)  Neither the Company nor any of its Company Subsidiaries has any request for a ruling in respect of Taxes pending between the Company or any Company Subsidiary and any Tax authority.

 

(h)  There is no contract or agreement, plan or arrangement by the Company or its Company Subsidiaries covering any person that, individually or collectively, would constitute compensation in excess of the deduction limitation set forth in Section 162(m) of the Code, except as described in the Company reports or as may arise as a result of the Transactions.

 

(i)  Neither the Company nor any of the Company Subsidiaries has in any year for which the applicable statute of limitations remains open distributed stock of another person, or has had its stock distributed by another person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

 

(j)  Neither the Company nor any of its Company Subsidiaries is, or has been a party to a reportable transaction, as described in Section 6707A(c) and Treasury Regulations Section 1.6011-4(b)(2), or any corresponding or similar provision of state, local or non-United States Law.

 

(k)  Neither the United States Internal Revenue Service nor any other United States or non-United States taxing authority or agency has asserted in writing or, to the knowledge of the Company, has threatened to assert against the Company or any Company Subsidiary any deficiency or claim for any Taxes or interest thereon or penalties in connection therewith.

 

(l)  There are no Tax Liens upon any assets of the Company or any of the Company Subsidiaries except for Permitted Liens.

 

(m)  None of the Company and its Company Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. None of the Company and its Company Subsidiaries: (i) has received written notice from a non-United States taxing authority that it has a permanent establishment (within the meaning of an applicable Tax treaty) or otherwise has an office or fixed place of business in a country other than the country in which it is organized or (ii) is otherwise subject to taxation in a country other than the country in which it is organized. None of the Company and its Company Subsidiaries has made an election under Section 965(h) of the Code.

 

 

(n)  The Company is, and has been since its formation, treated as a foreign corporation for United States federal income tax purposes.

 

(o)  Other than as a result of this Agreement, neither the Company nor any Company Subsidiary has suffered an ownership change within the meaning of Section 382 of the Code.

 

(p)  The Company has not taken or agreed to take any action, and does not intend or plan to take, any action, or have knowledge of any agreement, plan or intention to take any action that is reasonably likely to prevent the Merger and the Arrangement, taken together, from qualifying as a transaction subject to Section 351 of the Code.

 

(q)  Each of the Company and the Company Subsidiaries has complied in all material respects with all transfer pricing rules described in Section 482 of the Code and the regulations thereunder, or any corresponding or similar provision of state, local or non-United States Law (including Section 247 of the Income Tax Act (Canada)).

 

(r)  Each Company Share does not, and has not at any time within the past 60 months derived, more than fifty percent (50%) of its fair market value directly or indirectly from one or any combination of (i) real or immovable property situated in Canada, (ii) Canadian resource properties (as defined in the Income Tax Act (Canada)), (iii) timber resource properties (as defined in the Income Tax Act (Canada)) and (iv) options in respect of, or interests in, or for civil law, a right in, property described in any of (i) to (iii) above, whether or not the property exists.

 

(s)  There are no circumstances existing which could result in taxes becoming payable as a result of the application to the Company or any of the Company Subsidiaries of Sections 78, 80, 80.01, 80.02, 80.03, 80.04 of the Income Tax Act (Canada) or any analogous provision of any comparable Law of any province or territory of Canada.

 

(t)  The Company and each Company Subsidiary has charged, collected and remitted on a timely basis all Taxes as required by applicable Law (including Part IX of the Excise Tax Act (Canada) or the retail sales tax legislation of any province or territory of Canada) on any sale, supply or delivery whatsoever, made by such Company or Company Subsidiary.

 

 

SECTION 4.15  Environmental Matters. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole: (a) none of the Company nor any of the Company Subsidiaries has violated or is in violation of applicable Environmental Law; (b) to the knowledge of the Company, none of the properties currently or formerly owned, leased, operated or used by the Company or any Company Subsidiary is located in environmentally restricted areas pursuant to applicable Environmental Laws or applicable zoning or land-use regulations; (c) to the knowledge of the Company, none of the properties currently or formerly owned, leased, operated or used by the Company or any Company Subsidiary (including soils and surface and ground waters) are contaminated with any Hazardous Substance in violation of applicable Environmental Laws or which requires reporting, investigation, remediation, monitoring or other response action by the Company or any Company Subsidiary pursuant to applicable Environmental Laws; (d) none of the Company or any of the Company Subsidiaries is actually liable pursuant to applicable Environmental Laws for any off-site contamination by Hazardous Substances; (e) each of the Company and each Company Subsidiary has all permits, licenses, certificates, registrations and other authorizations required of each of the Company and each Company Subsidiary under applicable Environmental Law (“Environmental Permits”); (f) each of the Company and each Company Subsidiary is in compliance with its Environmental Permits; and (g) to the knowledge of the Company, there is no Action pending or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary, or any property or asset of the Company or any Company Subsidiary related to any violation by the Company or any Company Subsidiary to Environmental Law or, the Environmental Permits.

 

SECTION 4.16  Material Contracts.

 

(a)  Section 4.16(a) of the Company Disclosure Schedule lists, as of the date of this Agreement, the following types of contracts and agreements to which the Company or any Company Subsidiary is a party, excluding for this purpose, any purchase orders submitted by customers (such contracts and agreements as are required to be set forth Section 4.16(a) of the Company Disclosure Schedule along with any Plan listed on Section 4.10(a) of the Company Disclosure Schedule being the “Material Contracts”):

 

(i)  each contract and agreement with consideration paid or payable to the Company or any of the Company Subsidiaries of more than $500,000, in the aggregate, over the 12-month period ending December 31, 2019;

 

(ii)  all material contracts and agreements with customers of the Company or the Company Subsidiaries that have been referenced in any requests for quotas (cupos) filed by the Company and the Company Subsidiaries in respect of fiscal years 2020 and 2021;

 

(iii)  all material broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising contracts and agreements to which the Company or any Company Subsidiary is a party;

 

(iv)  all material management contracts (excluding contracts for employment) and contracts with other consultants, including any contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company or any Company Subsidiary or income or revenues related to any Product of the Company or any Company Subsidiary to which the Company or any Company Subsidiary is a party;

 

 

(v) all material contracts and agreements evidencing indebtedness for borrowed money of more than $1,000,000, in the aggregate;

 

(vi) all material definitive partnership, joint venture or similar agreements;

 

(vii) all material contracts and agreements that limit, or purport to limit, the ability of the Company or any Company Subsidiary to compete in any material respect in any line of business or with any person or entity or in any geographic area or during any period of time, excluding customary confidentiality agreements and agreements that contain customary confidentiality clauses;

 

(viii) all leases or master leases of personal property reasonably likely to result in annual payments of $250,000 or more in a 12-month period;

 

(ix) all contracts involving use of any Company-Licensed IP required to be listed in Section 4.13(a) of the Company Disclosure Schedule;

 

(x) contracts which involve the license or grant of rights to Company-Owned IP by the Company and/or the Company Subsidiaries, but excluding any nonexclusive licenses (or sublicenses) of Company-Owned IP granted to customers in the ordinary course of business that are substantially in the same form as the Company’s or a Company Subsidiary’s standard form customer agreements as have been provided to SPAC;

 

(xi) all contracts for employment and consulting services that provide for an annual base salary or fees in excess of $200,000; and

 

(xii) each contract and agreement the absence of which would have a Company Material Adverse Effect.

 

(b) Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, (i) each Material Contract is a legal, valid and binding obligation of the Company or the Company Subsidiaries (subject to the Remedies Exception) and, to the knowledge of the Company, the other parties thereto, and neither the Company nor any Company Subsidiary is in breach or violation of, or default under, any Material Contract nor has any Material Contract been canceled by the other party; (ii) to the Company’s knowledge, no other party is in breach or violation of, or default under, any Material Contract; and (iii) the Company and the Company Subsidiaries have not received any written, or to the knowledge of the Company, oral claim of default under any such Material Contract. The Company has furnished or made available to SPAC true and complete copies of all Material Contracts, including amendments thereto that are material in nature.

 

 

SECTION 4.17 Insurance. Except as would not have a Company Material Adverse Effect, (a) the Company and the Company Subsidiaries hold policies of insurance in amounts providing reasonably adequate coverage against risks customarily insured against by companies of similar nature and size operating in similar lines of business as the Company and the Company Subsidiaries, including any insurance required to be maintained by Material Contracts; (b) each policy is legal, valid, binding and enforceable in accordance with its terms (subject to the Remedies Exceptions) and, except for policies that have expired under their terms in the ordinary course, is in full force and effect; and (c) neither the Company nor any Company Subsidiary is in material breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or modification, under the policy.

 

SECTION 4.18 Board Approval; Vote Required. The Company Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in any way, or by unanimous written consent, has duly (a) determined that this Agreement and the Transactions are in the best interests of the Company and fair to the Company Shareholders, (b) approved this Agreement and the Transactions and (c) resolved to recommend that the Company Shareholders approve the Company Arrangement Resolution. The approval of the Company Arrangement Resolution at the Company Meeting is the only vote of the holders of the Company Shareholders necessary to approve the Transactions (including the Arrangement and the Merger).

 

SECTION 4.19 Customers and Suppliers. Section 4.19 of the Company Disclosure Schedule sets forth a true and complete list of the top five (5) customers (the “Customers”) of the Company and its Company Subsidiaries (based on the revenue from such customer during the 12-month period ended December 31, 2019). Section 4.19 of the Company Disclosure Schedule sets forth a true and complete list of the top five (5) suppliers (the “Suppliers”) of the Company and its Company Subsidiaries (based on the monies paid to such suppliers during the 12-month period ended December 31, 2019). To the Company’s knowledge, no customer or Supplier has (a) cancelled or otherwise terminated any contract with the Company or any Company Subsidiary prior to the expiration of the contract term or (b) notified the Company in writing of its intention, except as would not be material to the Company and the Company Subsidiaries, taken as a whole. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, neither the Company nor any Company Subsidiary has (i) breached, in any material respect, any Material Contract with or (ii) engaged in any fraudulent conduct with respect to, any Customer or Supplier.

 

SECTION 4.20 Inventories. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company or a Company Subsidiary, as the case may be, has valid and legal title to the Inventories free and clear of all Liens other than Permitted Liens. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, to the knowledge of the Company, the Inventories are in good condition in all material respects, are suitable and usable for the purposes for which they are intended and are in a condition such that they could reasonably be expected to be sold in the ordinary course of the business of the Company and the Company Subsidiaries.

 

 

SECTION 4.21 Fixtures and Equipment. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, to the Company’s knowledge, each of the Company and the Company Subsidiaries (as applicable) has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or the Company Subsidiaries in connection with the conduct of its business (the “Fixtures and Equipment”). Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, to the Company’s knowledge, each of the Company and the Company Subsidiaries owns all of its Fixtures and Equipment free and clear of all Liens except for (a) Liens for current taxes not yet due and (b) zoning Laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.

 

SECTION 4.22 Certain Business Practices. Since July 20, 2017:

 

(a) Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, neither the Company nor any Company Subsidiary, its employees or any independent contractor, agent or other person affiliated with the Company or Company Subsidiary, has offered, made or received on behalf of the Company or any Company Subsidiary any illegal payment or contribution of any kind, directly or indirectly, to any person, entity, or United States or foreign national, state or local government official, employees or agents or candidates therefor or other persons, including any (i) payments, gifts or gratuities, (ii) bribes, kickbacks or other similar payments, (iii) unlawful contributions to a domestic or foreign political party, candidate or (iv) unlawful foreign payment (as defined in the Foreign Corrupt Practices Act, 16 U.S.C. § 78dd-1 et seq.)

 

(b) Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, neither the Company nor any Company Subsidiary, the employees of the Company or any Company Subsidiary, or any independent contractor, agent or any other person acting on their behalf, has given or agreed to give, directly or indirectly, any gift or similar benefit to any dealer, supplier, customer, governmental employee or other person who is or may be in a position to help or hinder the business of the Company or any Company Subsidiary (or to assist the Company or Company Subsidiary in connection with any actual or proposed transaction relating to its businesses or assets) which might subject the Company or any Company Subsidiary to any damage or penalty in any civil, criminal or governmental Action, and there have been no false or fictitious entries made in the books and records of the Company or any Company Subsidiary relating to the same.

 

(c) Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the operations of the Company and all Company Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and any other money laundering statutes in any other jurisdiction (collectively, the “Anti-Money Laundering Laws”). Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, no action, suit or proceeding involving the Company or any Company Subsidiary with respect to the Anti-Money Laundering Laws is pending or threatened by or before any Governmental Authority. Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company and all Company Subsidiaries have maintained an adequate system or systems of internal control reasonably designed to ensure compliance with Anti-Money Laundering Laws and prevent and detect violations of any Anti-Money Laundering Laws.

 

 

(d) Except as would not be material to the Company and the Company Subsidiaries, taken as a whole, the Company and all Company Subsidiaries have been in compliance with all applicable Customs & International Trade Laws, and no Governmental Authority has imposed any civil or criminal fine, penalty, seizure, forfeiture, revocation of any Company Permit issued under any applicable Customs & International Trade Law, debarment or denial of future permit issued under any applicable Customs & International Trade Law against the Company or any Company Subsidiary or any of their respective directors or officers (in their capacities as such) in connection with any violation of, or failure to comply with, any Anti-Money Laundering Laws.

 

SECTION 4.23 Registration Statement; Canadian Information Circular.

 

(a) None of the information relating to the Company or the Company Subsidiaries supplied by the Company in writing for inclusion in the Proxy Statement/Prospectus or Registration Statement will, as of the date the Registration Statement is made effective, as of the date the Proxy Statement/Prospectus (or any amendment or supplement thereto) is first mailed to the SPAC Stockholders, at the time of the SPAC Stockholders’ Meeting, or at the Merger Effective Time, contain any Misrepresentation; provided, however, that the Company makes no representation with respect to any forward-looking statements supplied by or on behalf of the Company for inclusion in, or relating to information to be included in the Proxy Statement/Prospectus or Registration Statement.

 

(b) None of the information relating to the Company or the Company Subsidiaries supplied by the Company in writing for inclusion in the Canadian Information Circular will, as of the date the Canadian Information Circular (or any amendment or supplement thereto) is first mailed to the Company Shareholders, at the time of the Company Meeting, or at the Arrangement Effective Time, contain any Misrepresentation; provided, however, that the Company makes no representation with respect to any forward looking statements supplied by or on behalf of the Company for inclusion in, or relating to information to be included in the Canadian Information Circular.

 

SECTION 4.24 Interested Party Transactions. Except for employment relationships and the payment of compensation, benefits and expense reimbursements in the ordinary course of business, no director, officer or other affiliate of the Company or any Company Subsidiary has or has had, directly or indirectly: (a) an economic interest in any person that has furnished or sold, or furnishes or sells, services or Products that the Company or any Company Subsidiary furnishes or sells, or proposes to furnish or sell; (b) an economic interest in any person that purchases from or sells or furnishes to, the Company or any Company Subsidiary, any goods or services; (c) a beneficial interest in any contract or agreement disclosed in Section 4.16(a) of the Company Disclosure Schedule; or (d) any contractual or other arrangement with the Company or any Company Subsidiary, other than customary indemnity arrangements; provided, however, that ownership of no more than five percent (5%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an “economic interest in any person” for purposes of this Section 4.21.

 

 

SECTION 4.25 Exchange Act. Neither the Company nor any Company Subsidiary is currently (or has previously been) subject to the requirements of Section 12 of the Exchange Act.

 

SECTION 4.26 Brokers. Other than Cowen, Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company or any Company Subsidiary.

 

Article V

REPRESENTATIONS AND WARRANTIES OF SPAC

 

Except as set forth in the SPAC SEC Reports and the SPAC disclosure schedule (it being understood and agreed that information disclosed in any section of the SPAC Disclosure Schedule shall be deemed to be disclosed with respect to any other section of the SPAC Disclosure Schedule to which such disclosure would reasonably pertain or if its relevance to such other section is reasonably apparent on the face of such disclosure) delivered by SPAC in connection with this Agreement (the “SPAC Disclosure Schedule”), SPAC hereby represents and warrants to the Company as follows:

 

SECTION 5.01 Corporate Organization.

 

(a) SPAC is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. SPAC has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approvals would not have a SPAC Material Adverse Effect.

 

(b) SPAC does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or business association or other person.

 

SECTION 5.02 Certificate of Incorporation and By-laws. SPAC has prior to the date of this Agreement furnished to the Company true and complete copies of the SPAC Organizational Documents. The SPAC Organizational Documents are in full force and effect. SPAC is not in violation of any of the provisions of the SPAC Organizational Documents.

 

 

SECTION 5.03 Capitalization.

 

(a) As of the date of this Agreement, the authorized capital stock of SPAC consists of (i) 100,000,000 shares of SPAC Common Stock and (ii) 1,000,000 shares of preferred stock, par value $0.0001 per share (“SPAC Preferred Stock”). As of the date of this Agreement (x) 16,215,132 shares of SPAC Common Stock are issued and outstanding (which includes 12,965,132 shares subject to Redemption Rights), all of which are validly issued, fully paid and non-assessable and not subject to any preemptive rights, (y) no shares of SPAC Preferred Stock are issued and outstanding and (z) 17,150,000 SPAC Warrants are issued and outstanding, each exercisable for one (1) share of SPAC Common Stock at an exercise price of $11.50.

 

(b) All outstanding shares of SPAC Common Stock and SPAC Warrants are duly authorized, validly issued, fully paid and nonassessable, have been issued and granted in compliance with all applicable securities Laws and other applicable Laws and were issued free and clear of all Liens other than transfer restrictions under applicable securities Laws and the SPAC Organizational Documents.

 

(c) Other than the SPAC Warrants, there are no options, warrants, preemptive rights, calls, convertible securities, conversion rights or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of SPAC or obligating SPAC to issue or sell any shares of capital stock of, or other equity interests in, SPAC. SPAC is not a party to, or otherwise bound by, and has not granted, any equity appreciation rights, participations, phantom equity or similar rights. There are no voting trusts, voting agreements, proxies, shareholder agreements or other agreements with respect to the voting or transfer of SPAC Common Stock or any of the equity interests or other securities of SPAC. SPAC does not own any equity interests in any person.

 

(d) Other than Redemption Rights, here are no outstanding contractual obligations of SPAC to repurchase, redeem or otherwise acquire any SPAC Common Stock or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any person.

 

SECTION 5.04 Authority Relative to This Agreement. SPAC has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by SPAC and the consummation by SPAC of the Transactions, has been duly and validly authorized by all necessary corporate action, including approval by the SPAC Board, and no other corporate proceedings on the part of SPAC is necessary to authorize this Agreement or to consummate the Transactions (other than with respect to the Transactions, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding shares of SPAC Common Stock and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by SPAC and, assuming due authorization, execution and delivery by the Company, Holdco and Merger Sub, constitutes a legal, valid and binding obligation of SPAC, enforceable against SPAC, in accordance with its terms subject to the Remedies Exceptions.

 

 

SECTION 5.05 No Conflict; Required Filings and Consents.

 

(a) The execution and delivery of this Agreement by SPAC does not, and subject to receipt of the filing and recordation of appropriate merger documents or other documents as required by the DGCL, and the performance of this Agreement by SPAC will not, (i) conflict with or violate the SPAC Organizational Documents, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 5.05(b) have been obtained and all filings and obligations described in Section 5.05(b) have been made, conflict with or violate any Law, rule, regulation, order, judgment or decree applicable to SPAC or by which any of its property or assets is bound or affected or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of SPAC pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which SPAC is a party or by which SPAC or any of their property or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not have or reasonably be expected to have a SPAC Material Adverse Effect.

 

(b) The execution and delivery of this Agreement by SPAC does not, and the performance of this Agreement by SPAC will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) for applicable requirements, if any, of the Securities Act, Exchange Act, Blue Sky Laws and state takeover Laws, rules and regulations of Nasdaq, and filing and recordation of appropriate merger documents as required by the DGCL and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, prevent or materially delay consummation of any of the Transactions or otherwise prevent SPAC from performing its material obligations under this Agreement.

 

SECTION 5.06 Compliance. SPAC is not in conflict with, or in default, breach or violation of any Law applicable to SPAC or by which any property or asset of SPAC is bound or affected. SPAC is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary and/or required pursuant to applicable Law for SPAC to own, lease and operate its properties or to carry on its business as it has been and is now being conducted, as applicable (the “SPAC Permits”). Section 5.06 sets forth a complete and accurate list of all SPAC Permits. All such SPAC Permits necessary and/or required pursuant to applicable Law for SPAC to own, lease and operate its properties or to carry on its business as it is now being conducted, are valid, updated as required by applicable Law and currently in-effect and no suspension or cancellation of any of the SPAC Permits is pending or, to the knowledge of SPAC, threatened in writing.

 

 

SECTION 5.07 SEC Filings; Financial Statements.

 

(a) SPAC has filed all forms, reports, schedules, statements and other documents, including any exhibits thereto, required to be filed by it with the Securities and Exchange Commission since December 10, 2018, together with any amendments, restatements or supplements thereto (including each Additional SEC Report filed after the date hereof until Closing, collectively, the “SPAC SEC Reports”). SPAC has heretofore furnished to the Company true and complete copies of all amendments and modifications that have not been filed by SPAC with the SEC to all agreements, documents and other instruments that previously had been filed by SPAC with the SEC and are currently in effect. The SPAC SEC Reports (i) were prepared in all material respects in accordance and comply with either the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations promulgated thereunder and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, contain any Misrepresentation. Each director and executive officer of SPAC has filed with the SEC on a timely basis all statements required with respect to SPAC by Section 16(a) of the Exchange Act and the rules and regulations thereunder. As used in this Section 5.07, the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC or Nasdaq.

 

(b) Each of the financial statements (including, in each case, any notes thereto) contained in the SPAC SEC Reports was prepared in accordance with GAAP (applied on a consistent basis) and Regulation S-X and Regulation S-K, as applicable, throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the financial position, results of operations and cash flows of SPAC as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments). SPAC has no off-balance sheet arrangements that are not disclosed in the SPAC SEC Reports. No financial statements other than those of SPAC are required by GAAP to be included in the consolidated financial statements of SPAC.

 

(c) Except as and to the extent set forth in the SPAC SEC Reports, SPAC has no liability or obligation of a nature (whether accrued, absolute, contingent or otherwise) required to be reflected on a balance sheet prepared in accordance with GAAP, except for liabilities and obligations arising in the ordinary course of SPAC’s business.

 

(d) SPAC is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of Nasdaq Capital Market.

 

(e) SPAC maintains disclosure controls and procedures that satisfy the requirements of Rule 13a-15 under the Exchange Act, and such disclosure controls and procedures are designed to ensure that all material information concerning SPAC is made known on a timely basis to the individuals responsible for the preparation of SPAC’s filings with the SEC and other public disclosure documents.

 

 

(f) Neither SPAC nor any of its subsidiaries, or any director or officer of SPAC or any of its subsidiaries, or, to the knowledge of SPAC, any auditor or accountant of SPAC or any of its subsidiaries has received any written complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of SPAC or any of its subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that SPAC or any of its subsidiaries has engaged in questionable accounting or auditing practices.

 

(g) To SPAC’s knowledge, SPAC’s auditor has at all times since December 10, 2018 been (i) a registered public accounting firm (as defined in the Sarbanes-Oxley Act), (ii) independent with respect to SPAC within the meaning of Regulation S-X, and (iii) in compliance with subsections (g) through (i) of Section 10A of the Exchange Act and the rules promulgated thereunder.

 

(h) None of the information supplied by SPAC in writing for inclusion in the Proxy Statement/Prospectus or Registration Statement will, (i) as of the date of the Registration Statement is made effective, (ii) as of the date the Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) is first mailed to the SPAC Stockholders, (iii) the time of the SPAC Stockholders’ Meeting and (iv) the Merger Effective Time, contain any Misrepresentation; provided, however, that SPAC makes no representation with respect to any forward-looking statements supplied by or on behalf of SPAC.

 

(i) The information supplied by SPAC in writing for inclusion in the Canadian Information Circular shall not, at (i) the date the Canadian Information Circular (or any amendment or supplement thereto) is first mailed to the Company Shareholders, (ii) the time of the Company Meeting or (iii) the Arrangement Effective Time, contain any Misrepresentation; provided, however, that SPAC makes no representation with respect to any forward-looking statements supplied by or on behalf of SPAC for inclusion in, or relating to information to be included in the Canadian Information Circular.

 

SECTION 5.08 Absence of Certain Changes or Events. Since May 18, 2018, except as expressly contemplated or permitted by this Agreement, (a) SPAC has conducted its business in the ordinary course and (b) there has not been any SPAC Material Adverse Effect.

 

SECTION 5.09 Absence of Litigation. There is no Action pending or, to the knowledge of SPAC, threatened against SPAC, or any property or asset of SPAC, before any Governmental Authority. Neither SPAC nor any material property or asset of SPAC is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of SPAC, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority.

 

 

SECTION 5.10 Board Approval; Vote Required.

 

(a) The SPAC Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Transactions are fair to and in the best interests of SPAC and its stockholders, (ii) approved this Agreement and the Transactions and declared their advisability and (iii) recommended that the SPAC Stockholders approve and adopt this Agreement and approve the Transactions, and directed that this Agreement and the Transactions be submitted for consideration by the SPAC Stockholders at the SPAC Stockholders’ Meeting.

 

(b) The only vote of the holders of any class or series of capital stock of SPAC necessary to approve this Agreement and the Transactions is the affirmative vote of the holders of a majority of the outstanding shares of SPAC Common Stock.

 

SECTION 5.11 Post-Closing Operations. SPAC is qualified and able to acquire and hold or control each Company Permit necessary for the conduct of the business of the Company and the Company Subsidiaries after the Closing under applicable Law, including the rules and regulations of the Governmental Authority that issued such Company Permit and there are no facts or circumstances that exist which would materially impair, delay or preclude SPAC’s ability to obtain any Company Permits necessary for SPAC to conduct the business of the Company and the Company Subsidiaries.

 

SECTION 5.12 SPAC Material Contracts.

 

(a) The SPAC SEC Reports include true and complete copies of each “material contract” (as such term is defined in Regulation S-K of the SEC) to which SPAC is party (the “SPAC Material Contracts”).

 

(b) Each SPAC Material Contract is in full force and effect and, to the knowledge of SPAC, is valid and binding upon and enforceable against each of the parties thereto (subject to the Remedies Exception), except insofar as enforceability may be limited by the Remedies Exceptions. True and complete copies of all SPAC Material Contracts have been made available to the Company.

 

SECTION 5.13 Employees. Other than any former officers or as described in the SPAC SEC Reports, SPAC has never had any employees. Other than reimbursement of any out-of-pocket expenses incurred by SPAC’s officers and directors in connection with activities on SPAC’s behalf in an aggregate amount not in excess of the amount of cash held by SPAC outside of the Trust Account, SPAC has no unsatisfied liability with respect to any employee. SPAC does not currently maintain or have any liability under any employment or employee benefit plan, program or arrangement, and neither the execution and delivery of this Agreement or the other Ancillary Agreements nor the consummation of the Transactions will (a) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer or employee of SPAC, or (b) result in the acceleration of the time of payment or vesting of any such benefits. The Transactions shall not be the direct or indirect cause of any amount paid or payable by SPAC being classified as an “excess parachute payment” under Section 280G of the Code.

 

 

SECTION 5.14 Taxes.

 

(a) SPAC: (i) has duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by it as of the date hereof and all such filed Tax Returns are complete and accurate in all material respects; (ii) has timely paid all Taxes that are shown as due on such filed Tax Returns and any other material Taxes that are otherwise obligated to pay (whether or not such Taxes have been reported on any Tax Returns), except with respect to Taxes that are being contested in good faith, and no material penalties or charges are due with respect to the late filing of any Tax Return required to be filed by or with respect to it on or before the Merger Effective Time; (iii) with respect to all material Tax Returns filed by or with respect to it, have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency; and (iv) does not have any deficiency, audit, examination, investigation or other proceeding in respect of Taxes or Tax matters pending or proposed or threatened in writing, for a Tax period which the statute of limitations for assessments remains open.

 

(b) SPAC is not a party to, is bound by or has an obligation under any Tax sharing agreement, Tax indemnification agreement, Tax allocation agreement or similar contract or arrangement (including any agreement, contract or arrangement providing for the sharing or ceding of credits or losses).

 

(c) SPAC will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending or portion thereof on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law); (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; (iv) prepaid amount received or deferred revenue accrued on or prior to the Closing Date; (v) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local, or non-United States income Tax Law); (vi) any use of an improper method of accounting use for any tax period or portion thereof ending or ended on or prior to the Closing Date; or (vii) income arising or accruing prior to the Closing and includable after the Closing under Subchapter K, Sections 951, 951A, or 956 of the Code.

 

(d) SPAC has withheld and paid to the appropriate Tax authority all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any current or former employee, independent contractor, creditor, shareholder or other third party and has complied in all material respects with all applicable Law, rules and regulations relating to the payment and withholding of Taxes, including all reporting and record keeping requirements related thereto.

 

 

(e) SPAC has not been a member of an affiliated group filing a consolidated, combined or unitary United States federal, state, local or foreign income Tax Return.

 

(f) SPAC does not have any material liability for the Taxes of any person (other than the Company and its Company Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise.

 

(g) SPAC does not have any request for a ruling in respect of Taxes pending between SPAC and any Tax authority.

 

(h) There is no contract or agreement, plan or arrangement by SPAC covering any person that, individually or collectively, would constitute compensation in excess of the deduction limitation set forth in Section 162(m) of the Code.

 

(i) SPAC has not in any year for which the applicable statute of limitations remains open distributed stock of another person, or has had its stock distributed by another person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

 

(j) SPAC is not, and has not been a party to a “reportable transaction,” as described in Section 6707A(c) and Treasury Regulations Section 1.6011-4(b)(2), or any corresponding or similar provision of state, local or non-United States Law.

 

(k) Neither the IRS nor any other United States or non-United States taxing authority or agency has asserted in writing or, to the knowledge of SPAC, has threatened to assert against SPAC any deficiency or claim for any Taxes or interest thereon or penalties in connection therewith.

 

(l) There are no Tax Liens upon any assets of SPAC.

 

(m) SPAC has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. SPAC: (i)  has not received written notice from a non-United States taxing authority that it has a permanent establishment (within the meaning of an applicable Tax treaty) or otherwise has an office or fixed place of business in a country other than the country in which it is organized or (ii) is not otherwise subject to taxation in a country other than the country in which it is organized. SPAC has not made an election under Section 965(h) of the Code.

 

(n) Other than as a result of this Agreement, SPAC has not suffered an ownership change within the meaning of Section 382 of the Code. SPAC has complied in all material respects with all transfer pricing rules described in Section 482 and the regulations thereunder, or any corresponding or similar provision of state, local or non-United States Law.

 

 

(o) Each share of SPAC Common Stock does not, and has not at any time since December 10, 2018, more than fifty percent (50%) of its fair market value directly or indirectly from one or any combination of (i) real or immovable property situated in Canada, (ii) Canadian resource properties (as defined in the Income Tax Act (Canada)), (iii) timber resource properties (as defined in the Income Tax Act (Canada)) and (iv) options in respect of, or interests in, or for civil law, a right in, property described in any of (i) to (iii) above, whether or not the property exists.

 

SECTION 5.15 Listing. The issued and outstanding SPAC Units are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol “SAMAU.” The issued and outstanding shares of SPAC Common Stock are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol “SAMA.” The issued and outstanding SPAC Warrants are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol “SAMAW.” There is no Action pending or, to the knowledge of SPAC, threatened in writing against SPAC by the Nasdaq Capital Market or the SEC with respect to any intention by such entity to deregister the SPAC Units, the shares of SPAC Common Stock or the SPAC Warrants or terminate the listing of SPAC on the Nasdaq Capital Market. None of SPAC or any of its affiliates has taken any action in an attempt to terminate the registration of the SPAC Units, the shares of SPAC Common Stock or the SPAC Warrants under the Exchange Act.

 

SECTION 5.16 Brokers. Except for Canaccord Genuity LLC and EarlyBirdCapital, Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of SPAC.

 

SECTION 5.17 Investment Company Act. SPAC is not an “investment company” or a person directly or indirectly “controlled” by or acting on behalf of an “investment company”, or required to register as an “investment company”, in each case within the meaning of the Investment Company Act of 1940.

 

SECTION 5.18 SPAC Trust Fund. As of the date of this Agreement, SPAC has no less than $132,433,250.00 in the trust fund established by SPAC for the benefit of its public stockholders (the “Trust Fund”) maintained in a trust account at UBS Securities LLC (the “Trust Account”). The monies of such Trust Account are invested in United States Government securities or money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, and held in trust by Continental Stock Transfer & Trust Company (the “Trustee”) pursuant to the Investment Management Trust Agreement, dated as of December 10, 2018, by and between SPAC and the Trustee (the “Trust Agreement”). The Trust Agreement has not been amended or modified and is valid and in full force and effect and is enforceable in accordance with its terms, subject to the Remedies Exceptions. SPAC has complied in all material respects with the terms of the Trust Agreement and is not in breach thereof or default thereunder and there does not exist under the Trust Agreement any event which, with the giving of notice or the lapse of time, would constitute such a breach or default by SPAC or the Trustee. There are no separate contracts, agreements, side letters or other understandings (whether written or unwritten, express or implied): (a) between SPAC and the Trustee that would cause the description of the Trust Agreement in the SPAC SEC Reports to be inaccurate; or (b) that would entitle any person (other than SPAC Stockholders who shall have elected to redeem their shares of SPAC Common Stock pursuant to the SPAC Organizational Documents) to any portion of the proceeds in the Trust Account. Prior to the Closing, none of the funds held in the Trust Account may be released except: (i) to pay income and franchise taxes from any interest income earned in the Trust Account; and (ii) upon the exercise of Redemption Rights in accordance with the provisions of the SPAC Organizational Documents. As of the date hereof, there are no Actions pending or, to the knowledge of SPAC, threatened with respect to the Trust Account. SPAC has performed all material obligations required to be performed by it to date under, and is not in default, breach or delinquent in performance or any other respect (claimed or actual) in connection with, the Trust Agreement, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach thereunder. There are no claims, proceedings or other Actions pending with respect to, or against, the Trust Fund and, to the knowledge of SPAC, there are no events, circumstances or conditions that would reasonably result in any such claim, proceeding or other Actions. Upon consummation of the Transactions and notice thereof to the Trustee pursuant to the Trust Agreement, SPAC shall cause the Trustee to, and the Trustee shall thereupon be obligated to, release to SPAC as promptly as practicable, the Trust Funds in accordance with the Trust Agreement at which point the Trust Account shall terminate; provided, however that the liabilities and obligations of SPAC due and owing or incurred at or prior to the Merger Effective Time shall be paid as and when due, including all amounts payable (A) to SPAC Stockholders who shall have exercised their Redemption Rights, (B) with respect to filings, applications and/or other actions taken pursuant to this Agreement required under Law, (C) to the Trustee for fees and costs incurred in accordance with the Trust Agreement; and (D) to third parties (e.g., professionals, printers, etc.) who have rendered services to SPAC in connection with its efforts to effect the Transactions.

 

 

SECTION 5.19 Prior Business Operations. SPAC has limited its activities to those activities (a) contemplated in the prospectus of SPAC, dated as of December 10, 2018, or (b) otherwise necessary to consummate the Transactions.

 

SECTION 5.20 SPAC’s Investigation and Reliance. SPAC is a sophisticated purchaser and has made its own independent investigation, review and analysis regarding the Company and the Company Subsidiaries and the Transactions, which investigation, review and analysis were conducted by SPAC together with expert advisors, including legal counsel, that they have engaged for such purpose. SPAC and its Representatives have been provided with full and complete access to the Representatives, properties, offices, plants and other facilities, books and records of the Company and the Company Subsidiaries and other information that they have requested in connection with their investigation of the Company, the Company Subsidiaries and the Transactions. SPAC is not relying on any statement, representation or warranty, oral or written, express or implied, made by the Company or any of the Company Subsidiaries or Representatives (including the Company Shareholders), except as expressly set forth in Article IV (as modified by the Company Disclosure Schedule). Neither the Company nor any of its shareholders, affiliates or Representatives shall have any liability to SPAC or any of its respective stockholders, affiliates or Representatives resulting from the use of any information, documents or materials made available to SPAC, whether orally or in writing, in any confidential information memoranda, “data rooms,” management presentations, due diligence discussions or in any other form in expectation of the Transactions. Neither the Company nor any of its shareholders, affiliates or Representatives is making, directly or indirectly, any representation or warranty with respect to any estimates, projections or forecasts involving the Company and the Company Subsidiaries.

 

 

Article VI

REPRESENTATIONS AND WARRANTIES OF HOLDCO AND MERGER SUB

 

Holdco and Merger Sub hereby represent and warrant to SPAC and the Company as follows:

 

SECTION 6.01 Corporate Organization.

 

(a) Holdco is a corporation duly organized, validly existing and in good standing under the Laws of the Province of British Colombia. Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of Holdco and Merger Sub has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approvals would not be a material adverse effect.

 

(b) Holdco is a wholly-owned subsidiary of the Company. Merger Sub is the only subsidiary of Holdco. Except for Merger Sub and as a result of the Transactions, Holdco does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or business association or other person.

 

SECTION 6.02 Organizational Documents. Each of Holdco and Merger Sub has prior to the date of this Agreement made available to SPAC and the Company true and complete copies of the Holdco Organizational Documents and the Merger Sub Organizational Documents, respectively. The Holdco Organizational Documents and the Merger Sub Organizational Documents are in full force and effect. Neither Holdco nor Merger Sub is in violation of any of the provisions of the Holdco Organizational Documents and the Merger Sub Organizational Documents, respectively.

 

SECTION 6.03 Capitalization.

 

(a) As of the date of this Agreement, the authorized share capital of Holdco consists of an unlimited number of Holdco Common Shares. As of the date of this Agreement, one (1) Holdco Common Share is issued and outstanding, which is validly issued, fully paid and non-assessable and not subject to any preemptive rights. The Company is the record and beneficial holder of such Holdco Common Share.

 

 

(b) As of the date of this Agreement, the authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock. As of the date hereof, 100 shares of Merger Sub Common Stock are issued and outstanding. All outstanding shares of Merger Sub Common Stock have been duly authorized, validly issued, fully paid and are non-assessable and are not subject to preemptive rights, and are held by Holdco free and clear of all Liens, other than transfer restrictions under applicable securities Laws and the Merger Sub Organizational Documents.

 

(c) The outstanding Holdco Common Share has been issued and granted in compliance with all applicable securities Laws and other applicable Laws and were issued free and clear of all Liens other than transfer restrictions under applicable securities Laws and the Holdco Organizational Documents.

 

(d) The shares constituting the Transaction Consideration being delivered by Holdco hereunder shall be duly and validly issued, fully paid and nonassessable, and each such share or other security shall be issued free and clear of preemptive rights and all Liens, other than transfer restrictions under applicable securities Laws and the Holdco Organizational Documents. The Company Shares constituting the Transaction Consideration being delivered by Holdco hereunder will be issued in compliance with all applicable Laws and other applicable Laws and will not be subject to or give rise to any preemptive rights or rights of first refusal.

 

SECTION 6.04 Authority Relative to This Agreement. Each of Holdco and Merger Sub have all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by each of Holdco and Merger Sub and the consummation by each of Holdco and Merger Sub of the Transactions, have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Holdco or Merger Sub are necessary to authorize this Agreement or to consummate the Transactions (other than (a) with respect to the Transactions, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding Holdco Common Shares and by Holdco (as the holder of all of the then outstanding Merger Sub Common Stock), and the filing and recordation of appropriate merger documents as required by the DGCL and the BCBCA, as the case may be, and (b) with respect to the issuance of Holdco Common Shares and Holdco Non-Voting Common Shares and the amendment and restatement of the Holdco Organizational Documents, including the Amended and Restated Holdco Articles, pursuant to this Agreement, the approval of majority of the then-outstanding Holdco Common Shares). This Agreement has been duly and validly executed and delivered by Holdco and Merger Sub and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Holdco or Merger Sub, enforceable against Holdco or Merger Sub in accordance with its terms subject to the Remedies Exceptions.

 

 

SECTION 6.05 No Conflict; Required Filings and Consents.

 

(a) The execution and delivery of this Agreement by each of Holdco and Merger Sub do not, and the performance of this Agreement by each of Holdco and Merger Sub will not, (i) conflict with or violate the Holdco Organizational Documents or the Merger Sub Organizational Documents, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 6.05(b) have been obtained and all filings and obligations described in Section 6.05(b) have been made, conflict with or violate any Law, rule, regulation, order, judgment or decree applicable to each of Holdco or Merger Sub or by which any of their property or assets is bound or affected or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of each of Holdco or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which each of Holdco or Merger Sub is a party or by which each of Holdco or Merger Sub or any of their property or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which would not have or reasonably be expected to have a material adverse effect.

 

(b) The execution and delivery of this Agreement by each of Holdco and Merger Sub do not, and the performance of this Agreement by each of Holdco and Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws and state takeover Laws, rules and regulations of Nasdaq and filing and recordation of appropriate merger documents as required by the DGCL and BCBCA, as the case may be, the Final Order, the Interim Order, and filings required pursuant to the Plan of Arrangement and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, prevent or materially delay consummation of any of the Transactions or otherwise prevent Holdco or Merger Sub from performing its material obligations under this Agreement.

 

SECTION 6.06 Compliance. None of Holdco or Merger Sub is in conflict with, or in default, breach or violation of any Law applicable to Holdco or Merger Sub, respectively, or by which any property or asset of Holdco or Merger Sub is bound or affected. Holdco and Merger Sub are in possession of all material franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for Holdco or Merger Sub to own, lease and operate its properties or to carry on its business as it is now being conducted.

 

SECTION 6.07 Board Approval; Vote Required.

 

(a) The Holdco Board has, by resolutions duly adopted by written consent and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Transactions are in the best interests of Holdco and (ii) approved this Agreement and the Transactions.

 

 

(b) The only vote of the holders of any class or series of capital stock of Holdco that is necessary to approve this Agreement, the Plan of Arrangement and the Transactions is the affirmative vote of the Company as sole shareholder of all outstanding Holdco Common Shares.

 

(c) Merger Sub Board has, by resolutions duly adopted by written consent and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Transactions are fair to and in the best interests of Merger Sub and Holdco (as the sole shareholder of Merger Sub), (ii) approved this Agreement and the Transactions and declared their advisability and (iii) recommended that Holdco (as the sole shareholder of Merger Sub) approve and adopt this Agreement and approve the Transactions and directed that this Agreement and the Transactions be submitted for consideration by Holdco (as the sole shareholder of Merger Sub).

 

(d) The only vote of the holders of any class or series of capital stock of Merger Sub that is necessary to approve this Agreement and the Transactions is the affirmative vote of the Holdco as sole stockholder of all outstanding shares of Merger Sub Common Stock.

 

SECTION 6.08 Post-Closing Operations; No Prior Operations of Holdco or Merger Sub.

 

(a) Holdco and Merger Sub are qualified and able to acquire and hold or control each Company Permit necessary for the conduct of the business of the Company and the Company Subsidiaries after the Closing under applicable Law, including the rules and regulations of the Governmental Authority that issued such Company Permit and there are no facts or circumstances that exist which would materially impair, delay or preclude SPAC’s ability to obtain any Company Permits necessary for Holdco to conduct the business of the Company and the Company Subsidiaries.

 

(b) Holdco and Merger Sub were formed for the sole purposes of entering into this Agreement and the Ancillary Agreements to which they are party and engaging in the Transactions contemplated by this Agreement and the Ancillary Agreements. Since the date of the Holdco Organizational Documents and the Merger Sub Organizational Documents, as the case may be, neither Holdco nor Merger Sub has engaged in any business or activities whatsoever, nor incurred any liabilities, except in connection with this Agreement, the Ancillary Agreements or in furtherance of the Transactions. Neither Holdco nor Merger Sub has any employees or liabilities under any Plan.

 

 

SECTION 6.09 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Holdco or Merger Sub.

 

SECTION 6.10 Proxy Statement/Prospectus and Registration Statement.

 

(a) None of the information relating to Holdco or Merger Sub supplied by Holdco or Merger Sub in writing for inclusion in the Proxy Statement/Prospectus or Registration Statement will, as of the date the Registration Statement is made effective, as of the date the Proxy Statement/Prospectus (or any amendment or supplement thereto) is first mailed to the SPAC Stockholders, at the time of the SPAC Stockholders’ Meeting, or at the Merger Effective Time, contain any Misrepresentation; provided, however, that Holdco and Merger Sub make no representation with respect to any forward-looking statements supplied by or on behalf of Holdco or Merger Sub for inclusion in, or relating to information to be included in the Proxy Statement/Prospectus or Registration Statement.

 

(b) None of the information relating to Holdco or Merger Sub supplied by Holdco or Merger Sub in writing for inclusion in the Canadian Information Circular will, as of the date the Canadian Information Circular (or any amendment or supplement thereto) is first mailed to the Company Shareholders, at the time of the Company Meeting, or at the Arrangement Effective Time, contain any Misrepresentation; provided, however, that Holdco and Merger Sub make no representation with respect to any forward-looking statements supplied by or on behalf of Holdco or Merger Sub for inclusion in, or relating to information to be included in the Canadian Information Circular.

 

Article VII

CONDUCT OF BUSINESS PENDING THE TRANSACTIONS

 

SECTION 7.01 Conduct of Business by the Company, Holdco and Merger Sub Pending the Merger and the Arrangement.

 

(a) The Company agrees that, between the date of this Agreement and the Merger Effective Time or the earlier termination of this Agreement, except as (w) expressly contemplated or permitted by any other provision of this Agreement (including the Amendment and Restatement) or any Ancillary Agreement, (x) required by Law or any Governmental Authority or (y) set forth in Section 7.01 of the Company Disclosure Schedule, unless SPAC shall otherwise consent in writing, which consent shall not be unreasonably withheld, conditioned or delayed (and in any event, such consent shall be deemed given if SPAC has not affirmatively denied consent in writing within three (3) Business Days of the Company requesting consent):

 

(i) the Company shall, and shall cause the Company Subsidiaries to, conduct their business in all material respects in the ordinary course of business; provided that, in the case of actions that are taken (or omitted to be taken) reasonably in response to an emergency or urgent condition or conditions arising from COVID-19, the Company and the Company Subsidiaries shall not be deemed to be acting outside of the ordinary course of business, so long as such actions or omissions are reasonably designed to (A) protect the health or welfare of the Company’s employees, directors, officers or agents or (B) to comply with clause (ii) of this Section 7.01(a), and, in each case, the Company promptly notifies SPAC of such actions and reasonably takes into account the reasonable requests of SPAC in further acts or omissions of the Company with respect to such condition or conditions arising from COVID-19; and

 

 

(ii) the Company shall use reasonable best efforts to preserve intact the business organization of the Company and the Company Subsidiaries and preserve the business relationships of the Company and the Company Subsidiaries with significant customers, suppliers and other persons having significant business relationships with the Company and the Company Subsidiaries.

 

(b) By way of amplification and not limitation, except as (w) expressly contemplated or permitted by any other provision of this Agreement or any Ancillary Agreement, (x) as required by Law (including COVID-19 Measures) or any Governmental Authority or (y) set forth in Section 7.01 of the Company Disclosure Schedule, the Company shall not, and shall cause each Company Subsidiary, Merger Sub and Holdco not to, between the date of this Agreement and the Merger Effective Time or the earlier termination of this Agreement, do any of the following without the prior written consent of SPAC, which consent shall not be unreasonably withheld, conditioned or delayed (and in any event, such consent shall be deemed given if SPAC has not affirmatively denied consent in writing within three (3) Business Days of the Company requesting consent):

 

(i) amend or otherwise change the Company Notice of Articles, the Company Articles or equivalent organizational documents of any Company Subsidiary in a manner that would adversely affect the Transactions;

 

(ii) issue, sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any shares of any class of capital stock of the Company or any Company Subsidiary of the Company or any Company Subsidiary for an aggregate amount of consideration in excess of $10,000,000, except for the issuance of Company Common Shares upon exercise or settlement of Company Options or Company Warrants, (B) any options, warrants, convertible securities (other than convertible debt which the Company shall be permitted to issue so long as it complies with Sections 7.01(b)(ii) and 7.01(b)(vi) with respect to the amounts of debt and underlying equity) or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including any phantom interest), except for grants of Company Options and other awards, including Company Restricted Shares, with respect to up to 900,000 Company Common Shares in the aggregate, or (C) except in the ordinary course of business, any material assets of the Company or any Company Subsidiary;

 

 

(iii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;

 

(iv) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock, other than redemptions of equity securities from former employees upon the terms set forth in the underlying agreements governing such equity securities;

 

(v) acquire (including by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof in an amount greater than $10,000,000;

 

(vi) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets, in each case, except in an aggregate principal amount such that, after giving effect to the use of proceeds of such indebtedness, the amount of the Company’s net indebtedness does not exceed the amount of the Company’s outstanding indebtedness as of the date of this Agreement by more than $20,000,000;

 

(vii) increase the compensation or benefits payable or provided to or to become payable to be provided to, or, other than health and welfare plan renewals in the ordinary course of business consistent with past practices, the compensation or benefits provided to its executive level employees;

 

(viii) other than pursuant to the terms of an agreement entered into prior to the date of this Agreement and reflected on Section 4.10(a) of the Company Disclosure Schedule, (A) grant any severance or termination pay to, (B) enter into any employment, consulting or severance agreement with, any director or officer of the Company or of any Company Subsidiary, other than in the ordinary course of business consistent with past practice, (C) accelerate the vesting of any Company Share Award or (D) amend or alter the exercise price of any Company Option (other than any adjustment of the exercise price of any Company Option in accordance with the Calculation Methodology) or Company Warrant;

 

(ix) adopt, amend and/or terminate any Plan except as may be required by applicable Law, is necessary in order to consummate the Transactions, or health and welfare plan renewals in the ordinary course of business;

 

(x) amend and/or terminate any insurance policies of the Company or any Company Subsidiary except as may be required by applicable Law or is necessary in order to consummate the Transactions;

 

 

(xi) make, change or revoke any material Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, amend any Tax Returns or file claims for Tax refunds, enter into any closing agreement, waive or extend any statute of limitations period in respect of an amount of Taxes, settle any Tax claim, audit or assessment, or surrender any right to claim a Tax refund, offset or other reduction in Tax liability;

 

(xii) take any action, other than reasonable actions in the ordinary course of business, with respect to accounting policies or procedures, other than as required by GAAP;

 

(xiii) materially amend, modify or consent to the termination of any Material Contract or amend, waive, modify or consent to the termination of the Company’s or any Company Subsidiary’s material rights thereunder;

 

(xiv) other than as undertaken in the ordinary course, intentionally permit any material item of Company IP to lapse or to be abandoned or fail to perform or make any applicable filings, recordings or other similar actions or filings, or fail to pay all required fees and taxes required to maintain and protect its interest in each and every material item of Company IP; or

 

(xv) enter into any formal or informal agreement or otherwise make a binding commitment to do any of the foregoing;

 

provided that: (A) no action by the Company or any of its affiliates, to the extent expressly permitted by an exception to any provision of this Section 7.01 will be deemed a breach of any other provision of this Section 7.01; and (B) if the Company seeks the consent of SPAC to take any action prohibited by any of this Section 7.01, and such consent is withheld by SPAC, the failure to take such action and occurrences or conditions resulting from the failure to take such action will not be deemed to be a breach of this Agreement.

 

SECTION 7.02 Conduct of Business by SPAC Pending the Merger and the Arrangement.

 

(a) SPAC agrees that, between the date of this Agreement and the Merger Effective Time or the earlier termination of this Agreement, except as (w) expressly contemplated or permitted by any other provision of this Agreement (including the Amendment and Restatement) or any Ancillary Agreement, (x) required by Law or any Governmental Authority, or (y) set forth in Section 7.02 of the SPAC Disclosure Schedule, unless the Company shall otherwise consent in writing, each of SPAC shall not, directly or indirectly, take any action that would reasonably be likely to materially delay or prevent the Transactions.

 

 

(b) By way of amplification and not limitation, except as (w) expressly contemplated or permitted by any other provision of this Agreement or any Ancillary Agreement, (x) as required by Law or any Governmental Authority, or (y) set forth on Section 7.02 of the SPAC Disclosure Schedule, SPAC shall not, between the date of this Agreement and the Merger Effective Time or the earlier termination of this Agreement, directly or indirectly, do, any of the following without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed:

 

(i) amend or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents;

 

(ii) subject to Section 8.17, issue, sell, pledge, dispose of, grant or encumber, or authorize, solicit, propose, or negotiate with respect to the issuance, sale, pledge, disposition, grant or encumbrance of, any shares of any class of capital stock of SPAC (or of Holdco or Merger Sub) or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including any phantom interest), of SPAC (or of Holdco or Merger Sub);

 

(iii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except pursuant to the Redemption Rights);

 

(iv) reclassify, combine, split or subdivide, directly or indirectly, any of its capital stock (except pursuant to the Redemption Rights);

 

(v) acquire (including by merger, consolidation, or acquisition of equity or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or any material amount of assets;

 

(vi) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets, other than a promissory note or notes issued or issuable to Sponsor with an aggregate principal amount of less than or equal to $750,000 (the “Sponsor Loans”), which is to be repaid by issuing to Sponsor a number of Working Capital Warrants (as defined in the SPAC Warrant Amendment) in full satisfaction of the Sponsor Loans prior to or concurrently with the Closing;

 

(vii) take any action with respect to accounting policies or procedures, other than as required by GAAP;

 

(viii) make, change or revoke any material Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, amend any Tax Returns or file claims for Tax refunds, enter into any closing agreement, waive or extend any statute of limitations period in respect of an amount of Taxes, settle any Tax claim, audit or assessment, or surrender any right to claim a Tax refund, offset or other reduction in Tax liability; or

 

(ix) enter into any formal or informal agreement or otherwise make a binding commitment to do any of the foregoing.

 

 

SECTION 7.03 Claims Against Trust Account. Each of Holdco, Merger Sub and the Company agrees that, notwithstanding any other provision contained in this Agreement, none of Holdco, Merger Sub or the Company does now have, and shall not at any time prior to the Merger Effective Time have, any claim to, or make any claim against, the Trust Fund, regardless of whether such claim arises as a result of, in connection with or relating in any way to, the business relationship between or among Holdco, Merger Sub, the Company and SPAC, this Agreement, or any other agreement or any other matter, and regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability (any and all such claims are collectively referred to in this Section 7.03 as the “Claims”). Notwithstanding any other provision contained in this Agreement, each of Holdco, Merger Sub and the Company hereby irrevocably waives any Claim it may have, now or in the future and will not seek recourse against the Trust Fund for any reason whatsoever in respect thereof; provided, however, that the foregoing waiver will not limit or prohibit any of Holdco, Merger Sub or the Company from pursuing a claim against SPAC or any other person (a) for legal relief against monies or other assets of SPAC held outside of the Trust Account or for specific performance or other equitable relief in connection with the Transactions or (b) for damages for breach of this Agreement against SPAC (or any successor entity) in the event this Agreement is terminated for any reason and SPAC consummates a business combination transaction with another party. In the event that any of Holdco, Merger Sub or the Company commences any action or proceeding against or involving the Trust Fund in violation of the foregoing, SPAC shall be entitled to recover from such party the associated reasonable legal fees and costs in connection with any such action, in the event SPAC prevails in such action or proceeding.

 

SECTION 7.04 SPAC Public Filings.

 

(a) Between the date of this Agreement and the Merger Effective Time or the earlier termination of this Agreement, SPAC will keep current and timely file all of the forms, reports, schedules, statements and other documents required to be filed by SPAC with the SEC, including all necessary amendments and supplements thereto, and otherwise comply in all material respects with applicable securities Laws (the “Additional SEC Reports”). All such Additional SEC Reports (including any financial statements or schedules included therein) (i) shall be prepared in all material respects in accordance with either the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations promulgated thereunder and (ii) will not, at the time they are filed, or, if amended, as of the date of such amendment, contain any Misrepresentation. As used in this Section 7.04, the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC or Nasdaq. Any Additional SEC Reports which discuss or refer to this Agreement or the Transactions shall be subject to the prior review and approval of the Company (not to be unreasonably withheld, delayed or conditioned).

 

(b) Between the date of this Agreement and the Merger Effective Time or the earlier termination of this Agreement, SPAC shall use its reasonable best efforts prior to the Merger to maintain the listing of the SPAC Units, the SPAC Common Stock and the SPAC Warrants on the Nasdaq Capital Market.

 

 

Article VIII

ADDITIONAL AGREEMENTS

 

SECTION 8.01 Preparation of SEC Documents.

 

(a) As promptly as practicable after the execution of this Agreement, (i) Holdco, the Company and SPAC shall prepare and Holdco shall file with the SEC the proxy statement/prospectus (as amended or supplemented from time to time, the “Proxy Statement/Prospectus”) to be sent to the SPAC Stockholders relating to the SPAC Stockholders’ Meeting for the purpose of soliciting proxies from SPAC stockholders for the matters to be acted upon at the SPAC Stockholders’ Meeting and providing the public stockholders an opportunity in accordance with SPAC Organizational Documents to have their shares of SPAC Common Stock redeemed (the “Redemption”) in conjunction with the stockholder vote on the SPAC Proposals and (ii) Holdco, the Company and SPAC shall prepare and Holdco shall file (and the Company and SPAC shall cause Holdco to file) with the SEC a registration statement on Form S-4 or such other applicable form as the Company and SPAC may agree (as amended or supplemented from time to time, the “Registration Statement”), in which the Proxy Statement/Prospectus will be included, in connection with the registration under the Securities Act of the Holdco Common Shares and Holdco Warrants to be issued in the Arrangement and the Merger. Each party shall use its reasonable best efforts to cause the Registration Statement and the Proxy Statement/Prospectus to comply with the applicable rules and regulations promulgated by the SEC, including providing any necessary opinions of counsel, to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, to keep the Registration Statement effective as long as is necessary to consummate the Transactions. Each of Holdco, the Company and SPAC shall furnish all information as may be reasonably requested by the others in connection with any such action and the preparation, filing and distribution of the Registration Statement and the Proxy Statement/Prospectus; provided, however, that neither party shall use any such information for any purposes other than those contemplated by this Agreement unless such party obtains the prior written consent of the other. SPAC also agrees to use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the Transactions, and the Company shall furnish all information concerning the Company and the Company Subsidiaries as may be reasonably requested in connection with any such action; provided that, without the prior written consent of the Company, SPAC shall not use any such information for any purposes other than to obtain necessary state securities law or “Blue Sky” permits and approvals.

 

 

(b) As promptly as practicable after the Registration Statement shall have become effective, SPAC shall use its reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed to the SPAC Stockholders as of the record date for the SPAC Stockholders’ Meeting. No filing of, or amendment or supplement to, the Registration Statement or the Proxy Statement/Prospectus will be made (in each case including documents incorporated by reference therein) by SPAC, the Company or Holdco without providing the other with a reasonable opportunity to review and comment thereon and each party shall give reasonable and good faith consideration to any comments made by any other party and their counsel. Each of SPAC, the Company and Holdco will be given a reasonable opportunity to participate in the response to any SEC comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by participating with SPAC, the Company or Holdco or their counsel in any discussions or meetings with the SEC. SPAC shall comply with all applicable rules and regulations promulgated by the SEC, any applicable rules and regulations of Nasdaq, SPAC Organizational Documents, and this Agreement in the preparation, filing and distribution of the Proxy Statement/Prospectus, any solicitation of proxies thereunder, the calling and holding of the SPAC Stockholders’ Meeting and the Redemption.

 

(c) If at any time prior to the Merger Effective Time any information relating to SPAC, the Company or Holdco or any of their respective affiliates, directors or officers, should be discovered by SPAC, the Company or Holdco which should be set forth in an amendment or supplement to either the Registration Statement or the Proxy Statement/Prospectus, so that either such document would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, the party that discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by Law, disseminated to the SPAC Stockholders.

 

(d) Each of SPAC, the Company and Holdco will advise the other parties hereto promptly after it receives any oral or written request by the SEC for amendment of the Proxy Statement/Prospectus or the Registration Statement, as applicable, or comments thereon and responses thereto, any oral or written comments or requests in relation to the SPAC Stockholders’ Meeting or the Redemption, or requests by the SEC for additional information and each party will promptly provide the other with copies of any written communication between it or any of its Representatives, on the one hand, and the SEC, any state securities commission or their respective staffs, on the other hand, with respect to the Proxy Statement/Prospectus, the Registration Statement, the Arrangement, the Merger, the SPAC Stockholders’ Meeting or the Redemption. SPAC, the Company and Holdco shall use their respective reasonable best efforts, after consultation with each other, to resolve all such requests or comments with respect to the Proxy Statement/Prospectus, the Registration Statement, the SPAC Stockholders’ Meeting or the Redemption, as applicable, as promptly as reasonably practicable after receipt thereof.

 

(e) Without limiting the generality of the foregoing, each of SPAC, the Company and Holdco shall cooperate with each other in the preparation of each of the Proxy Statement/Prospectus and the Registration Statement, and each of the Company and SPAC shall furnish Holdco with all information concerning it and its affiliates as the providing party (after consulting with counsel) may deem reasonably necessary or advisable in connection with the preparation of the Proxy Statement/Prospectus or the Registration Statement, as applicable.

 

 

(f) SPAC, the Company and Holdco shall notify each other promptly of the time when the Registration Statement has become effective, of the issuance of any stop order or suspension of the qualification of the Holdco Common Shares or Holdco Warrants issuable in connection with the Arrangement or the Merger for offering or sale in any jurisdiction, or of the receipt of any comments from the SEC or the staff of the SEC and of any request by the SEC or the staff of the SEC for amendments or supplements to the Proxy Statement/Prospectus or the Registration Statement or for additional information.

 

SECTION 8.02 SPAC Stockholders’ Meetings. SPAC shall call the SPAC Stockholders’ Meeting in accordance with the SPAC Organizational Documents and applicable Law for the purposes of voting upon the SPAC Proposals as promptly as practicable after the date on which the SEC has cleared the Proxy Statement/Prospectus for the purpose of voting solely upon the SPAC Proposals. SPAC shall consult with the Company in fixing the record date for the SPAC Stockholders’ Meeting and the date of the SPAC Stockholders’ Meeting, give notice to the Company of the SPAC Stockholders’ Meeting and allow the Company’s representatives and legal counsel to attend the SPAC Stockholders’ Meeting. Without the prior written consent of the Company, the SPAC Proposals shall be the only matters (other than procedural matters) which SPAC shall propose to be acted on by the SPAC Stockholders at the SPAC Stockholders’ Meeting. SPAC shall include in the Proxy Statement/Prospectus the recommendation of the SPAC Board that the SPAC Stockholders vote in favor of the SPAC Proposals and shall otherwise use its reasonable best efforts to obtain the approval of the SPAC Proposals at the SPAC Stockholders’ Meeting, including by soliciting from its stockholders proxies as promptly as possible in favor of the SPAC Proposals, and shall take all other action necessary or advisable to secure the required vote or consent of its stockholders therefor. SPAC shall provide the Company with (a) updates with respect to the tabulated vote counts received by SPAC, (b) the right to demand postponement or adjournment of the SPAC Stockholders’ Meeting if, based on the tabulated vote count, SPAC will not receive the required approval of its stockholders of the SPAC Proposals; provided, however, that SPAC shall not be permitted to postpone the SPAC Stockholders’ Meeting more than the earlier of (i) five (5) Business Days prior to the Outside Date and (ii) ten (10) days from the date of the first SPAC Stockholders’ Meeting without the prior written consent of the Company (not to be unreasonably withheld, delayed or conditioned), and (c) the right to review and comment on all communication sent to SPAC Stockholders, holders of SPAC Warrants and/or proxy solicitation firms.

 

SECTION 8.03 Access to Information; Confidentiality.

 

(a) From the date of this Agreement until the Merger Effective Time, the Company and SPAC shall (and shall cause their respective subsidiaries to): (i) provide to the other party (and the other party’s officers, directors, employees, accountants, consultants, legal counsel, financial advisors, agents and other representatives, collectively, “Representatives”) reasonable access at reasonable times upon prior notice to the officers, employees, agents, properties, offices and other facilities of such party and its subsidiaries and to the books and records thereof; and (ii) furnish promptly to the other party such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as the other party or its Representatives may reasonably request. Notwithstanding the foregoing, neither the Company nor SPAC shall be required to provide access to or disclose information where the access or disclosure would jeopardize the protection of attorney-client privilege or contravene applicable Law (it being agreed that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that would not result in such jeopardy or contravention).

 

 

(b) All information obtained by the parties pursuant to this Section 8.03 shall be kept confidential in accordance with the confidentiality agreement, dated April 22, 2020 (the “Confidentiality Agreement”), by and between SPAC and the Company.

 

(c) Notwithstanding anything in this Agreement to the contrary, each party (and its Representatives) may consult any tax advisor regarding the tax treatment and tax structure of the Transactions and may disclose to any other person of any kind, the tax treatment and tax structure of the Transactions and all materials (including opinions or other tax analyses) that are provided relating to such treatment or structure, in each case in accordance with the Confidentiality Agreement.

 

SECTION 8.04 Company Solicitation.

 

(a) From and after the date hereof until the Merger Effective Time or, if earlier, the valid termination of this Agreement in accordance with Section 11.01, the Company shall not, and shall cause the Company Subsidiaries not to and shall direct its and their Representatives not to, (i) initiate, solicit, knowingly facilitate or knowingly encourage (including by way of furnishing non-public information), whether publicly or otherwise, any inquiries with respect to, or the making of, any Company Acquisition Proposal, (ii) engage in any negotiations or discussions concerning, or provide access to its properties, books and records or any Confidential Information or data to, any person relating to a Company Acquisition Proposal, (iii) enter into, engage in and maintain discussions or negotiations with respect to any Company Acquisition Proposal (or inquiries, proposals or offers or other efforts that would reasonably be expected to lead to any Company Acquisition Proposal) or otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, offers, efforts, discussions or negotiations, (iv) amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of the Company or any of the Company Subsidiaries, (v) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Company Acquisition Proposal, (vi) approve, endorse, recommend, execute or enter into any agreement in principle, letter of intent, memorandum of understanding, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other written arrangement relating to any Company Acquisition Proposal (each, a “Company Acquisition Agreement”) or any proposal or offer that could reasonably be expected to lead to a Company Acquisition Proposal or (vii) resolve or agree to do any of the foregoing or otherwise authorize or permit any of its Representatives to take any such action; provided that it is understood and agreed that any action by the Company Board made in accordance with Section 8.04(b) shall not be deemed to be a breach or violation of Section 8.04(a). The Company shall, and shall instruct and cause the Company Subsidiaries and shall direct each of their respective Representatives to immediately cease any solicitations, discussions or negotiations with any person (other than the parties hereto and their respective Representatives) in connection with a Company Acquisition Proposal. The Company also agrees that it will promptly request each person (other than the parties hereto and their respective Representatives) that has prior to the date hereof executed a confidentiality agreement in connection with its consideration of acquiring the Company to return or destroy all Confidential Information furnished to such person by or on behalf of it or any of the Company Subsidiaries prior to the date hereof. The Company shall promptly notify SPAC (and in any event within twenty-four (24) hours) of the receipt of any Company Acquisition Proposal after the date hereof, which notice shall identify the third party making any Company Acquisition Proposal and shall include a summary of the material terms and conditions of any material developments, discussions or negotiations in connection therewith, and any material modifications to the financial or other terms and conditions of any such Company Acquisition Proposal.

 

 

(b) Notwithstanding anything to the contrary in Section 8.04(a), this Agreement shall not prevent the Company or the Company Board from, prior to obtaining the Company Required Approval, disclosing to the Company Shareholders the receipt or existence of a bona fide Company Acquisition Proposal received after the date hereof that did not result from a material breach of Section 8.04(a), if required by applicable Law; provided, however, that if the Company Board discloses any bona fide Company Acquisition Proposal to the Company Shareholders in accordance with this Section 8.04(b), the Company Board shall, (i) provide SPAC with a reasonable opportunity to review and provide comments to any such announcement or disclosure of such Company Acquisition Proposal to the Company Shareholders (such review and comment period not to exceed three (3) Business Days upon SPAC’s receipt of any announcement or disclosure) prior to the Company Board making such announcement or disclosure (and consider such comments in good faith and may accept SPACs comments in Company’s sole discretion) and (ii) reaffirm in any such announcement or disclosure to the Company Shareholders the Company Board’s recommendation of this Agreement, the Transactions and that the Company Shareholders approve the Company Arrangement Resolution.

 

SECTION 8.05 Employee Benefits Matters.

 

(a) Holdco shall, or shall cause the Company, the Surviving Corporation and each of their respective subsidiaries, as applicable, to provide the employees of the Company and the Company Subsidiaries who remain employed immediately after the Closing (the “Continuing Employees”) to receive credit for purposes of eligibility to participate and vesting under any employee benefit plan, program or arrangement established or maintained by Holdco, the Company or the Surviving Corporation or any of their respective subsidiaries, other than any defined benefit pension plan, for service accrued or deemed accrued prior to the Closing with the Company or any Company Subsidiary; provided, however, that such crediting of service shall not operate to duplicate any benefit or the funding of any such benefit. In addition, Holdco shall use reasonable best efforts to (i) cause to be waived any eligibility waiting periods, any evidence of insurability requirements and the application of any pre-existing condition limitations under each of the employee benefit plans established or maintained by Holdco, the Company, the Surviving Corporation or any of their respective subsidiaries that cover the Continuing Employees or their dependents and (ii) cause any eligible expenses incurred by any Continuing Employee and his or her covered dependents, during the portion of the plan year in which the Closing occurs, under those health and welfare Plans in which such Continuing Employee participates immediately prior to the Closing to be taken into account under those health and welfare benefit plans of Holdco, the Company, the Surviving Corporation or any of their respective subsidiaries in which such Continuing Employee participates subsequent to the Closing for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such Continuing Employee and his or her covered dependents for the applicable plan year. Following the Closing, Holdco shall, or shall cause the Company, the Surviving Corporation and each of their respective subsidiaries, as applicable, to honor all accrued but unused vacation and other paid time off of the Continuing Employees that existed immediately prior to the Closing.

 

 

(b) The parties shall cooperate to establish an equity incentive plan for service providers of Holdco and its subsidiaries (the “Holdco Plan”) to be effective after the Closing, which shall provide for an aggregate share reserve thereunder (the “Post-Closing Equity Pool”) equal to fifteen percent (15%) of the Benefits Pool; provided, however, that (i) only up to ten percent (10%) of the Benefits Pool shall be available for grant under the Post-Closing Equity Pool prior to the first anniversary of the Closing and (ii) only up to twelve and a half percent (12.5%) of the Benefits Pool shall be available for grant under the Post-Closing Equity Pool prior to the second anniversary of the Closing; provided further, however, all Converted Option Awards, Converted Restricted Shares and Converted Company RSUs, as provided in accordance with Section 3.04 of this Agreement, shall be deemed to be issued out of the Post-Closing Equity Pool and shall reduce the number of Holdco Common Shares available for issuance under the Holdco Plan immediately following the Closing. Any Holdco Common Shares granted under the Holdco Plan that are forfeited following grant shall be added back to the Post-Closing Equity Pool. Notwithstanding anything to the contrary herein, any awards with respect to Company Earn-Out Shares that are allocated to service providers of Holdco and its subsidiaries under the terms of the Transaction Support Agreement shall be provided under a separate equity incentive plan and shall not reduce the Post-Closing Equity Pool.

 

(c) Notwithstanding anything in this Section 8.05 to the contrary, nothing contained herein, whether express or implied, is or will be deemed to be an establishment, amendment or other modification of any Plan or any employee benefit plan of Holdco or any of its affiliates, or shall limit the right of Holdco or any of its affiliates to amend, terminate or otherwise modify any Plan or other employee benefit plan following the Closing. The parties acknowledge and agree that all provisions contained in this Section 8.05 are included for their sole benefit, and that nothing in this Section 8.05, whether express or implied, shall create any third party beneficiary or other rights: (i) in any other person, including any Continuing Employee, any participant in any Plan or employee benefit plan of Holdco or any of its affiliates, or any dependent or beneficiary thereof, or (ii) to continued employment with Holdco or any of its affiliates or to any particular term or condition of employment.

 

 

SECTION 8.06 Directors’ and Officers’ Indemnification.

 

(a) To the fullest extent permitted under applicable Law, the Holdco Governance Documents shall contain provisions no less favorable with respect to indemnification, advancement or expense reimbursement than are set forth in the Company Governance Documents and the SPAC Organizational Documents, which provisions shall not be amended, repealed or otherwise modified for a period of six (6) years from the Closing Date in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Merger Effective Time, were directors, officers, employees, fiduciaries or agents of the Company or SPAC (each such individual, a “D&O Indemnified Party”), unless such modification shall be required by applicable Law. Holdco and the Company agree that with respect to the provisions of the articles, bylaws, limited liability company agreements or other equivalent organizational documents of the Company Subsidiaries relating to indemnification, advancement or expense reimbursement, such provisions shall not be amended, repealed or otherwise modified for a period of six (6) years from the Merger Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Closing Date, were directors, managers, officers, employees, fiduciaries or agents of such Company Subsidiary, unless such modification shall be required by applicable Law.

 

(b) SPAC and the Company shall each obtain, fully pay the premium for, and maintain prior to the Closing fully-paid “tail” insurance policies for, with respect to SPAC, a term of six (6) years from the Closing Date, and with respect to the Company, a term of one (1) or six (6) years from the Closing Date (each a “D&O Tail Policy” and collectively, the “D&O Tail Policies”, and the applicable period for any D&O Tail Policies, the “Tail Period”) with terms and scope of coverage at least as favorable as their respective directors and officers insurance policies; provided, however, that nothing in this Section 8.06(b) shall relieve Holdco or the Company of its other obligations under this Section 8.06, or allow Holdco or the Company to delay in its performance of its obligations under this Section 8.06 and otherwise to provide indemnification for or make any expense advances with respect to the expenses of any claim for indemnification by a D&O Indemnified Party. Holdco shall cause SPAC and Holdco to maintain the D&O Tail Policies in full force and effect, for their full terms, and cause all obligations thereunder to be honored by Holdco, the Company and SPAC. Such D&O Tail Policies shall be non-cancellable and placed with the incumbent insurers using the policies that were in place as of the date of this Agreement (unless the incumbent insurers will not offer such policies in which case coverage for the Tail Period shall be placed with a substantially comparable insurer with the same or better terms, conditions, exclusions, retentions and limits of the expiring policies). SPAC and the Company will instruct the insurers and their brokers that they may communicate directly with the D&O Indemnified Party(ies) regarding such claim, and Holdco, the Company and SPAC will provide the D&O Indemnified Party(ies) a copy of all insurance policies and coverage correspondence relating to any proceeding involving any D&O Indemnified Party upon request.

 

 

(c) Prior to the Closing Date, Holdco shall purchase and maintain for such periods as the Holdco Board shall in good faith determine, at its expense, insurance reasonable for Holdco, given its size and activities in an amount of coverage of at least ten million dollars ($10,000,000) or, on an aggregate basis, a premium not to exceed two million seven hundred fifty thousand dollars ($2,750,000), prior to the Closing Date, on behalf of any person who after the Closing is or was a director or officer of Holdco, or is or was serving at the request of Holdco as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including any direct or indirect subsidiary of Holdco, against any expense, liability or loss asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, subject to customary exclusions (the “Holdco D&O Policy”).

 

(d) In the event Holdco, the Company, the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity in such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any person, then and in any such case proper provision shall be made so that the successors and assigns of Holdco, the Company, the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 8.06.

 

(e) The D&O Indemnified Parties are express and intended third-party beneficiaries of the provisions of this Section 8.06 and shall be entitled to independently enforce the terms hereof as if they were each a party to this Agreement.

 

SECTION 8.07 Notification of Certain Matters. The Company shall give prompt notice to SPAC, and SPAC shall give prompt notice to the Company, of any event which a party becomes aware of between the date of this Agreement and the Closing (or the earlier termination of this Agreement in accordance with Article X), the occurrence, or non-occurrence of which causes or would reasonably be expected to cause any of the conditions set forth in Article IX to fail. The failure by the Company or SPAC to give notice under this Section 8.07 shall not be deemed to be a breach under this Section 8.07, unless such breach is knowing and with the intent to breach this Section 8.07 and in any event shall not give rise to any additional damages above and beyond the breach of the underlying representation, warranty, covenant, condition or agreement, as the case may be.

 

SECTION 8.08 Further Action; Reasonable Best Efforts.

 

(a) Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, appropriate action, and to do, or cause to be done, such things as are necessary, proper or advisable under applicable Laws or otherwise to consummate and make effective the Transactions as soon as reasonably practicable, and in any event prior to the Outside Date, including using its reasonable best efforts to obtain all permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities as are necessary for the consummation of the Transactions and to fulfill the conditions to the Transactions. In case, at any time after the Merger Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party shall use their reasonable best efforts to take all such action.

 

 

(b) Each of the parties shall keep each other apprised of the status of matters relating to the Transactions, including promptly notifying the other parties of any communication it or any of its affiliates receives from any Governmental Authority relating to the matters that are the subject of this Agreement and permitting the other parties to review in advance, and to the extent practicable consult about, any proposed communication by such party to any Governmental Authority in connection with the Transactions. No party to this Agreement shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry unless it consults with the other parties in advance and, to the extent permitted by such Governmental Authority, gives the other parties the opportunity to attend and participate at such meeting. Subject to the terms of the Confidentiality Agreement, the parties will use reasonable best efforts to coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other parties may reasonably request in connection with the foregoing. Subject to the terms of the Confidentiality Agreement, the parties will provide each other with copies of all material correspondence, filings or communications, including any documents, information and data contained therewith, between them or any of their Representatives, on the one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to this Agreement and the Transactions contemplated hereby. No party shall take or cause to be taken any action before any Governmental Authority that is inconsistent with or intended to delay its action on requests for a consent or the consummation of the Transactions.

 

SECTION 8.09 Public Announcements.

 

(a) The initial press release relating to this Agreement shall be a joint press release the text of which has been agreed to by each of SPAC and the Company. Thereafter, between the date of this Agreement and the Closing Date (or the earlier termination of this Agreement in accordance with Article X) unless otherwise required by applicable Law or the requirements of the Nasdaq Capital Market, each of SPAC and the Company shall each use its reasonable best efforts to consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement, the Ancillary Agreements or the Transactions, and shall not issue any such press release or make any such public statement without the prior written consent of the other party (not to be unreasonably withheld, conditioned or delayed). Furthermore, nothing contained in this Section 8.09 shall prevent SPAC or the Company and/or its respective affiliates from furnishing customary or other reasonable information concerning the Transactions to their investors and prospective investors.

 

 

SECTION 8.10 Tax Matters.

 

(a) Intended Tax Treatment. For the United States Federal income tax purposes, the Arrangement and the Merger, taken together, are intended to be treated as an integrated exchange governed by the provisions of Section 351 of the Code. From and after the date of this Agreement and until the Merger Effective Time, each party hereto shall use its reasonable best efforts to cause the Arrangement and the Merger to qualify, and will not take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken (in each case other than any action provided for or prohibited by this Agreement), which action or failure to act could reasonably be expected to prevent the Arrangement and the Merger from qualifying, as an integrated exchange governed by the provisions of Section 351 of the Code. Following the Merger Effective Time, each party hereto shall not take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken (in each case other than any action provided for or prohibited by this Agreement), which action or failure to act could reasonably be expected to cause the Arrangement and the Merger to fail to qualify as an integrated exchange governed by the provisions of Section 351 of the Code. To the extent any party hereto has a United States federal income tax reporting obligation with respect to the Transactions, such party shall report the Transactions as an exchange under Section 351 of the Code unless otherwise required by Law. Holdco shall or, after the Closing, shall cause SPAC to comply with the tax reporting obligations of Treasury Regulation 1.367(a)-3(c)(6).

 

(b) Tax Covenants. From the date of this Agreement to the Merger Effective Time, (i) the Company shall, and shall cause each of the Company Subsidiaries to and (ii) SPAC shall:

 

(i) prepare, in the ordinary course of business consistent with past practice (except as otherwise required by a change in applicable Law), and timely file all Tax Returns required to be filed by it on or before the Closing Date (“Post-Signing Returns”);

 

(ii) deliver drafts of such Post-Signing Returns to the other party no later than ten Business Days prior to the date (including extensions) on which such Post-Signing Returns are required to be filed;

 

(iii) fully and timely pay all Taxes due and payable in respect of such Post-Signing Returns that are so filed; and

 

(iv) properly reserve (and reflect such reserve in its books and records and relevant financial statements), in the ordinary course of business consistent with past practice, for all Taxes payable by it for which no Post-Signing Return is due prior to the Closing Date; and

 

(v) promptly notify the other party of any material federal, state, local or foreign income or franchise, Action or audit pending or threatened in writing against or with respect to such party or its subsidiaries in respect of any Tax matter.

 

(c) Transfer Taxes. All Transfer Taxes incurred in connection with the Transactions shall be borne by SPAC.

 

 

(d) Withholding. Notwithstanding anything to the contrary in this Agreement, Merger Sub, Holdco, the Company and SPAC and/or Exchange Agent shall be permitted to deduct and withhold from any payment made in respect of this Agreement all amounts that may be required to deduct and withhold pursuant to applicable Laws; provided that the parties shall cooperate and use reasonable best efforts to reduce, minimize or eliminate any applicable withholding to the extent reasonably permitted under applicable Laws. To the extent that such amounts are so withheld and paid to the applicable Governmental Authority, such amounts will be treated for all purposes of this Agreement as having been paid to the person with respect to which such withholding was made.

 

SECTION 8.11 Nasdaq Listing. The Company, Holdco and SPAC shall use their respective reasonable best efforts to cause the Holdco Common Shares and Holdco Warrants issuable in the Merger or the Arrangement under Article III and the Holdco Common Shares that will become issuable upon the exercise of the Holdco Warrants to be approved for listing on Nasdaq, subject to official notice of issuance, as promptly as practicable after the date of this Agreement, and in any event prior to the Closing Date.

 

SECTION 8.12 Delisting and Deregistration. The Company, Holdco and SPAC shall use their respective reasonable best efforts to cause the SPAC Units, SPAC Common Stock and SPAC Warrants to be delisted from Nasdaq (or be succeeded by the respective Holdco securities) and to terminate its registration with the SEC pursuant to Sections 12(b), 12(g) and 15(d) of the Exchange Act (or be succeeded by Holdco) as of the Closing Date or as soon as practicable thereafter.

 

SECTION 8.13 Antitrust.

 

(a) To the extent required under any Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (“Antitrust Laws”), each party hereto agrees to promptly make any required filing or application under Antitrust Laws, as applicable. The parties hereto agree to supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to Antitrust Laws and to take all other actions necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods or obtain required approvals, as applicable under Antitrust Laws as soon as practicable, including by requesting early termination of the waiting period provided for under any Applicable Antitrust Laws if any filing under any Antitrust Laws are required.

 

(b) Each party shall, in connection with its efforts to obtain all requisite approvals and authorizations for the Transactions under any Antitrust Law, use its reasonable best efforts to: (i) cooperate in all respects with each other party or its affiliates in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private person; (ii) keep the other parties reasonably informed of any communication received by such party or its Representatives from, or given by such party or its Representatives to, any Governmental Authority and of any communication received or given in connection with any proceeding by a private person, in each case regarding any of the Transactions; (iii) permit a Representative of the other parties and their respective outside counsel to review any communication given by it to, and consult with each other in advance of any meeting or conference with, any Governmental Authority or, in connection with any proceeding by a private person, with any other person, and to the extent permitted by such Governmental Authority or other person, give a Representative or Representatives of the other parties the opportunity to attend and participate in such meetings and conferences; (iv) in the event a party’s Representative is prohibited from participating in or attending any meetings or conferences, the other parties shall keep such party promptly and reasonably apprised with respect thereto; and (v) use reasonable best efforts to cooperate in the filing of any memoranda, white papers, filings, correspondence or other written communications explaining or defending the Transactions, articulating any regulatory or competitive argument, and/or responding to requests or objections made by any Governmental Authority.

 

 

(c) No party hereto shall take any action that could reasonably be expected to adversely affect or materially delay the approval of any Governmental Authority of any required filings or applications under Antitrust Laws. The parties hereto further covenant and agree, with respect to a threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of the parties to consummate the Transactions, to use reasonable best efforts to prevent or lift the entry, enactment or promulgation thereof, as the case may be.

 

SECTION 8.14 Contributions and Restructuring After the Merger Effective Time.

 

(a) Immediately following the Merger Effective Time, Holdco shall contribute, as a capital contribution from Holdco to its wholly-owned subsidiary, all of the issued and outstanding shares of capital stock of the Surviving Corporation to the Company in exchange for Company Common Shares, such that Surviving Corporation shall become a wholly-owned subsidiary of the Company.

 

(b) Immediately following the consummation of the SPAC Contribution and as a capital contribution by the Company to its wholly-owned subsidiary, the Company shall contribute all of the issued and outstanding shares of capital stock of US Subsidiary to SPAC in exchange for SPAC Common Stock, such that US Subsidiary shall become a wholly-owned subsidiary of SPAC.

 

SECTION 8.15 PCAOB Financials. The Company shall use reasonable best efforts to deliver true and complete copies of the audited consolidated balance sheet of the Company and the consolidated Company Subsidiaries as of December 31, 2018 and December 31, 2019, the reviewed consolidated balance sheet of the Company and the consolidated Company Subsidiaries as of March 31, 2020 and June 30, 2020, and the related audited or unaudited, as applicable, consolidated statements of income and cash flows of the Company and the consolidated Company Subsidiaries for the periods then ended, each audited or reviewed, as applicable, in accordance with the auditing standards of the PCAOB for public companies as required by the SEC in connection with the filing of a Form S-4 (collectively, the “PCAOB Financials”) not later (i) one (1) Business Day after delivery to the Company from its certified public accountant of the PCAOB Financials as of and for the three (3) month period ended as of March 31, 2020 and (ii) September 15, 2020 for the PCAOB Financials as of and for the three (3) and six (6) month periods ended as of June 30, 2020.

 

 

SECTION 8.16 Eagle Share Exchange. The Company shall use its reasonable best efforts to cause the Eagle Minority Shareholders to, and shall cause Eagle and any other applicable Company Subsidiary to, take all action required to complete and consummate the Eagle Share Exchange immediately prior to the Arrangement Effective Time.

 

SECTION 8.17 PIPEs. Notwithstanding Section 7.02(b)(ii) or anything to the contrary in this Agreement and other than the Agreed PIPE pursuant to the Subscription Agreements, subject to the prior written consent of the Company (which shall not be unreasonably withheld, delayed or conditioned if the PIPE is a Qualifying PIPE as defined in Schedule 8.17), SPAC shall be permitted to enter into subscription agreements with a financing source or sources relating to a PIPE transaction, which agreements shall, upon execution, be deemed Subscription Agreements and such PIPEs shall be deemed part of the Agreed PIPE. During the pendency of any negotiations with respect to a PIPE transaction, SPAC shall keep the Company informed on a continuing basis of the status of such negotiations, the identity of proposed financing sources and the proposed terms of such PIPE and shall promptly provide to the Company copies of any indicative or definitive agreements proposed to be entered into by SPAC with respect to a PIPE. Upon and following the entry of SPAC into the Subscription Agreements, SPAC shall, and shall cause their respective Representatives to, take, or cause to be taken, appropriate action, and to do, or cause to be done, such things as are necessary, proper or advisable to satisfy the conditions under the Subscription Agreements to consummate the transactions contemplated by the Subscription Agreements to occur. SPAC shall keep the Company promptly apprised of the status of matters relating to the PIPEs.

 

SECTION 8.18 SPAC Extension. SPAC shall use its reasonable best efforts to take all actions necessary (including at the request of the Company) to obtain the approval of the SPAC Stockholders to extend the deadline for SPAC to consummate its initial business combination to December 31, 2020 (such extension, the “SPAC Extension”) and shall use its reasonable best efforts to obtain such approval. In connection with obtaining the approval, SPAC shall prepare with the assistance of the Company and file with the SEC under the Exchange Act, and with all other regulatory bodies, materials in the form of a proxy statement to be used for the purpose of soliciting proxies from the SPAC Stockholders to approve, at a special meeting, an amendment to the SPAC Organizational Documents to provide for the SPAC Extension, and providing the SPAC Stockholders with the opportunity to redeem their shares of SPAC Common Stock in connection therewith (the “Extension Proxy Statement”).

 

SECTION 8.19 Indebtedness Covenants. If at any time prior to Closing the Company is in default or noncompliance with any term, condition or financial or negative covenant (collectively, the “Indebtedness Covenants”) in any agreement of the Company for any indebtedness of the Company, the Company shall cure such default or noncompliance, or obtain a waiver therefor, as promptly as practicable following receipt of notice from the applicable counterparty of such indebtedness of any breach or noncompliance of any such Indebtedness Covenants.

 

 

SECTION 8.20 Disclosure Schedules. Notwithstanding anything to the contrary in this Agreement, the Company shall within seven (7) calendar days of the date of this Agreement, deliver to SPAC Sections 4.03, 4.06, 4.11 and 4.16 of the Company Disclosure Schedule (the “Post-Signing Schedules”), and the Company shall give SPAC and its legal counsel a reasonable opportunity to review and comment on the Post-Signing Schedules and other related documents, and shall accept in its reasonable discretion the reasonable comments made by SPAC and its counsel. The Post-Signing Schedules will be deemed to have supplemented the Company Disclosure Schedules as if such Post-Signing Schedules were included in the Company Disclosure Schedules as of the date of this Agreement; provided, that, if any such Post-Signing Schedule would result in, or includes any facts or circumstances that would result in, a Company Material Adverse Effect or otherwise cause the nonsatisfaction of any condition set forth in Section 9.02, the parties acknowledge and agree that the condition set forth in Section 9.02(e) or such other condition shall not be satisfied and SPAC shall have the right to terminate this Agreement in accordance with Article X below.

 

Article IX

CONDITIONS TO THE TRANSACTIONS

 

SECTION 9.01 Conditions to the Obligations of Each Party. The obligations of the Company, SPAC, Holdco and Merger Sub to consummate the Transactions are subject to the satisfaction or waiver (where permissible) at or prior to the Closing by SPAC and the Company of the following conditions:

 

(a) Company Arrangement Resolution. The Company Required Approval of the Company Arrangement Resolution shall have been approved at the Company Meeting in accordance with the Interim Order and applicable Law and a certified copy of such Company Arrangement Resolution shall have been delivered to SPAC.

 

(b) SPAC Stockholders’ Approval. The SPAC Proposals shall have been approved and adopted by the requisite affirmative vote of the SPAC Stockholders.

 

(c) Interim and Final Order. The Interim Order and the Final Order shall have each been obtained on terms consistent with this Agreement, and shall have not been set aside or modified in a manner unacceptable to either the Company or SPAC, each acting reasonably, on appeal or otherwise.

 

(d) No Order. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law, rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the Transactions illegal or otherwise prohibiting consummation of the Transactions.

 

 

(e) Antitrust Approval and Waiting Period. All required filings under the applicable Antitrust Laws, if any, shall have been completed and any applicable waiting period (and any extension thereof) applicable to the consummation of the Transactions under applicable Antitrust Laws shall have expired or been terminated, if any, and any pre-Closing approvals or clearances reasonably required thereunder shall have been obtained.

 

(f) Registration Statement. The Registration Statement shall have become effective under the Securities Act prior to the mailing of the Proxy Statement/Prospectus by SPAC to the SPAC Stockholders and the Canadian Information Circular to the Company Shareholders, and no stop order or proceedings seeking a stop order shall have been initiated by the SEC and not withdrawn.

 

(g) Arrangement Dissent Rights. Arrangement Dissent Rights shall not have been exercised (and not withdrawn) with respect to more than ten percent (10%) of the issued and outstanding Company Shares.

 

(h) Nasdaq Listing. The Holdco Common Shares and Holdco Warrants issuable under Article III and the Holdco Common Shares that will become issuable upon the exercise of the Holdco Warrants shall have been approved for listing on Nasdaq, subject to official notice of issuance.

 

(i) D&O Tail Policies. The D&O Tail Policies and the Holdco D&O Policy shall have been bound and effective on or prior to the Closing.

 

SECTION 9.02 Conditions to the Obligations of SPAC. The obligations of SPAC to consummate the Transactions are subject to the satisfaction or waiver (where permissible) at or prior to the Closing by SPAC of the following additional conditions:

 

(a) Representations and Warranties. (i) The (A) representations and warranties of the Company contained in Section 4.03(a) (Capitalization) shall be true and correct in all respects as of the Closing Date as though made at and as of the Closing Date except for de minimis errors therein (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) and (B) representations and warranties of the Company contained in Section 4.01(a) (first sentence) (Organization and Qualification; Subsidiaries), Section 4.02 (last sentence) (Governance Documents), Section 4.04 (Authority Relative to This Agreement), Section 4.08(c) (Absence of Certain Changes or Events), Section 4.26 (Brokers) and each representation and warranty in Article IV that is qualified by “Company Material Adverse Effect” or any similar limitation set forth herein shall be true and correct in all respects as of the Closing Date as though made on the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date). (ii) Each representation and warranty of the Company contained in this Agreement (other than those referred to in clause (i) of this Section 9.02(a)) shall be true and correct (without giving effect to any limitation as to “material”, “in all material respects” any similar limitation set forth herein) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

 

(b) Agreements and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Merger Effective Time.

 

(c) Officer Certificate. The Company shall have delivered to SPAC a certificate, dated the date of the Closing, signed by an officer of the Company, certifying as to the satisfaction of the conditions specified in Section 9.02(a), Section 9.02(b) and Section 9.02(d).

 

(d) Ecomedics Certificate. The Company shall cause Ecomedics to have delivered to SPAC a certificate, dated the date of Closing, signed by an officer of Ecomedics, certifying the accuracy of certain factual statements as to the history and historic business activities of Ecomedics in the form attached hereto as Schedule 9.02(d).

 

(e) Material Adverse Effect. Since the date of this Agreement, no Company Material Adverse Effect shall have occurred.

 

(f) Investors’ Rights Agreement. Holdco shall have delivered, or cause to be delivered, the Investors’ Rights Agreement duly by Holdco.

 

(g) Chief Executive Officer Employment Agreement. The Chief Executive Officer of the Company and Holdco shall have executed an amended and restated employment agreement in accordance with the terms set forth on Schedule 9.02(g).

 

(h) Eagle Share Exchange. The Eagle Share Exchange shall have been completed immediately prior to the Arrangement Effective Time.

 

SECTION 9.03 Conditions to the Obligations of the Company, Holdco and Merger Sub. The obligations of the Company, Holdco and Merger Sub to consummate the Transactions are subject to the satisfaction or waiver (where permissible) at or prior to Closing by the Company of the following additional conditions:

 

(a) Representations and Warranties. (i) The (A) representations and warranties of SPAC contained in Section 5.03(a) (Capitalization) shall be true and correct in all respects as of the Closing Date as though made at and as of the Closing Date except for de minimis errors therein (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) and (B) representations and warranties of SPAC, contained in Section 5.01(a) (first sentence) (Corporate Organization), Section 5.02 (last sentence) (Certificate of Incorporation and By-laws), Section 5.04 (Authority Relative to this Agreement), Section 5.08(b) (Absence of Certain Changes or Events), Section 5.16 (Brokers), Section 5.18 (SPAC Trust Fund) and each representation and warranty in Article V that is qualified by “SPAC Material Adverse Effect” or any similar limitation set forth herein shall be true and correct in all respects as of the Closing as though made on the Closing (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date). (ii) Each representation and warranty of SPAC contained in this Agreement (other than those referred to in clause (i) of this Section 9.03(a)) shall be true and correct (without giving effect to any limitation as to “material”, “in all material respects” or any similar limitation set forth herein) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a SPAC Material Adverse Effect.

 

 

(b) Agreements and Covenants. SPAC, Holdco and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Merger Effective Time.

 

(c) Officer Certificate. SPAC shall have delivered to the Company a certificate, dated the date of the Closing, signed by the President of SPAC, certifying as to the satisfaction of the conditions specified in Section 9.03(a)(i), Section 9.03(b), Section 9.03(d) and Section 9.03(f), including, in respect of Section 9.03(f) reasonable supporting materials for the amount of each item included within such calculation.

 

(d) Material Adverse Effect. Since the date of this Agreement, no SPAC Material Adverse Effect shall have occurred.

 

(e) FIRPTA Tax Certificates. On or prior to the Closing, SPAC shall deliver to the Company a properly executed certification that the shares of SPAC Common Stock are not “United States real property interests” in accordance with the Treasury Regulations under Sections 897 and 1445 of the Code, together with a notice to the IRS (which shall be filed by SPAC with the IRS following the Closing) in accordance with the provisions of Section 1.897-2(h)(2) of the Treasury Regulations.

 

(f) Available Net Cash. After giving effect to the exercise of the Redemption Rights and payments related thereto, SPAC shall have at least an aggregate of twenty six million dollars ($26,000,000) of cash held either in or outside the Trust Account, including the aggregate amount of the PIPEs (including, for the avoidance of doubt, the aggregate amount of the Agreed PIPE) consummated prior to, or as of, the Closing.

 

 

(g) Resignation. Other than the director nominated by SPAC prior to Closing who the parties shall have identified as a continuing director, all members of the SPAC Board shall have executed written resignations effective as of the Merger Effective Time.

 

Article X

TERMINATION, AMENDMENT AND WAIVER

 

SECTION 10.01 Termination. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Arrangement Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the Transactions by the Company or SPAC, as follows:

 

(a) by mutual written consent of SPAC and the Company;

 

(b) by either SPAC or the Company if the Arrangement Effective Time shall not have occurred prior to December 31, 2020 (the “Outside Date”); provided, however, that this Agreement may not be terminated under this Section 10.01(b) by or on behalf of any party that either directly or indirectly through its affiliates is in breach or violation of any representation, warranty, covenant, agreement or obligation contained herein and such breach or violation is the principal cause of the failure of a condition set forth in Article IX on or prior to the Outside Date;

 

(c) by either SPAC or the Company if any Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling which has become final and nonappealable and has the effect of making consummation of the Transactions illegal or otherwise preventing or prohibiting consummation of the Transactions;

 

(d) by either SPAC or the Company if any of the SPAC Proposals shall fail to receive the requisite vote for approval at the SPAC Stockholders’ Meeting;

 

(e) by SPAC if the Company Board has withdrawn or modified in any manner adverse to SPAC its approval or recommendation of the Transactions or this Agreement;

 

(f) by SPAC if the Company Required Approval shall not have been obtained at the Company Meeting in accordance with the Interim Order and applicable Law;

 

(g) by SPAC upon a breach of any representation, warranty, covenant or agreement on the part of the Company, Holdco or Merger Sub set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Sections 9.02(a) and 9.02(b) would not be satisfied (“Terminating Company Breach”); provided that SPAC has not waived such Terminating Company Breach and SPAC is not then in material breach of any of its representations, warranties, covenants or agreements in this Agreement; provided further that, if such Terminating Company Breach is curable by the Company, SPAC may not terminate this Agreement under this Section 10.01(g) unless such breach remains uncured thirty (30) days after written notice of such breach is provided by SPAC to the Company;

 

 

(h) by the Company upon a breach of any representation, warranty, covenant or agreement on the part of SPAC set forth in this Agreement, or if any representation or warranty of SPAC shall have become untrue, in either case such that the conditions set forth in Sections 9.03(a) and 9.03(b) would not be satisfied (“Terminating SPAC Breach”); provided that the Company has not waived such Terminating SPAC Breach and the Company is not then in material breach of any of its representations, warranties, covenants or agreements in this Agreement; provided, however, that, if such Terminating SPAC Breach is curable by SPAC, the Company may not terminate this Agreement under this Section 10.01(h) unless such breach remains uncured thirty (30) days after written notice of such breach is provided by the Company to SPAC; or

 

(i) by SPAC, if there shall have occurred a Company Material Adverse Effect.

 

SECTION 10.02 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 10.01, this Agreement shall forthwith become void, and there shall be no liability under this Agreement on the part of any party hereto, except as set forth in Section 10.02, Section 10.03, Article XI and any corresponding definitions set forth in Article I, which provisions shall survive such termination; provided, however, that nothing herein shall relieve any party from any liability for any willful and material breach of this Agreement. The parties hereto agree that, without further action by any party, no party will have, and each party waives (and will not bring), any claim or Action arising out of or related to the Original Agreement or any rights, liabilities, responsibilities or obligations thereunder (whether for any intentional and willful breach of the Original Agreement or otherwise), and that any claims with respect to this Agreement or the Original Agreement shall only be made in respect of, and in accordance with, this Agreement.

 

SECTION 10.03 Transaction Expenses. In the event that this Agreement is terminated in accordance with Section 10.01 above, all Transaction Expenses incurred in connection with this Agreement, the Ancillary Agreements and the Transactions shall be paid by the party incurring such Transaction Expenses, except for Shared Transaction Expenses, which shall be borne equally between SPAC and the Company. If the Transactions are consummated, subject to Section 3.01(a), Holdco shall bear the reasonable and documented Transaction Expenses of all of the parties.

 

SECTION 10.04 Amendment. Subject to applicable Law and the Interim Order, this Agreement and the Plan of Arrangement, may, at any time and from time before or after the Company Meeting, but not later than the Arrangement Effective Time, be amended by mutual written agreement of each of the parties hereto, without further notice to or authorization on the part of the Company Shareholders. Without limiting the generality of the foregoing, any such amendment may: (a) change the time for the performance of any of the obligations or acts of the parties; (b) modify any representation or warranty contained herein or in any document to be delivered pursuant hereto; (c) modify any of the covenants contained herein or waive or modify the performance of any of the obligations of the parties; and (d) modify any mutual conditions contained herein. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

 

 

SECTION 10.05 Waiver. At any time prior to the Merger Effective Time, (a) SPAC may (i) extend the time for the performance of any obligation or other act of the Company, Holdco or Merger Sub, (ii) waive any inaccuracy in the representations and warranties of the Company, Holdco or Merger Sub contained herein or in any document delivered by the Company, Holdco or Merger Sub pursuant hereto and (iii) waive compliance with any agreement of the Company, Holdco or Merger Sub or any condition to its own obligations contained herein and (b) the Company may (i) extend the time for the performance of any obligation or other act of SPAC, Holdco or Merger Sub, (ii) waive any inaccuracy in the representations and warranties of SPAC, Holdco or Merger Sub contained herein or in any document delivered by SPAC, Holdco or Merger Sub pursuant hereto and (iii) waive compliance with any agreement of SPAC, Holdco or Merger Sub or any condition to its own obligations contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby.

 

Article XI

GENERAL PROVISIONS

 

SECTION 11.01 Non-Survival of Representations, Warranties and Agreements. The representations, warranties, agreements and covenants in this Agreement or in any certificate, statement or instrument delivered pursuant to this Agreement shall terminate at the Merger Effective Time, except that (a) this Article XI shall survive the Merger Effective Time and (b) this Section 11.01 shall not limit any covenant or agreement of the parties that by its terms requires performance after the Closing. Effective as of the Closing, there are no remedies available to the parties hereto with respect to any breach of the representations, warranties, covenants or agreements of the parties to this Agreement, except, with respect to those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Closing and the remedies that may be available under Section 11.10.

 

SECTION 11.02 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person or by email to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.02):

 

if to SPAC:

 

Schultze Special Purpose Acquisition Corp.
Attention: George Schultze; Gary Julien 
Email: [email protected]; [email protected]

 

 

with a copy (which shall not constitute notice) to:

 

Greenberg Traurig, P.A.
Attention: Alan I. Annex, Esq.
Email: [email protected]

 

if to the Company, Holdco or Merger Sub:

 

Clever Leaves International Inc.

Attention: Kyle Detwiler

Email: [email protected]

 

with a copy (which shall not constitute notice) to:

 

Freshfields Bruckhaus Deringer US LLP

Attention:	Sebastian L. Fain, Esq.
	Pamela L. Marcogliese, Esq.
Email:	[email protected]
	[email protected]

 

SECTION 11.03 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible.

 

SECTION 11.04 Entire Agreement; Assignment. This Agreement and the Ancillary Agreements constitute the entire agreement among the parties with respect to the subject matter hereof and supersede, except as set forth in Section 8.03(b), all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof, including the Original Agreement, except for the Confidentiality Agreement. This Agreement shall not be assigned (whether pursuant to a merger, by operation of law or otherwise) by any party without the prior express written consent of the other parties hereto. This Agreement supersedes the Original Agreement in its entirety, and upon the effectiveness of this Agreement, the Original Agreement shall no longer have any force or effect.

 

SECTION 11.05 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 8.06 (which is intended to be for the benefit of the persons covered thereby and may be enforced by such persons).

 

 

SECTION 11.06 Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware applicable to contracts executed in and to be performed in that State, except to the extent mandatorily governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein, including the provisions relating to the Arrangement and the Plan of Arrangement. All legal actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any Delaware Chancery Court; provided, that if jurisdiction is not then available in the Delaware Chancery Court, then any such legal Action may be brought in any federal court located in the State of Delaware or any other Delaware state court. The parties hereto hereby (a) irrevocably submit to the exclusive jurisdiction of the aforesaid courts for themselves and with respect to their respective properties for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, and (b) agree not to commence any Action relating thereto except in the courts described above in Delaware, other than Actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any Action arising out of or relating to this Agreement or the Transactions, (i) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (ii) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) that (A) the Action in any such court is brought in an inconvenient forum, (B) the venue of such Action is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

SECTION 11.07 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.07.

 

SECTION 11.08 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

 

SECTION 11.09 Counterparts. This Agreement may be executed and delivered (including by facsimile or portable document format (pdf) transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

 

SECTION 11.10 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof, and, accordingly, that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the parties’ obligation to consummate the Transactions) in the Chancery Court of the State of Delaware or, if that court does not have jurisdiction, any court of the United States located in the State of Delaware without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity as expressly permitted in this Agreement. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security or a bond as a prerequisite to obtaining equitable relief.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, SPAC, Holdco, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	SCHULTZE SPECIAL PURPOSE ACQUISITION cORP.
	By	/s/ George J. Schultze
	Name:	George J. Schultze
	Title:	Chief Executive Officer and President
	CLEVER LEAVES HOLDINGS INC.
	By	/s/ Kyle Detwiler
	Name:	Kyle Detwiler
	Title:	Director
	NOVEL Merger Sub INC.
	By	/s/ Kyle Detwiler
	Name:	Kyle Detwiler
	Title:	Chief Executive Officer
	CLEVER LEAVES INTERNATIONAL INC.
	By	/s/ Kyle Detwiler
	Name:	Kyle Detwiler
	Title:	Chief Executive Officer

 

[Signature Page to Amended and Restated Business Combination Agreement]

 

 

EXHIBIT A

 

Investors’ Rights Agreement

 

 

INVESTORS’ RIGHTS AGREEMENT

 

THIS INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is entered into as of the [__] day of [____], 2020, by and among Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada (the “Company”), and the undersigned parties listed under Investors on the signature page hereto (each, an “Investor” and collectively, the “Investors”).

 

WHEREAS, the Company is party to that certain Business Combination Agreement, dated as of July 25, 2020 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “BCA”), by and among the Company, Schultze Special Purpose Acquisition Corp., a Delaware corporation (“Schultze”), Novel Merger Sub Inc., a Delaware corporation (“Merger Sub”), and Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada, pursuant to which, among other things, Merger Sub will merge with and into Schultze (with Schultze being the surviving entity) in exchange for Schultze’s stockholders receiving Common Shares of the Company as provided by the BCA; and

 

WHEREAS, in connection with the transactions contemplated by the BCA, the Company has agreed to grant to the Investors certain rights with respect to nomination of directors and the registration of the Registrable Securities (as defined below) on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.

DEFINITIONS. The following terms used herein have the following meanings:

 

1.1.

“Affiliate” means, with respect to any specified person, any person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified person, through one or more intermediaries or otherwise.

 

1.2.

“Agreement” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.

 

1.3.

“Assignment Agreement” means that certain Assignment, Assumption and Amendment Agreement dated as of [__], 2020, by and among the Company, Schultze and Continent Stock Transfer & Trust Company.

 

1.4.

“BCA” is defined in the recitals to this Agreement.

 

1.5.

“Beneficially Own” or “Beneficially Owned” has the meaning ascribed to it in Section 13(d) of the Exchange Act.

 

1.6.

“Board of Directors” means the board of directors of the Company.

 

1.7.

“Commission” means the Securities and Exchange Commission, or any other Federal agency then administering the Securities Act or the Exchange Act.

 

1.8.

“Common Shares” means the Common Shares of the Company.

 

1.9.

“Company” is defined in the preamble to this Agreement.

 

 

1.10.

“Demand Registration” is defined in Section 2.1.1.

 

1.11.

“Demanding Holder” is defined in Section 2.1.1.

 

1.12.

“Earn-Out Shares” means the Common Shares issuable pursuant to the Transaction Support Agreement.

 

1.13.

“Earn-Out Target Conditions” means the First Level Earn-Out Target and the Second Level Earn-Out Target (each as defined in Exhibit A to the Transaction Support Agreement).

 

1.14.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

1.15.

“Form S-3” is defined in Section 2.2.4.

 

1.16.

“Indemnified Party” is defined in Section 4.3.

 

1.17.

“Indemnifying Party” is defined in Section 4.3.

 

1.18.

“Independent Director” shall mean a director who complies with the independence requirements for directors with respect to the Company (without reference to any applicable exemptions from such requirements, and without reference to any heightened requirements for service on the audit committee of the Board of Directors) for companies listed on Nasdaq.

 

1.19.

“Initiating Holders” is defined in Section 2.1.1.

 

1.20.

“Investor” is defined in the preamble to this Agreement.

 

1.21.

“Investor Indemnified Party” is defined in Section 4.1.

 

1.22.

“Maximum Number of Shares” is defined in Section 2.1.4.

 

1.23.

“Merger Sub” is defined in the recitals to this Agreement.

 

1.24.

“Minimum Holding Condition” is defined in Section 6.1.1.

 

1.25.

“Misstatement” is defined in Section 3.1.4.

 

1.26.

“Notices” is defined in Section 7.2.

 

1.27.

“Permitted Transferees” means (i) with respect to any Investor, its (a) officers, directors, members, consultants or Affiliates, (b) relatives and trusts for estate planning purposes, (c) descendants upon death or (d) pursuant to a qualified domestic relations order; (ii) the Company; and (iii) any other Investor.

 

1.28.

“person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

 

1.29.

“Piggy-Back Registration” is defined in Section 2.2.1.

 

1.30.

“Pro Rata” is defined in Section 2.1.4.

 

1.31.

“Register,” “Registered” and “Registration” mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

1.32.

“Registrable Securities” means (i) any Common Shares issued to an Investor pursuant to the terms of the BCA, (ii) any Common Shares issuable upon the exercise of the Warrants, and (iii) any Common Shares issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Common Shares referenced in clauses (i) and (ii) above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding; or (d) the Registrable Securities are freely saleable under Rule 144 under the Securities Act without volume limitations.

 

1.33.

“Registration Statement” means a registration statement filed by the Company with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).

 

1.34.

“Schultze” is defined in the recitals to this Agreement.

 

1.35.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

1.36.

“SPAC Director” means an individual elected to the Board of Directors that has been nominated by the Investors pursuant to this Agreement.

 

1.37.

“SPAC Majority Holders” is defined in Section 6.1.1.

 

1.38.

“SPAC Shares” means Common Shares held by the Investors.

 

 

1.39.

“Warrants” means the Private Warrants and Public Warrants issued pursuant to the Existing Warrant Agreement (each as defined in the Assignment Agreement) and assumed by the Company pursuant to the Assignment Agreement.

 

1.40.

“Transaction Support Agreement” means the Transaction Support Agreement dated as of July 25, 2020, as amended by Amendment No. 1 to Transaction Support Agreement dated as of November 9, 2020, by and among the Company, Schultze and the other parties party thereto.

 

1.41.

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

 

2.

REGISTRATION RIGHTS.

 

2.1.

Demand Registration.

 

2.1.1. Request for Registration. At any time and from time to time on or after the expiration of the Lockup Period (as such term is defined in the Transaction Support Agreement), Investors holding at least a majority in interest of the then-outstanding number of Registrable Securities held by all Investors (such Investors, the “Initiating Holders”) may make a written demand for registration under the Securities Act of all or part of their Registrable Securities (a “Demand Registration”). Any demand for a Demand Registration shall specify the number of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will notify all holders of Registrable Securities of the demand, and each holder of Registrable Securities who wishes to include all or a portion of such holder’s Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “Demanding Holder”) shall so notify the Company, and provide the information request by the Company to prepare the Registration Statement, within five (5) days after the receipt by the holder of the notice from the Company. Upon any such request and provision of such information, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.1.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to effect more than an aggregate of two (2) Demand Registrations under this Section 2.1.1 in respect of all Demand Registrations initiated by the Investors.

 

2.1.2. Effective Registration. A registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority in interest of the Demanding Holders thereafter elect to continue the offering; provided, further, that the Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated. For the avoidance of doubt, any terminated Registration Statement shall be counted as a Demand Registration provided for in Section 2.1.

 

 

2.1.3. Underwritten Offering. If a majority in interest of the Demanding Holders so elect and such holders so advise the Company as part of their written demand for a Demand Registration, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. In such event, the right of any holder to include its Registrable Securities in such registration shall be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by the Initiating Holders.

 

2.1.4. Reduction of Offering. If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises, in its good faith opinion, the Company and the Demanding Holders that the dollar amount or number of shares of Registrable Securities which the Demanding Holders desire to sell, taken together with all other shares of Common Shares or other securities which the Company desires to sell and the shares of Common Shares, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other shareholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “Maximum Number of Shares”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Initiating Holders (pro rata in accordance with the number of shares that each such person has requested be included in such registration, regardless of the number of shares held by each such person (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Common Shares or other securities that any other Demanding Holders desire to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the shares of Common Shares or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i), (ii) and (iii), the shares of Common Shares or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Shares.

 

2.1.5. Demand Registration Withdrawal. If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to the Company and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Demand Registration. If a majority-in-interest of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration then such registration shall count as a Demand Registration provided for in Section 2.1.

 

2.2.

Piggy-Back Registration.

 

2.2.1. Piggy-Back Rights. If at any time on or after the date the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company including, without limitation, pursuant to Section 2.1), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) for a dividend reinvestment plan or (v) for the registration of shares or equity securities underlying any Warrants, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of shares of Registrable Securities as such holders may request in writing within five (5) days following receipt of such notice, provided such holders also provide the information requested by the Company to prepare the Registration Statement within five (5) days following receipt of such notice (a “Piggy-Back Registration”). Subject to Section 2.2.2, the Company shall cause such Registrable Securities to be included in such registration and shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.

 

 

2.2.2. Reduction of Offering. If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders of Registrable Securities that in its good faith opinion the dollar amount or number of shares of Common Shares which the Company desires to sell, taken together with shares of Common Shares, if any, as to which registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the holders of Registrable Securities hereunder, the Registrable Securities as to which registration has been requested under this Section 2.2, and the shares of Common Shares, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other shareholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such registration:

 

(a) If the registration is undertaken for the Company’s account: (A) the shares of Common Shares or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (B) to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Shares or other securities, if any, comprised of Registrable Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof, that can be sold without exceeding the Maximum Number of Shares; and (C) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the shares of Common Shares or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual piggy-back registration rights with such persons and that can be sold without exceeding the Maximum Number of Shares; and

 

(b) If the registration is a “demand” registration undertaken at the demand of persons other than the holders of Registrable Securities, (A) first, the shares of Common Shares or other securities for the account of the demanding persons that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Shares or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (C) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), collectively the shares of Common Shares or other securities comprised of Registrable Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof that can be sold without exceeding the Maximum Number of Shares; and (D) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A), (B) and (C), the shares of Common Shares or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons, that can be sold without exceeding the Maximum Number of Shares.

 

2.2.3. Piggyback Registration Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement.

 

2.2.4. Registrations on Form S-3. The holders of Registrable Securities may at any time and from time to time request in writing that the Company register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may be available at such time (“Form S-3”) so long as such request covers at least $25 million worth of the market value of Common Shares; provided, however, that the Company shall not be obligated to effect such request through an underwritten offering. Upon receipt of such written request, the Company will give written notice of the proposed registration to all other holders of Registrable Securities, and each holder of Registrable Securities who wishes to include all or a portion of such holder’s Registrable Securities in such registration on such Form S-3 shall so notify the Company, and provide the information request by the Company to prepare the Registration Statement, within five (5) days after the receipt by the holder of the notice from the Company. As soon as practicable thereafter, the Company shall effect the registration of all or such portion of such holder’s or holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities or other securities of the Company, if any; provided, however, that the Company shall not be obligated to effect any such registration pursuant to this Section 2.2.4: (i) if Form S-3 is not available for such offering; or (ii) if the holders of the Registrable Securities, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at any aggregate price to the public of less than $25 million. Registrations effected pursuant to this Section 2.2.4 shall not be counted as Demand Registrations effected pursuant to Section 2.1.

 

 

3.

REGISTRATION PROCEDURES.

 

3.1. Filings; Information. Whenever the Company is required to effect the registration of any Registrable Securities pursuant to Section 2, the Company shall use its commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as reasonably possible, and in connection with any such request:

 

3.1.1. Filing Registration Statement. The Company shall use commercially reasonable efforts after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its commercially reasonably efforts to cause such Registration Statement to become effective and, upon request of the holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for the period required by Section 3.1.3; provided, however, that the Company shall have the right to defer any Demand Registration for up to sixty (60) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if the Company shall furnish to the holders a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company and its shareholders for such Registration Statement to be effected at such time; provided further, however, that the Company shall not have the right to exercise the right set forth in the immediately preceding proviso more than twice in any 365-day period in respect of a Demand Registration hereunder.

 

3.1.2. Copies. The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the holders of Registrable Securities included in such registration, and such holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the holders of Registrable Securities included in such registration or legal counsel for any such holders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such holders.

 

3.1.3. Amendments and Supplements. Except as otherwise set forth herein, the Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act in order to enable the disposition of all Registrable Securities and other securities covered by such Registration Statement.

 

3.1.4. Notification. After the filing of a Registration Statement, the Company shall promptly after such filing, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such holders promptly and confirm such advice in writing in all events within five (5) business days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order; and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an 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 not misleading (a “Misstatement”), and promptly make available to the holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity to review such documents and comment thereon.

 

3.1.5. State Securities Laws Compliance. The Company shall use its commercially reasonable efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may reasonably request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable the holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business or to file a general consent to service of process in any jurisdiction, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

 

 

3.1.6. Agreements for Disposition. The Company shall enter into customary agreements (including, if applicable in an underwritten offering, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. No holder of Registrable Securities included in such Registration Statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such holder’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such holder’s material agreements and organizational documents, and with respect to written information relating to such holder that such holder has furnished in writing expressly for inclusion in such Registration Statement.

 

3.1.7. Cooperation. The chief executive officer, the chief financial officer, the principal accounting officer of the Company and all other officers and members of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors in an underwritten offering.

 

3.1.8. Records. The Company shall make available for inspection by any seller of Registrable Securities included in the Registration Statement, any Underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other professional retained by any such seller of Registrable Securities or any Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any of them in connection with such Registration Statement.

 

3.1.9. Opinions and Comfort Letters. The Company shall obtain an opinion or comfort letter from the Company’s legal counsel and independent public accountants delivered to any Underwriter in the event of an underwritten offering, in customary form and covering such matters of the type customarily covered by any opinions or comfort letters as the managing Underwriter may reasonably request, and reasonably satisfactory to a majority in interest of the participating holders.

 

3.1.10. Earnings Statement. The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and make available to its shareholders, as soon as reasonably practicable, an earnings statement covering a period of twelve (12) months, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

3.1.11. Listing. The Company shall use its commercially reasonable efforts to cause all Registrable Securities included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated.

 

3.1.12. Road Show. If the registration involves the registration of Registrable Securities involving gross proceeds in excess of $25,000,000, the Company shall use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any underwritten offering.

 

3.1.13. Other. The Company shall otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Investors, in connection with any Registration.

 

 

3.2. Obligation to Suspend Distribution. Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1.4(iv) or that a Registration Statement contains a Misstatement, each holder of Registrable Securities included in any Registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such holder receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or is advised in writing by the Company that the use of the prospectus contained in such Registration Statement may be resumed, and, if so directed by the Company, each such holder will deliver to the Company all written copies, other than permanent file copies then in such holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. The Company shall immediately notify the holders of Registrable Securities of the expiration of any period during which it exercised its rights under this Section 3.2.

 

3.3. Registration Expenses. The Company shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.2.4, and all of the following expenses incurred in performing or complying with its other obligations under this Agreement: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees and disbursements of counsel for the Company and reasonable fees and expenses for independent certified public accountants retained by the Company (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration and (ix) the reasonable and documented fees and expenses, not to exceed $75,000 in connection with any Registration Statement, of one legal counsel selected by the holders of a majority in interest of the Registrable Securities included in such registration. The Company shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the holders thereof, which underwriting discounts or selling commissions shall be borne by such holders. Additionally, in an underwritten offering, all selling shareholders and the Company shall bear the expenses of the Underwriter Pro Rata in proportion to the respective amount of shares each is selling in such offering.

 

3.4. Information. The holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the Company’s obligation to comply with federal, provincial and applicable state securities laws.

 

 

4.

INDEMNIFICATION AND CONTRIBUTION.

 

4.1. Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the extent permitted by law, each Investor whose Registrable Securities are covered by a Registration Statement, such Investor’s officers, directors and each Person, if any, who controls such Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “Investor Indemnified Party”), from and against any out-of-pocket expenses, losses, judgments, claims, damages or liabilities (collectively, “Losses”), caused by any Misstatement or alleged Misstatement contained in any Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or any violation by the Company of the Securities Act or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration; and the Company shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such Loses; provided, however, that the Company shall not be liable in any such case to the extent that any such Losses arises out of or is based upon any Misstatement made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by such selling holder expressly for use therein. In connection with an underwritten offering, the Company also shall indemnify any Underwriter of the Registrable Securities, their officers, directors, and each person who controls such Underwriter to the same extent as provided above with respect to the indemnification of the Investor Indemnified Parties. It is agreed that the indemnity agreement contained in this Section 4.1 shall not apply to amounts paid in settlement of any such Losses (or actions in respect thereof) if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

 

4.2. Indemnification by Holders of Registrable Securities. Subject to the limitations set forth in Section 4.4.3 hereof, each selling holder of Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling holder, indemnify and hold harmless the Company, each of its directors and officers and each Underwriter (if any), and each other selling holder and each other person, if any, who controls another selling holder or such Underwriter within the meaning of the Securities Act, against any Losses, insofar as such Losses arise out of or are based upon any Misstatement or alleged Misstatement contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by such selling holder expressly for use therein, and shall reimburse the Company, its directors and officers, and each other selling holder or controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such Loss. Each selling holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling holder.

 

4.3. Conduct of Indemnification Proceedings. Promptly after receipt by any person of any notice of any Loss in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the “Indemnified Party”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder, notify such other person (the “Indemnifying Party”) in writing of the Loss; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written advice of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of any Losses for which the Indemnified Party seeks indemnification hereunder if such settlement or judgment includes any non-monetary remedies, requires an admission of fault or culpability on the part of the Indemnified Party or does not include an unconditional release from all liability of the Indemnified Party in respect of such Losses.

 

 

4.4. Contribution.

 

4.4.1. If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any Loss referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such Loss. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the Misstatement relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such Misstatement.

 

4.4.2. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1.

 

4.4.3. The amount paid or payable by an Indemnified Party as a result of any Loss referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

5.

RULE 144 INFORMATION.

 

5.1. Rule 144. The Company covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

 

 

6.

BOARD OF DIRECTORS.

 

6.1. Director Nomination Rights.

 

6.1.1. For so long as the Minimum Holding Condition is satisfied, the Investors holding a majority in interest of the SPAC Shares then outstanding (the “SPAC Majority Holders”) shall have the right to nominate, collectively, one person (the “Nominee”) to the Board of Directors for election to the Board of Directors by giving written notice to the Company not later than twenty (20) days after receiving notice of the date of the applicable meeting of shareholders provided to the Investors, provided that the Nominee has: (a) provided the Company with the Nominee’s written consent to a customary background check, which consent shall be provided promptly after the Nominee is proposed; (b) completed a reasonably satisfactory interview with the Nominating and Governance Committee (or similarly designated committee), which shall be completed as promptly as practicable following receipt of a completed director questionnaire; (c) provided the Company with a completed director questionnaire (in the form to be provided by the Company within three (3) business days of being identified) and such other information required as may be reasonably requested by the Board of Directors; (d) agreed to take all necessary action not be considered to be “overboarded” under the applicable policies of Institutional Shareholder Services, Inc. (“ISS”) and Glass Lewis & Co., LLC (“Glass Lewis”) as a result of his or her appointment to the Board of Directors; and (e) qualifies as an Independent Director. In the event the Nominating and Governance Committee declines to approve a Nominee, the SPAC Majority Holders may propose a new Nominee, subject to the approval process described above, until a Nominee is approved in accordance with this Section 6.1.1. For purposes of this Agreement, the “Minimum Holding Condition” shall be deemed to be satisfied until the first such time that Investors (together with their respective Affiliates) cease to Beneficially Own collectively a number of Common Shares equal to or greater than: (i) 50% of the total number of Common Shares held by the Investors on the date hereof (as the same may be adjusted by share splits, reverse splits, share dividends, recapitalizations or other similar events) and (ii) 2.0% of the then-issued and outstanding Common Shares, as determined on a fully diluted basis, including the Earn-Out Shares for so long as the Earn-Out Target Conditions pertaining to such Earn-Out Shares remain capable of being satisfied; provided that if the Investors do not satisfy clause (ii) of the Minimum Holding Condition at closing of the transactions contemplated by the BCA, the Minimum Holding Condition shall nevertheless be deemed to be satisfied until such time that the Investors (or any of their respective Affiliates) sell, transfer or otherwise divest any Common Shares, in which case the Minimum Holding Condition shall immediately cease to be satisfied.

 

6.1.2. Following approval of a Nominee by the Board of Directors, the Company shall take all actions necessary to ensure that: (i) the applicable Nominee is included in the Board of Director’s slate of nominees to the shareholders of the Company for each election of directors and recommended by the Board of Directors at any meeting of shareholders called for the purpose of electing directors; (ii) the Nominee up for election is included in the proxy statement prepared by management of the Company in connection with the Company’s soliciting proxies or consents in favor of the foregoing for every meeting of the shareholders of the Company called with respect to the election of members of the Board of Directors, and at every adjournment or postponement thereof, and on every action or approval by written resolution of the shareholders of the Company or the Board of Directors with respect to the election of members of the Board of Directors; and (iii) such Nominee receives the same level of support as is provided for the other director nominees of the Company with respect to the applicable meeting of stockholders or consent solicitation. In addition, each Investor agrees with the Company that such Investor shall vote in favor of each person to be appointed or nominated, as the case may be, for election to the Board of Directors and who has been recommended by the Board of Directors for such appointment or nomination at every meeting of the shareholders of the Company called with respect to the election of members of the Board of Directors, and at every adjournment or postponement thereof, and on every action or approval by written resolution of the shareholders of the Company or the Board of Directors with respect to the election of members of the Board of Directors.

 

 

6.1.3. If a vacancy occurs because of the death, disability, disqualification, resignation or removal of a SPAC Director or for any other reason, and at such time, the Minimum Holding Condition is satisfied then SPAC Majority Holders shall be entitled to designate such person’s successor, and the Company shall, within ten (10) days of such designation, take all necessary actions within its control such that such vacancy shall be filled with such successor Nominee, it being understood that any such successor designee shall serve the remainder of the term of the director whom such designee replaces.

 

6.1.4. If at any time, the Minimum Holding Condition cease to be satisfied, then within ten (10) days of such occurring, the SPAC Director shall tender his or her resignation to the Board of Directors for the Board of Director’s consideration. The Investors’ board designation right pursuant to this Section 6 shall terminate and be of no further force and effect upon the first time the Investors cease to satisfy the Minimum Holding Condition and shall not be reinstated under any circumstances.

 

6.2. Director Consent Rights. If (i) at the time of the closing of the transactions contemplated by the BCA, the Board of Directors is composed of five (5) or fewer directors, (ii) the Company proposes for the number of directors comprising the Board of Directors to be greater than five (5) directors and (iii) at the time the Company makes such proposal, the Minimum Holding Condition is satisfied, then prior to the nomination (or, if there is no nomination, the appointment) of a sixth individual to the Board of Directors (an “Additional Director”), the SPAC Majority Holders shall have the right to consent (such consent not to be unreasonably withheld, conditioned or delayed) to the nomination (or, if there is no nomination, the appointment) of the Additional Director; provided, however, that such right to consent with respect to such Additional Director shall expire upon an Additional Director becoming a member of the Board of Directors in accordance with the requirements of this sentence. For the avoidance of doubt, if the SPAC Majority Holders do not provide consent to the nomination of an Additional Director in accordance with this Section 6.2 (and the refusal to provide consent was reasonable), the Company may propose a new Additional Director, and such nomination (or, if there is no nomination, the appointment) of such Additional Director shall be subject to the approval process described above, until the SPAC Majority Holders shall have consented to the nomination (or, if there is no nomination, the appointment) and such Additional Director shall have begun service as a member of the Board of Directors.

 

7.

MISCELLANEOUS.

 

7.1. Assignment; No Third Party Beneficiaries. This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the holders of Registrable Securities hereunder may only be transferred or assigned to Permitted Transferees of a holder of Registrable Securities. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and the Permitted Transferees of the applicable holder of Registrable Securities or of any assignee of the Investors or holder of Registrable Securities. This Agreement is not intended to confer any rights or benefits on any persons that are not party hereto other than as expressly set forth in Section 4 and this Section 7.1.

 

7.2. Notices. All notices, demands, requests, consents, approvals or other communications (collectively, “Notices”) required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile; provided, that if such service or transmission is not on a business day or is after normal business hours, then such notice shall be deemed given on the next business day. Notice otherwise sent as provided herein shall be deemed given on the next business day following timely delivery of such notice to a reputable air courier service with an order for next-day delivery.

 

 

To the Company:

 

Clever Leaves Holdings Inc.

489 Fifth Ave, 27^th Floor

New York, NY 10017

Attn:

Kyle Detwiler, Chief Executive Officer

David Kastin, General Counsel

Email:

[email protected]

[email protected]

 

with a copy to:

 

Freshfields Bruckhaus Deringer US LLP

601 Lexington Avenue, 31st Floor

New York, NY 10022

Attn:

Sebastian L. Fain, Esq.

Pamela L. Marcogliese, Esq.

Email:

[email protected]

[email protected]

 

To an Investor, to the address set forth below such Investor’s name on Exhibit A.

 

7.3. Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

 

7.4. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.

 

7.5. Entire Agreement. This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written.

 

 

7.6. Modifications and Amendments. No amendment, modification or termination of this Agreement shall be binding upon any party unless executed in writing by such party.

 

7.7. Titles and Headings. Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.

 

7.8. Waivers and Extensions. Any party to this Agreement may waive any right, breach or default which such party has the right to waive, provided that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts.

 

7.9. Remedies Cumulative. In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the Investor or any other holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

 

7.10. Governing Law; Dispute Resolution. This Agreement shall be governed by the laws of the Province of British Columbia and the laws of Canada applicable in such Province. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the courts of the Province of British Columbia for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the courts of the Province of British Columbia, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

7.11. Waiver of Trial by Jury. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF. THE SCOPE OF THIS WAVIER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT OR DELICT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW, CIVIL LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO A TRIAL BY JURY FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

Each party will bear its own costs in respect of any disputes arising under this Agreement. The prevailing party shall be entitled to reasonable legal fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in any court of competent jurisdiction.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties have caused this Investors’ Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.

 

	COMPANY:
	CLEVER LEAVES HOLDINGS INC.
	By:
		Name:
		Title:
	INVESTORS:
	SCHULTZE SPECIAL PURPOSE ACQUISITION SPONSOR, LLC
	By:	Schultze Asset Management, LP
	By:	Schultze Asset Management GP, LLC
	By:
		Name: George J. Schultze
		Title: Managing Member
		Name: William G. LaPerch
		Name: William T. Allen
		Name: John J. Walker

 

Signature Page to Investors’ Rights Agreement 

 

 

EXHIBIT A

 

Investor Names and Addresses

 

Schultze Special Purpose Acquisition Sponsor, LLC

800 Westchester Avenue, Suite 632

Rye Brook, NY 10573

 

William G. LaPerch

c/o Schultze Special Purpose Acquisition Corp.

800 Westchester Avenue, Suite 632

Rye Brook, NY 10573

 

William T. Allen

c/o Schultze Special Purpose Acquisition Corp.

800 Westchester Avenue, Suite 632

Rye Brook, NY 10573

 

John J. Walker

c/o Schultze Special Purpose Acquisition Corp.

800 Westchester Avenue, Suite 632

Rye Brook, NY 10573

 

 

EXHIBIT B

 

Company Arrangement Resolution

 

 

FORM OF COMPANY ARRANGEMENT RESOLUTION

 

ARRANGEMENT RESOLUTION — CLEVER LEAVES INTERNATIONAL INC. BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:

 

1.

The arrangement (the "Arrangement") under Part 9, Division 5 of the Business Corporations Act (British Columbia) (the "BCBCA") involving Clever Leaves International Inc., a corporation existing under the laws of the Province of British Columbia (the "Corporation") and its shareholders (the "Corporation Shareholders"), pursuant to the amended and restated business combination agreement by and among the Corporation, Schultze Special Purpose Acquisition Corp., Clever Leaves Holdings Inc. ("Holdco") and Novel Merger Sub Inc. dated November 9, 2020, as it may be modified, supplemented or amended from time to time in accordance with its terms (the "Agreement"), as more particularly described and set forth in the management information circular of the Corporation dated [●], 2020 (the "Circular"), and all transactions contemplated thereby (collectively, the "Business Combination"), are hereby authorized, approved and adopted.

 

2.

The plan of arrangement of the Corporation, as it has been or may be modified, supplemented or amended in accordance with the Agreement and its terms (the "Plan of Arrangement"), the full text of which is set out as Exhibit "C" to the Agreement, is hereby authorized, approved and adopted.

 

3.

The Agreement and all transactions contemplated therein, including all actions of the directors of the Corporation in approving the Business Combination as a whole and all actions of the directors and officers of the Corporation in executing and delivering the Agreement and any modifications, supplements or amendments thereto, and causing the performance by the Corporation of its obligations thereunder, are hereby ratified, confirmed and approved.

 

4.

The Corporation be and is hereby authorized to apply for a final order from the British Columbia Supreme Court (the "Court") to approve the Arrangement on the terms set forth in the Agreement and the Plan of Arrangement (as they may be amended, modified or supplemented and as described in the Circular).

 

5.

Notwithstanding that this resolution has been passed (and the Plan of Arrangement adopted) by the Corporation Shareholders or that the Arrangement has been approved by the Court, the directors of the Corporation are hereby authorized and empowered, without further notice to or approval of Corporation Shareholders, subject to the terms of the Agreement and Plan of Arrangement, to: (a) amend, modify or supplement the Agreement or the Plan of Arrangement; and (b) not proceed with the Arrangement and any related transactions.

 

6.

Any one officer or director of the Corporation is hereby authorized and directed, for and on behalf of the Corporation, to execute or cause to be executed and to deliver or cause to be delivered, whether under corporate seal of the Corporation or otherwise, and to deliver or cause to be delivered:

 

(a)

to the Registrar under the BCBCA for filing such documents as are necessary or desirable to give effect to the Arrangement and the Plan of Arrangement in accordance with the Agreement; and

 

(b)

all such other documents and instruments and to perform or cause to be performed all such other acts and things as, in such person's opinion, may be necessary or desirable to give full force and effect to the foregoing resolutions and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument to the doing of any such act or thing.

 

 

EXHIBIT C

 

Plan of Arrangement

 

 

PLAN OF ARRANGEMENT UNDER SECTION 288 OF
THE BUSINESS CORPORATIONS ACT (BRITISH COLUMBIA)

 

Article 1
DEFINITIONS AND INTERPRETATION

 

1.1

Definitions

 

In this Plan of Arrangement, unless the context otherwise requires, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

 

(a)

“Affiliate” of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person;

 

(b)

“Arrangement” means the arrangement under Part 9, Division 5 of the BCBCA, on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations to this Plan of Arrangement made in accordance with the terms of the Business Combination Agreement and the provisions of this Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of SPAC and the Company, such consent to not to be unreasonably withheld, conditioned or delayed;

 

(c)

“Arrangement Consideration” means the amount, expressed in U.S. dollars, set out in the Company Certificate;

 

(d)

“BCBCA” means the Business Corporations Act (British Columbia);

 

(e)

“Business Combination Agreement” means the amended and restated business combination agreement dated as of November 9, 2020 among SPAC, Holdco, Novel Merger Sub Inc., and Company, together with the schedules attached thereto, as same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof;

 

(f)

“Business Day” means a day, except a Saturday, a Sunday or any other day on which the SEC in Washington, D.C. or banks in New York, New York or Vancouver, British Columbia, Canada are authorized or required by Law to be closed;

 

(g)

“Calculation Methodology” means the methodology, assumptions, formulas and techniques used to calculate the Exchange Ratio, Class D Preferred Conversion Ratio and Option and Warrant Value as set forth on Exhibit F to the Business Combination Agreement;

 

(h)

“Cash Arrangement Consideration” means an aggregate amount up to $2,000,000, which aggregate final amount shall be set forth on the Payment Spreadsheet; provided that, if after giving effect to the exercise of the Redemption Rights and payments related thereto, (i) the funds in the Trust Account plus proceeds from any PIPE, are, in the aggregate, greater than or equal to $60,000,000, then the Cash Arrangement Consideration shall be $3,000,000 and (ii) the funds in the Trust Account plus proceeds from any PIPE, are, in the aggregate, greater than or equal to $90,000,000, then the Cash Arrangement Consideration shall be $4,000,000;

 

 

(i)

“Class D Preferred Conversion Ratio” means the ratio for which each Company Class D Preferred Share shall, at the Effective Time, convert into the right to receive that number of Company Common Shares, as determined in accordance with the Company Articles as set forth in the Calculation Methodology;

 

(j)

“Closing Date” means the date on which the Merger shall become effective;

 

(k)

“Company” means Clever Leaves International Inc;

 

(l)

“Company Arrangement Resolution” means a special resolution of the Company Shareholders in respect of the Arrangement to be considered at the Company Meeting, in substantially the form attached to the Business Combination Agreement as Exhibit B;

 

(m)

“Company Common Shares” means the Company’s Class A voting common shares;

 

(n)

“Company Meeting” means the meeting of the Company Shareholders, including any adjournment or postponement thereof in accordance with the terms of the Business Combination Agreement, that is to be convened as provided by the Interim Order to consider, and if deemed advisable approve, the Company Arrangement Resolution;

 

(o)

“Company Shareholders” means the holders of the Company Shares;

 

(p)

“Company Shares” means the Company Common Shares and the Company Preferred Shares;

 

(q)

“Court” means the Supreme Court of British Columbia;

 

(r)

“Designated Holder” means, collectively, Neem Holdings, LLC (a Delaware limited liability company) and its Affiliates.

 

(s)

“Dissent Rights” means the right of a Dissenting Company Shareholder to dissent to the Company Arrangement Resolution and to be paid the fair market value of the Company Shares, as the case may be, granted pursuant to the Interim Order, all in accordance with Section 291(2)(c) of the BCBCA (as modified by the Interim Order), the Interim Order and Article 5 of this Plan of Arrangement;

 

(t)

“Dissenting Company Shareholder” means a registered Company Shareholder who dissents in respect of the Arrangement in strict compliance with Article 5 of this Plan of Arrangement and has not withdrawn or been deemed to have withdrawn such exercise of Dissent Rights as at the Effective Time;

 

(u)

“Effective Date” means the calendar day immediately preceding the Closing Date;

 

(v)

“Effective Time” means 11:59 p.m. Vancouver, British Columbia time, on the Effective Date, or such other time on the Effective Date as the Company and SPAC agree in writing (but in any event not later than on the calendar day immediately preceding the Closing Date);

 

 

(w)

“Excess Shares” means any Holdco Common Shares that, if delivered pursuant to the Arrangement to the Designated Holder would, after taking into account the aggregate number of Holdco Common Shares that the Designated Holder will otherwise have the right to receive pursuant to the Arrangement and the Merger, result in the Designated Holder owning beneficially or of record more than 9.99% of the issued and outstanding Holdco Common Shares immediately following the Merger Effective Time;

 

(x)

“Exchange Agent” means a bank or trust company that shall be designated by SPAC and is reasonably satisfactory to the Company;

 

(y)

“Exchange Ratio” means the ratio for which each Company Common Share receiving the Arrangement Share Consideration Amount shall, at the Effective Time, convert into the right to receive that number of Holdco Common Shares or, in lieu of any Excess Shares that would otherwise be issued to the Designated Holder, Holdco Non-Voting Common Shares, determined in accordance with the Calculation Methodology;

 

(z)

“Final Order” means the final order of the Court pursuant to Section 291 of the BCBCA, in a form reasonably acceptable to each of SPAC and the Company, approving the Arrangement, as such order may be amended by the Court with the consent of SPAC and Company, such consent to not be unreasonably withheld, conditioned or delayed, at any time prior to the Effective Time or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended, on appeal, provided that any such amendment is reasonably acceptable to each of SPAC and the Company;

 

(aa)

“Holdco” means Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada;

 

(bb)

“Holdco Common Shares” means the common shares in the capital of Holdco;

 

(cc)

“Holdco Non-Voting Common Shares” means the non-voting common shares in the capital of Holdco;

 

(dd)

“Holdco Shareholders” means the registered holders of Holdco Common Shares and Holdco Non-Voting Common Shares;

 

(ee)

“Immediate Family” means any relationship by blood, marriage, domestic partnership or adoption, not more remote than first cousin;

 

(ff)

“Interim Order” means the interim order of the Court contemplated by Section 2.02 of the Business Combination Agreement and made pursuant to Section 291 of the BCBCA, in a form reasonably acceptable to each of SPAC and the Company, providing for, among other things, the calling and holding of the Company Meeting, as the same may be amended by the Court with the consent of SPAC and the Company, such consent not to be unreasonably withheld, conditioned or delayed, provided that any such amendment is reasonably acceptable to each of the Company and SPAC;

 

 

(gg)

“Lien” means any lien, security interest, mortgage, pledge, adverse claim or other encumbrance of any kind that secures the payment or performance of an obligation (other than those created under applicable securities Laws, and not including any license of Intellectual Property);

 

(hh)

“Locked Shares” means the Holdco Common Shares and the Holdco Non-Voting Common Shares issued and outstanding at the time Section 3.1(h) occurs in the Plan of Arrangement;

 

(ii)

“Lockup Period” means the period commencing on the Effective Date and ending on the earlier of (A) the date that is one (1) year following the Closing Date and (B) the date on which the closing price of the Holdco Common Shares on Nasdaq as reported by Bloomberg Financial L.P. using the AQR function equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for any 20 trading days within any consecutive 30-trading day period commencing after the 180th day after the Closing Date;

 

(jj)

“Merger” means the merger of Novel Merger Sub Inc. with and into SPAC, to be completed pursuant to the Business Combination Agreement and the General Corporation Law of the State of Delaware on the Merger Effective Time and resulting in SPAC surviving such Merger as a direct wholly-owned subsidiary of Holdco;

 

(kk)

“Merger Effective Time” means 12:01 a.m. Vancouver, British Columbia time, on the calendar day immediately following the Effective Date;

 

(ll)

“Payment Spreadsheet” means a spreadsheet that shall be delivered by the Company to SPAC pursuant to Section 3.01(b) of the Business Combination Agreement at least five (5) Business Days prior to the Closing, which shall set forth, in accordance with the Calculation Methodology, the allocation of the Arrangement Consideration among each of the Company Shareholders, including: (a) the number of Holdco Common Shares issuable to each Company Shareholder; (b) the number of Holdco Non-Voting Common Shares issuable to the Designated Holder; and (c) the amount of Cash Arrangement Consideration payable to Selling Shareholders;

 

(mm)

“PIPE” means any private placement or placements of SPAC common stock or securities or indebtedness exercisable or exchangeable for, or convertible into, shares of SPAC common stock, in each case, which shall become Holdco Common Shares in connection with the consummation of the transactions set forth under the Business Combination Agreement;

 

(nn)

“Plan of Arrangement” means this Plan of Arrangement;

 

(oo)

“Purchased Shares” means the Company Common Shares designated as Purchased Shares in the Payment Spreadsheet that are purchased by Holdco as part of the Arrangement from certain Company Shareholders in exchange for the Cash Arrangement Consideration;

 

(pp)

“Redemption Rights” means the redemption rights provided for in Section 9.2 of Article IX of SPAC’s Certificate of Incorporation;

 

 

(qq)

“Selling Shareholders” means the Company Shareholders that are designated in the Payment Spreadsheet as holders of Purchased Shares, and will sell Company Shares to Holdco and receive Cash Arrangement Consideration as part of the Arrangement;

 

(rr)

“SPAC” means Schultze Special Purpose Acquisition Corp.;

 

(ss)

“Tax Act” means the Income Tax Act (Canada); and

 

(tt)

“Trust Account” means the trust account established by SPAC for the benefit of its public stockholders and maintained at UBS Securities LLC.

 

Any capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Business Combination Agreement. In addition, words and phrases used herein and defined in the Business Combination Agreement and not otherwise defined herein shall have the same meaning herein as in the Business Combination Agreement unless the context otherwise requires.

 

1.2

Interpretation Not Affected by Headings

 

The division of this Plan of Arrangement into articles, sections, paragraphs and subparagraphs and the insertion of headings herein are for convenience of reference only and shall not affect the construction or interpretation of this Plan of Arrangement. The terms “this Plan of Arrangement”, “hereof”, “herein”, “hereto”, “hereunder” and similar expressions refer to this Plan of Arrangement and not to any particular article, section or other portion hereof and include any instrument supplementary or ancillary hereto.

 

1.3

Number, Gender and Persons

 

In this Plan of Arrangement, unless the context otherwise requires, words importing the singular shall include the plural and vice versa, words importing the use of either gender shall include both genders and neuter and the word person and words importing persons shall include a natural person, firm, trust, partnership, association, corporation, joint venture or government (including any governmental agency, political subdivision or instrumentality thereof) and any other entity or group of persons of any kind or nature whatsoever.

 

1.4

Date for any Action

 

If the date on which any action is required to be taken hereunder is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day.

 

1.5

Statutory References

 

Any reference in this Plan of Arrangement to a statute includes all regulations made thereunder, all amendments to such statute or regulation in force from time to time and any statute or regulation that supplements or supersedes such statute or regulation.

 

1.6

Currency

 

Unless otherwise stated, all references to currency, monetary values and dollars set forth herein shall mean U.S. dollars (USD) and all payments hereunder shall be made in U.S. dollars (USD).

 

 

1.7

Time

 

All times expressed herein are local time (Vancouver, British Columbia) unless otherwise stipulated herein.

 

Article 2
BUSINESS COMBINATION AGREEMENT AND EFFECT OF ARRANGEMENT

 

2.1

Business Combination Agreement

 

(a)

This Plan of Arrangement is made pursuant to, and is subject to the provisions of, the Business Combination Agreement, except in respect of the sequence of the steps comprising the Arrangement, which shall occur in the order set forth herein, unless otherwise indicated.

 

(b)

This Plan of Arrangement will, effective at and after the Effective Time, become effective and be binding on the Company, Holdco, and the Company Shareholders, without any further act or formality required on the part of any person except as expressly provided herein.

 

Article 3
ARRANGEMENT

 

3.1

Arrangement

 

Commencing at the Effective Time the following transactions will occur and be deemed to occur in the following sequence without further act or formality:

 

(a)

each Company Share held by a Dissenting Company Shareholder who has validly exercised such Company Shareholder’s Dissent Rights pursuant to Article 5 of this Plan of Arrangement and which Dissent Rights remain valid immediately prior to the Effective Time shall be transferred to, and acquired by the Company without any further act or formality on its part, free and clear of all Liens, and cancelled and the Dissenting Company Shareholder shall cease to: (i) be a registered Company Shareholder; and (ii) have any rights as a Company Shareholder other than the right to be paid the fair value of such Company Share in accordance with Article 5 of this Plan of Arrangement;

 

(b)

each Company Class C Preferred Share issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one (1) validly issued, fully paid and non-assessable Company Common Share;

 

(c)

each Company Class D Preferred Share issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for a number of validly issued, fully paid and non-assessable Company Common Shares equal to the Class D Preferred Conversion Ratio;

 

(d)

the issued and outstanding Company Common Shares that are designated as Purchased Shares in the Payment Spreadsheet and held by a Selling Shareholder entitled to Cash Arrangement Consideration as set forth the Payment Spreadsheet will be transferred to Holdco in exchange for the portion of the Cash Arrangement Consideration set forth in the Payment Spreadsheet, and the Purchased Shares will be deemed to have been transferred to Holdco without any further act or formality, free and clear of all Liens, and each Selling Shareholder entitled to receive a portion of the Cash Arrangement Consideration will cease to be the registered holder of the Purchased Shares and will cease to have any rights as registered holder of such Purchased Shares other than the right to be paid by Holdco the portion of the Cash Arrangement Consideration set out on the Payment Spreadsheet, and such Company Shareholder’s name will be removed as the registered holder of such Purchased Shares from the central securities register of the Company;

 

 

(e)

each of the issued and outstanding Company Common Shares held by the Designated Holder shall be transferred to, and acquired by Holdco, free and clear of all Liens, and the Designated Holder will be issued the number of Holdco Common Shares and, in lieu of any Holdco Common Shares deemed to be Excess Shares, the number of Holdco Non-Voting Common Shares set forth in the Payment Spreadsheet, provided that:

 

(i)

no fractional Holdco Common Shares or fractional Holdco Non-Voting Common Shares shall be issued pursuant to this Section 3.1 and the Designated Holder shall receive, in respect of any such fractional Holdco Common Share and fractional Holdco Non-Voting Common Share that would otherwise be issued, the treatment per Section 3.2; and

 

(ii)

the Designated Holder will cease to be the holder of Company Shares and its name will be removed from the central securities register of Company Shares and added to the register of Holdco Common Shares and Holdco Non-Voting Common Shares, and Holdco will be recorded as the registered holder of the Company Shares so exchanged and will be deemed to be the legal and beneficial owner thereof;

 

(f)

each remaining issued and outstanding Company Common Share shall be transferred to, and acquired by Holdco, free and clear of all Liens, and each Company Shareholder will be issued the number of Holdco Common Shares set forth in the Payment Spreadsheet, provided that:

 

(i)

no fractional Holdco Common Shares shall be issued pursuant to this Section 3.1 and the person otherwise entitled to receive such fractional Holdco Common Share shall receive treatment per Section 3.2; and

 

(ii)

each Company Shareholder will cease to be the holder of Company Shares and the name of each Company Shareholder will be removed from the central securities register of Company Shares and added to the register of Holdco Common Shares, and Holdco will be recorded as the registered holder of all of the Company Shares so exchanged and will be deemed to be the legal and beneficial owner thereof;

 

(g)

the Holdco Common Share held by the Company will be cancelled for no consideration and the Company will cease to be the registered shareholder of such Holdco Common Share, and the Company’s name will be removed as the registered holder of such Holdco Common Share from the central securities register of Holdco;

 

 

(h)

the Holdco Common Shares and Holdco Non-Voting Common Shares issued and outstanding at the time of this Section 3.1(h) are the Locked Shares. The Locked Shares are subject to the transfer restrictions set out in Article 6 of this Plan of Arrangement. Holdco will only register a transfer of the Locked Shares that is made in accordance with the transfer restrictions. The Locked Shares are uncertificated and will have a notation in the central securities register of Holdco regarding the transfer restrictions, and the written notice sent to Holdco Shareholders will state that the transfer restrictions exist;

 

(i)

the number of directors comprising the Holdco board of directors will be set at five individuals consisting of Kyle Detwiler, Gary M. Julien, Etienne Deffarges, Elisabeth DeMarse, and Andres Fajardo;

 

(j)

the number of directors comprising the Company board of directors will be set at one individual consisting of Kyle Detwiler; and

 

(k)

the Company will adopt the form of articles attached as Appendix A to this Plan of Arrangement. The Company Unanimous Shareholders’ Agreement and the Company Investor Rights Agreement will be terminated and no person will have any rights or obligations under these agreements.

 

3.2

No Fractional Holdco Shares

 

No fractional Holdco Common Shares or Holdco Non-Voting Common Shares shall be issued to former Company Shareholders in connection with this Plan of Arrangement. The total number of Holdco Common Shares and, as applicable, Holdco Non-Voting Common Shares to be issued to any former Company Shareholder shall, without additional compensation, be rounded down to the nearest whole Holdco Common Share or Holdco Non-Voting Common Share, respectively, in the event that a former Company Shareholder would otherwise be entitled to a fractional share.

 

3.3

Transfers Free and Clear

 

Any transfer of securities pursuant to this Plan of Arrangement shall be free and clear of all Liens.

 

3.4

Withholding

 

Company, Holdco, or the Exchange Agent, as applicable, shall be entitled to deduct and withhold from any payment, issue, transfer or distribution of the Arrangement Consideration pursuant to this Plan of Arrangement such amounts as the Company, Holdco, or the Exchange Agent may be required to deduct or withhold pursuant to the Tax Act or any other applicable law, and any amount so deducted and withheld will be deemed for all purposes of this Plan of Arrangement to be paid, issued, transferred or distributed to the person entitled thereto under this Plan of Arrangement.

 

3.5

Deemed Fully Paid and Non-Assessable Shares

 

All Holdco Common Shares and Holdco Non-Voting Common Shares issued pursuant hereto shall be deemed to be validly issued and outstanding as fully paid and non-assessable shares for all purposes of the BCBCA.

 

 

Article 4
PAYMENT OF CONSIDERATION

 

4.1

Payment of Arrangement Consideration

 

(a)

Holdco shall pay or cause to be paid the Cash Arrangement Consideration as set out in the Payment Spreadsheet within ten (10) Business Days of the Effective Date, less any amounts withheld pursuant to Section 3.4.

 

(b)

No holder of Company Shares shall be entitled to receive any consideration with respect to such Company Shares other than the Arrangement Consideration to which such holder is entitled in accordance with the Payment Spreadsheet, Section 3.1 and this Article 4 and, for greater certainty, no such holder will be entitled to receive any interest, dividends, premium or other payment in connection therewith.

 

4.2

Share Exchange Procedures

 

(a)

All of the Company Common Shares, Holdco Common Shares and Holdco Non-Voting Common Shares issued pursuant to this Plan of Arrangement will be issued as uncertificated pursuant to Section 107 of the BCBCA.

 

(b)

All of the share certificates issued by the Company to Company Shareholders prior to the Effective Time will cease to represent any interest in Company Shares and will be cancelled by the Company as of the Effective Time.

 

(c)

In accordance with Section 107(6) of the BCBCA, Holdco will send to each Holdco Shareholder a written notice containing the information required by the BCBCA.

 

Article 5
DISSENT RIGHTS

 

5.1

Dissent Rights

 

Registered Company Shareholders may exercise Dissent Rights with respect to the Company Shares held by such holders in connection with the Arrangement pursuant to the procedure set forth in Part 8, Division 2 of the BCBCA, as may be modified by the Interim Order and this Article 5. Registered Company Shareholders who exercise such Dissent Rights and who:

 

(a)

are ultimately entitled to be paid fair value for their Company Shares shall be deemed not to have participated in the transactions in Section 3.1 (other than Section 3.1(a)), and such Company Shares shall be irrevocably transferred to the Company and cancelled in accordance with the Arrangement and will not be exchanged for Holdco Common Shares or, as applicable, Holdco Non-Voting Common Shares in accordance with the Arrangement; or

 

(b)

are ultimately not entitled, for any reason, to be paid fair value for their Company Shares shall be deemed to have participated in the Arrangement, as of the Effective Time, on the same basis as a non-dissenting holder of Company Shares, and shall be entitled to receive only the consideration for their Company Shares that such Dissenting Company Shareholder would have received pursuant to the Arrangement if such Dissenting Company Shareholder had not exercised its Dissent Rights,

 

 

provided that in no case shall the Company, Holdco or any other person be required to recognize Company Shareholders who exercise Dissent Rights as Company Shareholders after the Effective Time, and the names of such holders of Company Shares shall be deleted from the register of holders of Company Shares as at the Effective Time. The fair value of Company Shares shall be determined as of the close of business on the last Business Day before the day on which the Arrangement is approved by the holders of Company Shares at the Company Meeting and shall be payable by the Company.

 

5.2

Holdco Share Reservation

 

Holdco shall:

 

(a)

reserve the number of Holdco Common Shares and Holdco Non-Voting Common Shares set forth in the Payment Spreadsheet for issuance to Company Shareholders that have validly exercised Dissent Rights pursuant to Article 5 of this Plan of Arrangement and which Dissent Rights remain valid immediately prior to the Effective Time, and

 

(b)

issue such Holdco Common Shares and, as applicable, Holdco Non-Voting Common Shares to former Company Shareholders that are ultimately not entitled, for any reason, to be paid fair value for their Company Shares, and are deemed to have participated in the Arrangement pursuant to Section 5.1(b).

 

5.3

Exercise of Dissent Rights

 

In addition to any other restrictions in Part 8, Division 2 of the BCBCA, Company Shareholders who vote in favour of the Arrangement shall not be entitled to exercise Dissent Rights.

 

5.4

Dissent Right Written Notice

 

Notwithstanding Section 242 of the BCBCA, the written notice of dissent must be received by no later than 5:00 p.m. (Vancouver time) on the Business Day which is two (2) Business Days immediately preceding the date of the Company Meeting (as it may be adjourned or postponed from time to time).

 

Article 6
TRANSFER RESTRICTIONS

 

6.1

Lockup

 

(a)

Subject to section 6.1(b), during the Lockup Period the Holdco Shareholders may not

 

(i)

lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any Locked Shares or

 

(ii)

enter into, or allow to exist, any swap or other arrangement that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Locked Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Locked Shares or other securities of Holdco, in cash, or otherwise.

 

  

(b)

Section 6.1(a) shall not apply to the following:

 

(i)

transactions relating to Holdco Common Shares or Holdco Non-Voting Common Shares acquired by a Holdco Shareholder in open market transactions, provided that it shall be a condition to the transfer that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended, reporting such transfer of the Holdco Common Shares or Holdco Non-Voting Common Shares, as applicable, shall be required or shall be voluntarily made during the Lockup Period;

 

(ii)

transfers of Locked Shares as a bona fide gift, provided that the donee or donees thereof agree to be bound in writing by these transfer restrictions;

 

(iii)

transfers of Locked Shares to any trust or other entity formed for estate planning purposes for the direct or indirect benefit of such Holdco Shareholder or the Immediate Family of such Holdco Shareholder, provided that (A) the trustee of the trust agrees to be bound in writing by these transfer restrictions and (B) any such transfer shall not involve a disposition for value;

 

(iv)

transfers of Locked Shares by will or intestate succession, provided that (A) the transferee agrees to be bound in writing by these transfer restrictions and (B) any such transfer shall not involve a disposition for value;

 

(v)

transfers of Locked Shares pursuant to a qualified domestic order or in connection with a divorce settlement, provided the transferee agrees to be bound in writing by these transfer restrictions;

 

(vi)

conversions of Holdco Non-Voting Common Shares to Holdco Common Shares pursuant to the special rights set forth in the Amended and Restated Holdco Articles, provided that any Holdco Common Shares issued as a result of any such conversions shall also constitute Locked Shares and remain subject to these transfer restrictions;

 

(vii)

transfers of Locked Shares to another person that controls, is controlled by or is under common control or management with such Holdco Shareholder, if applicable, provided that (A) the transferee or distributee agrees to be bound in writing by these transfer restrictions and (B) any such transfer shall not involve a disposition for value;

 

(viii)

distributions of Locked Shares to members, partners or shareholders of such Holdco Shareholder, if applicable, provided that (A) the transferee or distributee agrees to be bound in writing by these transfer restrictions and (B) any such transfer shall not involve a disposition for value;

 

(ix)

transfers of Locked Shares to officers, directors or affiliates of such Holdco Shareholder, if applicable, provided that (A) the transferee or distributee agrees to be bound in writing by these transfer restrictions, (B) any such transfer shall not involve a disposition for value and (C) no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended, reporting such transfer of the Locked Shares, shall be required or shall be voluntarily made during the Lockup Period; or

 

 

(x)

pledges of shares of the Locked Shares as security or collateral in connection with any borrowing or the incurrence of any indebtedness of such Holdco Shareholder, provided that such borrowing or incurrence of indebtedness is secured by a portfolio of assets or equity interests issued by multiple issuers, provided further that the Locked Shares pledged remain subject to these transfer restrictions.

 

(c)

During the Lockup Period the Holdco Shareholders holding Locked Shares will execute such agreements as may be reasonably requested by Holdco in connection with these transfer restrictions.

 

Article 7
AMENDMENTS AND TERMINATION

 

7.1

Amendments to the Plan of Arrangement

 

In accordance with Section 10.04 of the Business Combination Agreement and subject to applicable law and the Interim Order, the parties to the Business Combination Agreement may amend, modify or supplement this Plan of Arrangement at any time and from time to time, provided that each such amendment, modification or supplement is:

 

(a)

agreed in writing by each of the parties;

 

(b)

filed with the Court;

 

(c)

communicated to the Company Shareholders, if and as required by the Court; and

 

(d)

approved by the Company Shareholders, if and as required by the Court.

 

7.2

Termination

 

Notwithstanding any prior approvals by the Court or by the Company Shareholders, the board of directors of the Company may decide not to proceed with the Arrangement and to revoke the Company Arrangement Resolution adopted at the Company Meeting without further approval of the Court or the Company Shareholders.

 

Article 8
FURTHER ASSURANCES

 

8.1

Further Assurances

 

Notwithstanding that the transactions and events set out herein shall occur and be deemed to occur at the Effective Time in the order set out in this Plan of Arrangement without any further act or formality, each of the parties to the Business Combination Agreement shall make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by any of them in order further to document or evidence any of the transactions or events set out herein.

 

 

8.2

Paramountcy

 

From and after the Effective Time:

 

(a)

this Plan of Arrangement shall take precedence and priority over any and all rights related to Company Shares issued prior to the Effective Time;

 

(b)

the rights and obligations of the Company Shareholders and any trustee and transfer agent therefor, shall be solely as provided for in this Plan of Arrangement; and

 

(c)

all actions, causes of actions, claims or proceedings (actual or contingent, and whether or not previously asserted) based on or in any way relating to Company Shares shall be deemed to have been settled, compromised, released and determined without liability except as set forth herein.

 

 

APPENDIX A
COMPANY ARTICLES

 

Please see attached.

  

 

ARTICLES

 

Clever leaves international inc.

 

(the “Company”)

 

The Company has as its Articles the following Articles.

 

Incorporation Number: BC1127460

 

TABLE OF CONTENTS

  

Article 1 INTERPRETATION	1
1.1 Definitions	1
1.2 Statutory Definitions Applicable	1
Article 2 SHARES AND SHARE CERTIFICATES	1
2.1 Authorized Share Structure	1
2.2 Shares may be Certificated or Uncertificated	1
2.3 Shareholder Entitled to Certificate or Acknowledgment	2
2.4 Delivery by Mail	2
2.5 Replacement of Worn Out or Defaced Certificate or Acknowledgment	2
2.6 Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment	2
2.7 Splitting Share Certificates	2
2.8 Certificate Fee	3
2.9 Recognition of Trusts	3
Article 3 ISSUE OF SHARES	3
3.1 Directors Authorized	3
3.2 Commissions and Discounts	3
3.3 Brokerage	3
3.4 Conditions of Issue	3
3.5 Share Purchase Warrants and Rights	4
Article 4 SHARE REGISTERS	4
4.1 Central Securities Register	4
4.2 Closing Register	4
4.3 Branch Registers	4

 

 

Article 5 SHARE TRANSFERS	4
5.1 Registering Transfers	4
5.2 Form of Instrument of Transfer	5
5.3 Transferor Remains Shareholder	5
5.4 Signing of Instrument of Transfer	5
5.5 Enquiry as to Title Not Required	5
5.6 Transfer Fee	5
Article 6 TRANSMISSION OF SHARES	6
6.1 Recognition on Death	6
6.2 Rights of Legal Personal Representative or Trustee in Bankruptcy	6
Article 7 PURCHASE OF SHARES	6
7.1 Company Authorized to Purchase Shares	6
7.2 Purchase When Insolvent	6
7.3 Sale and Voting of Purchased Shares	6
Article 8 BORROWING POWERS	7
8.1 Borrowing Powers	7
8.2 Special Privileges for Debt Obligations	7
8.3 Signing of Debt Obligations	7
Article 9 ALTERATIONS	8
9.1 Alteration of Authorized Share Structure	8
9.2 Special Rights and Restrictions	8
9.3 Change of Name	9
9.4 Other Alterations	9
Article 10 MEETINGS OF SHAREHOLDERS	9
10.1 Annual General Meetings	9
10.2 Resolution Instead of Annual General Meeting	9
10.3 Calling of Meetings of Shareholders	9
10.4 Notice for Meetings of Shareholders	10
10.5 Record Date for Notice	10
10.6 Record Date for Voting	10
10.7 Failure to Give Notice and Waiver of Notice	10
10.8 Notice of Special Business at Meetings of Shareholders	11
10.9 Advance Notice for Nomination of Directors	11
Article 11 PROCEEDINGS AT MEETINGS OF SHAREHOLDERS	13
11.1 Special Business	13
11.2 Special Majority	13
11.3 Quorum	13
11.4 One Shareholder May Constitute Quorum	14
11.5 Other Persons May Attend	14
11.6 Requirement of Quorum	14
11.7 Lack of Quorum	14
11.8 Lack of Quorum at Succeeding Meeting	14

 

  

11.9 Chair	14
11.10 Selection of Alternate Chair	15
11.11 Adjournments	15
11.12 Notice of Adjourned Meeting	15
11.13 Decisions by Show of Hands or Poll	15
11.14 Declaration of Result	15
11.15 Motion Need Not be Seconded	16
11.16 Casting Vote	16
11.17 Manner of Taking Poll	16
11.18 Demand for Poll on Adjournment	16
11.19 Chair Must Resolve Dispute	16
11.20 Casting of Votes	16
11.21 No Demand for Poll	16
11.22 Demand for Poll Not to Prevent Continuance of Meeting	17
11.23 Retention of Ballots and Proxies	17
11.24 Ordinary Resolution	17
Article 12 VOTES OF SHAREHOLDERS	17
12.1 Number of Votes by Shareholder or by Shares	17
12.2 Votes of Persons in Representative Capacity	17
12.3 Votes by Joint Holders	17
12.4 Legal Personal Representatives as Joint Shareholders	18
12.5 Representative of a Corporate Shareholder	18
12.6 Appointment of Proxy Holders	18
12.7 Alternate Proxy Holders	18
12.8 Who May Act as Proxy Holder	19
12.9 Deposit of Proxy	19
12.10 Validity of Proxy Vote	19
12.11 Form of Proxy	20
12.12 Revocation of Proxy	20
12.13 Revocation of Proxy Must be Signed	20
12.14 Production of Evidence of Authority to Vote	20
Article 13 DIRECTORS	21
13.1 First Directors; Number of Directors	21
13.2 Change in Number of Directors	21
13.3 Directors’ Acts Valid Despite Vacancy	21
13.4 Qualifications of Directors	21
13.5 Remuneration of Directors	22
13.6 Reimbursement of Expenses of Directors	22
13.7 Special Remuneration for Directors	22
13.8 Gratuity, Pension or Allowance on Retirement of Director	22

 

 

Article 14 ELECTION AND REMOVAL OF DIRECTORS	22
14.1 Election at Annual General Meeting	22
14.2 Consent to be a Director	22
14.3 Failure to Elect or Appoint Directors	23
14.4 Places of Retiring Directors Not Filled	23
14.5 Directors May Fill Casual Vacancies	23
14.6 Remaining Directors Power to Act	23
14.7 Shareholders May Fill Vacancies	23
14.8 Additional Directors	24
14.9 Ceasing to be a Director	24
14.10 Removal of Director by Shareholders	24
14.11 Removal of Director by Directors	24
Article 15 ALTERNATE DIRECTORS	25
15.1 Appointment of Alternate Director	25
15.2 Notice of Meetings	25
15.3 Alternate for More Than One Director Attending Meetings	25
15.4 Consent Resolutions	25
15.5 Alternate Director Not an Agent	25
15.6 Revocation of Appointment of Alternate Director	25
15.7 Ceasing to be an Alternate Director	26
15.8 Remuneration and Expenses of Alternate Director	26
Article 16 POWERS AND DUTIES OF DIRECTORS	26
16.1 Powers of Management	26
16.2 Appointment of Attorney of Company	26
Article 17 DISCLOSURE OF INTEREST OF DIRECTORS	27
17.1 Obligation to Account for Profits	27
17.2 Restrictions on Voting by Reason of Interest	27
17.3 Interested Director Counted in Quorum	27
17.4 Disclosure of Conflict of Interest or Property	27
17.5 Director Holding Other Office in the Company	27
17.6 No Disqualification	27
17.7 Professional Services by Director or Officer	27
17.8 Director or Officer in Other Corporations	28
Article 18 PROCEEDINGS OF DIRECTORS	28
18.1 Meetings of Directors	28
18.2 Voting at Meetings	28
18.3 Chair of Meetings	28
18.4 Meetings by Telephone or Other Communications Medium	29
18.5 Calling of Meetings	29
18.6 Notice of Meetings	29
18.7 When Notice Not Required	29
18.8 Meeting Valid Despite Failure to Give Notice	29
18.9 Waiver of Notice of Meetings	30
18.10 Quorum	30
18.11 Validity of Acts Where Appointment Defective	30
18.12 Consent Resolutions in Writing	30

 

 

Article 19 EXECUTIVE AND OTHER COMMITTEES	30
19.1 Appointment and Powers of Executive Committee	30
19.2 Appointment and Powers of Other Committees	31
19.3 Obligations of Committees	31
19.4 Powers of Board	31
19.5 Committee Meetings	32
Article 20 OFFICERS	32
20.1 Directors May Appoint Officers	32
20.2 Functions, Duties and Powers of Officers	32
20.3 Qualifications	32
20.4 Remuneration and Terms of Appointment	33
Article 21 INDEMNIFICATION	33
21.1 Definitions	33
21.2 Mandatory Indemnification of Eligible Party	34
21.3 Indemnification of Other Persons	34
21.4 Non-Compliance with the Act	34
21.5 Company May Purchase Insurance	34
Article 22 DIVIDENDS	34
22.1 Payment of Dividends Subject to Special Rights	34
22.2 Declaration of Dividends	34
22.3 No Notice Required	35
22.4 Record Date	35
22.5 Manner of Paying Dividend	35
22.6 Settlement of Difficulties	35
22.7 When Dividend Payable	35
22.8 Dividends to be Paid in Accordance With Number of Shares	35
22.9 Receipt by Joint Shareholders	35
22.10 Dividend Bears No Interest	35
22.11 Fractional Dividends	36
22.12 Payment of Dividends	36
22.13 Capitalization of Surplus	36
Article 23 FINANCIAL RECORDS AND AUDITS	36
23.1 Recording of Financial Affairs	36
23.2 Inspection of Accounting Records	36
23.3 Remuneration of Auditor	36

 

 

Article 24 NOTICES	37
24.1 Method of Giving Notice	37
24.2 Deemed Receipt of Mailing	38
24.3 Certificate of Sending	38
24.4 Notice to Joint Shareholders	38
24.5 Notice to Trustees	38
Article 25 SEAL	39
25.1 Who May Attest Seal	39
25.2 Sealing Copies	39
25.3 Mechanical Reproduction of Seal	39
Article 26 PROHIBITIONS	40
26.1 Definitions	40
26.2 Application	40
26.3 Consent Required for Transfer of Shares or Designated Securities	40

  

 

Article 1
INTERPRETATION

 

1.1	Definitions

 

In these Articles, unless the context otherwise requires:

 

“Act” means the Business Corporations Act, S.B.C. 2002, c. 57, as amended from time to time, as well as any successor legislation, and includes any regulations made thereunder.

 

“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being.

 

“Interpretation Act” means the Interpretation Act, R.S.B.C. 1996, c. 238, as amended from time to time, as well as any successor legislation, and includes any regulations made thereunder.

 

“legal personal representative” means the personal or other legal representative of the shareholder.

 

“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register.

 

“seal” means the seal of the Company, if any.

 

1.2	Statutory Definitions Applicable

 

The definitions in the Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Act, the Act will prevail.

 

Article 2
SHARES AND SHARE CERTIFICATES

 

2.1	Authorized Share Structure

 

The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

 

2.2	Shares may be Certificated or Uncertificated

 

The Company may issue certificated or uncertificated shares, and the directors may, by resolution, provide that specific shares, classes of shares, or series of shares be certificated or uncertificated. A share certificate issued by the Company must comply with, and be signed as required by, the Act.

 

 

2.3	Shareholder Entitled to Certificate or Acknowledgment

 

Each shareholder is entitled, without charge, to one share certificate representing the shares of each class or series of shares registered in the shareholder’s name. At its option, the Company may, in lieu of a share certificate, issue to the shareholder a non-transferable written acknowledgment of the shareholder’s right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders’ duly authorized agents will be sufficient delivery to all.

 

2.4	Delivery by Mail

 

Any share certificate or non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate or acknowledgment is lost in the mail or stolen.

 

2.5	Replacement of Worn Out or Defaced Certificate or Acknowledgment

 

If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think fit:

 

(a)

order the share certificate or acknowledgment, as the case may be, to be cancelled; and

 

(b)

issue a replacement share certificate or acknowledgment, as the case may be.

 

2.6	Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment

 

If a share certificate or a non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, if the directors receive:

 

(a)

proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and

 

(b)

any indemnity the directors consider adequate.

 

2.7	Splitting Share Certificates

 

If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

 

 

2.8	Certificate Fee

 

There must be paid to the Company, in relation to the issue of any share certificate under Article 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Act, determined by the directors.

 

2.9	Recognition of Trusts

 

Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

 

Article 3
ISSUE OF SHARES

 

3.1	Directors Authorized

 

Subject to the Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

 

3.2	Commissions and Discounts

 

The directors may authorize the Company to pay at any time a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person, or procuring or agreeing to procure purchasers for shares of the Company.

 

3.3

Brokerage

 

The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

 

3.4	Conditions of Issue

 

Except as provided for by the Act, no share may be issued until it is fully paid. A share is fully paid when:

 

(a)

consideration is provided to the Company for the issue of the share by one or more of the following:

 

(i)

past services performed for the Company;

 

(ii)

property; or

 

(iii)

money; and

 

(b)

the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

 

 

3.5	Share Purchase Warrants and Rights

 

Subject to the Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

 

Article 4
SHARE REGISTERS

 

4.1	Central Securities Register

 

As required by and subject to the Act, the Company must maintain its central securities register at its records office or at any other location inside or outside British Columbia designated by the directors, and may maintain branch securities registers. The directors may, subject to the Act, appoint an agent to maintain the central securities register and any branch central securities registers. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

 

4.2	Closing Register

 

The Company must not at any time close its central securities register.

 

4.3	Branch Registers

 

The Company may keep or cause to be kept one or more branch securities registers.

 

Article 5
SHARE TRANSFERS

 

5.1	Registering Transfers

 

In addition to any other restrictions set forth in these Articles, a transfer of a share of the Company must not be registered unless:

 

(a)

a duly signed instrument of transfer in respect of the share has been received by the Company or its agent;

 

(b)

if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company or its agent;

 

(c)

if a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment has been surrendered to the Company or its agent; and

 

(d)

such other evidence, if any, as the Company or its agent may require to prove the title of the transferor or the transferor’s right to transfer the shares and the right to the transferee to have the transfer registered.

 

 

5.2	Form of Instrument of Transfer

 

The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form that may be approved by the directors from time to time.

 

5.3	Transferor Remains Shareholder

 

Except to the extent that the Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company as the registered owner of the transferred shares.

 

5.4	Signing of Instrument of Transfer

 

If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgments deposited with the instrument of transfer:

 

(a)

in the name of the person named as transferee in that instrument of transfer; or

 

(b)

if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

 

5.5	Enquiry as to Title Not Required

 

Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares. A transfer, when entered in a securities register of the Company, shall confer upon the person whose name the shares have been entered into valid title to such shares.

 

5.6	Transfer Fee

 

There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors from time to time.

 

 

Article 6
TRANSMISSION OF SHARES

 

6.1	Recognition on Death

 

In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

 

6.2	Rights of Legal Personal Representative or Trustee in Bankruptcy

 

The legal personal representative or trustee in bankruptcy of a shareholder, as the case may be, has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Act and the directors have been deposited with the Company.

 

Article 7
PURCHASE OF SHARES

 

7.1	Company Authorized to Purchase Shares

 

Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Act, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

 

7.2	Purchase When Insolvent

 

The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:

 

(a)

the Company is insolvent; or

 

(b)

making the payment or providing the consideration would render the Company insolvent.

 

7.3	Sale and Voting of Purchased Shares

 

If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

 

(a)

is not entitled to vote the share at a meeting of its shareholders;

 

(b)

must not pay a dividend in respect of the share; and

 

(c)

must not make any other distribution in respect of the share.

 

 

Article 8
BORROWING POWERS

 

8.1	Borrowing Powers

 

The Company, if authorized by the directors, may:

 

(a)

borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;

 

(b)

issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the directors consider appropriate;

 

(c)

guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

 

(d)

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

 

8.2	Special Privileges for Debt Obligations

 

Any bonds, debentures or other debt obligations of the Company may be issued with any special privileges as to redemption, surrender, drawing, allotment of or conversion into or exchange for shares or other securities, attending and voting at general meetings of the Company, appointment of directors or otherwise and may, by their terms, be assignable free from any equities between the Company and the person to whom they were issued or any subsequent holder thereof, all as the directors may determine.

 

8.3	Signing of Debt Obligations

 

Every bond, debenture or other debt obligation of the Company shall be signed manually by at least one director or officer of the Company or by or on behalf of the agent or trustee for the bond, debenture, or other debt obligation appointed by the Company or under any instrument under which the bond, debenture, or other debt obligation is issued and any additional signatures may be printed or otherwise mechanically reproduced thereon and, in such event, a bond, debenture, or other debt obligation so signed is as valid as if signed manually notwithstanding that any person whose signature is so printed or mechanically reproduced shall have ceased to hold the office that he or she is stated on such bond, debenture, or other debt obligation to hold at the date of issue thereof.

 

 

Article 9
ALTERATIONS

 

9.1	Alteration of Authorized Share Structure

 

Subject to Article 9.2 and the Act, the Company may:

 

(a)

by special resolution:

 

(i)

create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

 

(ii)

if the Company is authorized to issue shares of a class of shares with par value, decrease the par value of those shares;

 

(iii)

change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value; or

 

(iv)

alter the identifying name of any of its shares;

 

(b)

by ordinary resolution:

 

(i)

increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

 

(ii)

if the Company is authorized to issue shares of a class of shares with par value, if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

 

(iii)

subdivide or consolidate all or any of its unissued, or fully paid issued, shares; or

 

(iv)

otherwise alter its shares or authorized share structure when required or permitted to do so by the Act.

 

9.2	Special Rights and Restrictions

 

Subject to the Act, the Company may by special resolution:

 

(a)

create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

 

(b)

vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

 

 

9.3	Change of Name

 

The Company may, by a resolution of the directors, authorize an alteration of its Notice of Articles in order to change its name.

 

9.4	Other Alterations

 

If the Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.

 

Article 10
MEETINGS OF SHAREHOLDERS

 

10.1	Annual General Meetings

 

Unless an annual general meeting is deferred or waived in accordance with the Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and location, within or outside British Columbia, as may be determined by the directors, and including a place or location that is entirely virtual such that the annual general meeting is held electronically without a physical location or place, in which case the deemed location of the virtual meeting, if any is so required for compliance with the Act or applicable law, shall be Vancouver, British Columbia.

 

10.2	Resolution Instead of Annual General Meeting

 

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

 

10.3	Calling of Meetings of Shareholders

 

The directors may, whenever they think fit, call a meeting of shareholders. Any meeting of shareholders may be held at such time and location, within or outside of British Columbia, including locations outside North America, as may be determined by the directors, and including a place or location that is entirely virtual such that the meeting is held electronically without a physical location or place, in which case the deemed location of the virtual meeting, if any is so required for compliance with the Act or applicable law, shall be Vancouver, British Columbia.

 

 

10.4	Notice for Meetings of Shareholders

 

The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

 

(a)

if and for so long as the Company is a public company, 21 days; or

 

(b)

otherwise, 10 days.

 

10.5	Record Date for Notice

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

 

(a)

if and for so long as the Company is a public company, 21 days; or

 

(b)

otherwise, 10 days.

 

If no record date is set, the record date is 5:00 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

 

10.6	Record Date for Voting

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Act, by more than four months. If no record date is set, the record date is 5:00 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

 

10.7	Failure to Give Notice and Waiver of Notice

 

The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.

 

 

10.8	Notice of Special Business at Meetings of Shareholders

 

If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must state the general nature of the special business. If the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, then, in lieu of attaching a copy of the document to the notice of meeting, the notice may state that a copy of the document will be available for inspection by shareholders who are entitled to vote at the meeting:

 

(a)

at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

 

(b)

during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

 

10.9	Advance Notice for Nomination of Directors

 

If and for so long as the Company is a public company, subject only to the Act and these Articles, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Company. Nominations of persons for election to the board of directors at any annual meeting of shareholders, or at any special meeting of shareholders called for the purpose of electing directors as set forth in the Company's notice of such special meeting, may be made (i) by or at the direction of the board of directors, including pursuant to a notice of meeting, (ii) by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the Act or, (iii) by any shareholder of the Company (a “Nominating Shareholder”) who, at the close of business on the date of the giving of the notice provided for below in this Article 10.9 and on the record date for notice of such meeting, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting, and who complies with the notice procedures set forth in this Article 10.9:

 

(a)

In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, such person must have given timely notice thereof in proper written form to the secretary of the Company in accordance with this Article 10.9;

 

(b)

To be timely, a Nominating Shareholder's notice must be received by the secretary of the Company (i) in the case of an annual meeting, not less than 30 days or more than 65 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made (the "Meeting Notice Date"), the Nominating Shareholder’s notice must be so received not later than the close of business on the 10th day following the Meeting Notice Date; and (ii) in the case of a special meeting of shareholders (which is not also an annual meeting) called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the 15th day following the day on which public announcement of the date of the special meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting or special meeting commence a new time period for the giving of a Nominating Shareholder's notice as described in this Article 10.9;

 

 

(c)

To be in proper written form, a Nominating Shareholder's notice must set forth: (i) as to each person whom the Nominating Shareholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of the Company that are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws; and (ii) as to the Nominating Shareholder giving the notice, any proxy, contract, arrangement, understanding or relationship pursuant to which such Nominating Shareholder has a right to vote any shares of the Company and any other information relating to such Nominating Shareholder that would be required to be made in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable shareholder's understanding of the independence, or lack thereof, of such proposed nominee. The Nominating Shareholder's notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected;

 

(d)

No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in this Article 10.9; provided, however, that nothing in this Article 10.9 shall be deemed to preclude a shareholder from discussing (as distinct from nominating directors) at a meeting of shareholders any matter in respect of which the shareholder would have been entitled to submit a proposal pursuant to the provisions of the Act. The chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded;

 

(e)

For purposes of this Article 10.9, (i) "public announcement" shall mean disclosure in a press release disseminated by a nationally recognized news service in Canada, or in a document publicly filed by the Company under its profile on the System of Electronic Document Analysis and Retrieval at www.sedar.com; and (ii) "Applicable Securities Laws" means the applicable securities legislation in each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commission and similar regulatory authority of each province and territory of Canada;

 

(f)

Notice given to the secretary of the Company pursuant to this Article 10.9 may only be given by personal delivery, facsimile transmission or by email (at such email address as stipulated from time to time by the secretary of the Company for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery, email (at the address aforesaid) or sent by facsimile transmission (provided the receipt of confirmation of such transmission has been received) to the secretary at the address of the principal executive offices of the Company; provided that if such delivery or electronic communication is made on a day which is not a business day or later than 5:00 p.m. (Vancouver time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been on the subsequent day that is a business day; and

 

(g)

Notwithstanding the foregoing, the board may, in its sole discretion, waive any requirement in this Article 10.9.

 

 

Article 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

 

11.1	Special Business

 

At a meeting of shareholders, the following business is special business:

 

(a)

at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting; and

 

(b)

at an annual general meeting, all business is special business except for the following:

 

(i)

business relating to the conduct of or voting at the meeting;

 

(ii)

consideration of any financial statements of the Company presented to the meeting;

 

(iii)

consideration of any reports of the directors or auditor;

 

(iv)

the setting or changing of the number of directors;

 

(v)

the election or appointment of directors;

 

(vi)

the appointment of an auditor;

 

(vii)

the setting of the remuneration of an auditor;

 

(viii)

business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; and

 

(ix)

any other business which, under these Articles or the Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

 

11.2	Special Majority

 

The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

 

11.3

Quorum

 

Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is one or more persons who are, or who represent by proxy, one or more shareholders who, in the aggregate, hold at least 10% of the issued shares of the Company entitled to be voted at the meeting.

 

 

11.4	One Shareholder May Constitute Quorum

 

If there is only one shareholder entitled to vote at a meeting of shareholders:

 

(a)

the quorum is one person who is, or who represents by proxy, that shareholder; and

 

(b)

that shareholder, present in person or by proxy, may constitute the meeting.

 

11.5	Other Persons May Attend

 

The directors, the chief executive officer (if any), the president (if any), the secretary (if any), the assistant secretary (if any and only in the absence of the secretary), the auditor of the Company (if any), and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder otherwise entitled to vote at the meeting.

 

11.6	Requirement of Quorum

 

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

 

11.7	Lack of Quorum

 

If, within one half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

 

(a)

in the case of a general meeting requisitioned by shareholders, the meeting is dissolved; and

 

(b)

in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

 

11.8	Lack of Quorum at Succeeding Meeting

 

If, at the meeting to which the meeting referred to in Article 11.7(b) was adjourned, a quorum is not present within one half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

 

11.9

Chair

 

The following individual is entitled to preside as chair at a meeting of shareholders:

 

(a)

the chair of the board, if any;

 

(b)

if the chair of the board is absent or unwilling to act as chair of the meeting, the vice chair of the board, if any;

 

(c)

if the vice chair of the board is absent or unwilling to act as chair of the meeting, the chief executive officer, if any; or

 

(d)

if the chief executive officer is absent or unwilling to act as chair of the meeting, the president, if any.

 

 

11.10

Selection of Alternate Chair

 

If, at any meeting of shareholders, there is no chair of the board, vice chair of the board, chief executive officer or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board, vice chair of the board, chief executive officer and president are unwilling to act as chair of the meeting, or if the chair of the board, vice chair of the board, chief executive officer and president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present may choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

 

11.11

Adjournments

 

The chair of a meeting of shareholders may, with the consent of any meeting at which a quorum is present, and must, if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

 

11.12

Notice of Adjourned Meeting

 

It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

 

11.13

Decisions by Show of Hands or Poll

 

Subject to the Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

 

11.14

Declaration of Result

 

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

 

 

11.15

Motion Need Not be Seconded

 

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

 

11.16

Casting Vote

 

In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

 

11.17

Manner of Taking Poll

 

Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:

 

(a)

the poll must be taken:

 

(i)

at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

 

(ii)

in the manner, at the time and at the place that the chair of the meeting directs;

 

(b)

the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

 

(c)

the demand for the poll may be withdrawn by the person who demanded it.

 

11.18

Demand for Poll on Adjournment

 

A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

 

11.19

Chair Must Resolve Dispute

 

In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

 

11.20

Casting of Votes

 

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

 

11.21

No Demand for Poll

 

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

 

 

11.22

Demand for Poll Not to Prevent Continuance of Meeting

 

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

 

11.23

Retention of Ballots and Proxies

 

The Company must, for at least three months after a meeting of shareholders, keep at its record office each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxyholder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

 

11.24

Ordinary Resolution

 

Unless the Act or these Articles otherwise provide, any action that must or may be taken or authorized by the shareholders may be taken or authorized by ordinary resolution.

 

Article 12
VOTES OF SHAREHOLDERS

 

12.1	Number of Votes by Shareholder or by Shares

 

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

 

(a)

on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

 

(b)

on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

 

12.2	Votes of Persons in Representative Capacity

 

A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

 

12.3	Votes by Joint Holders

 

If there are joint shareholders registered in respect of any share:

 

(a)

any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

 

(b)

if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

 

 

12.4	Legal Personal Representatives as Joint Shareholders

 

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.

 

12.5	Representative of a Corporate Shareholder

 

If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

 

(a)

for that purpose, the instrument appointing a representative must:

 

(i)

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

 

(ii)

if the notice so provides, be provided at the meeting to the chair of the meeting or to a person designated by the chair of the meeting;

 

(b)

if a representative is appointed under this Article 12.5:

 

(i)

the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

 

(ii)

the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

 

Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

 

12.6	Appointment of Proxy Holders

 

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy, including specifying the number of shares each proxy holder shall be entitled to vote.

 

12.7	Alternate Proxy Holders

 

A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

 

 

12.8	Who May Act as Proxy Holder

 

Any person having attained the age of majority may act as proxy holder whether or not he or she is entitled on his or her own behalf to be present and to vote at the meeting at which he or she acts as proxy holder. The proxy may authorize the person so appointed to act as proxy holder for the appointor for the period, at any meeting or meetings and to the extent permitted by the Act.

 

12.9	Deposit of Proxy

 

A proxy for a meeting of shareholders must:

 

(a)

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

 

(b)

if the notice so provides, be provided at the meeting to the chair of the meeting or to a person designated by the chair of the meeting.

 

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages and by using available internet or telephone services as may be approved by the directors.

 

12.10

Validity of Proxy Vote

 

A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given or the transfer of the shares in respect of which the proxy is given, unless notice in writing of that death, incapacity, transfer or revocation is received:

 

(a)

at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of revocations, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

 

(b)

by the chair of the meeting, before the vote is taken.

 

 

12.11

Form of Proxy

 

A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

 

[ Name of Company ]

 

(the “Company”)

 

The undersigned, being a shareholder of the Company, hereby appoints [ name ] or, failing that person, [ name ], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned [ at the meeting of shareholders of the Company to be held on [ month, day, year ] and at any adjournment of that meeting. ] [ at any and all general meetings of the Company to be held between [ month, day, year ] and [ month, day, year ], and at any adjournment of any such meeting to be held within that period of time. ]

 

Number and class of shares in respect of which this proxy is given (if no number or class is specified, then this proxy if given in respect of all shares registered in the name of the shareholder): __________________________

 

	Signed [ month, day, year ]
	[ Signature of Shareholder ]
	[ Name of Shareholder – printed ]

 

12.12

Revocation of Proxy

 

Subject to Article 12.13, every proxy may be revoked by an instrument in writing that is:

 

(a)

received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of revocations, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used;

 

(b)

provided, at the meeting, to the chair of the meeting before any vote in respect of which the proxy used shall have been taken; or

 

(c)

in any manner provided by law.

 

12.13

Revocation of Proxy Must be Signed

 

An instrument referred to in Article 12.12 must be signed as follows:

 

(a)

if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy; and

 

(b)

if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

 

12.14

Production of Evidence of Authority to Vote

 

The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

 

 

Article 13
DIRECTORS

 

13.1	First Directors; Number of Directors

 

The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

 

(a)

subject to Articles 13.1(b) and (c), the number of directors that is equal to the number of the Company’s first directors;

 

(b)

if the Company is a public company, the greater of three and the most recently set of:

 

(i)

the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

 

(ii)

the number of directors set under Article 14.4; and

 

(c)

if the Company is not a public company, the greater of one and the most recently set of:

 

(i)

the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

 

(ii)

the number of directors set under Article 14.4.

 

13.2	Change in Number of Directors

 

If the number of directors is set under Article 13.1(b)(i) or 13.1(c)(i):

 

(a)

the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number; and

 

(b)

if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

 

13.3	Directors’ Acts Valid Despite Vacancy

 

An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

 

13.4	Qualifications of Directors

 

A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Act to become, act or continue to act as a director.

 

 

13.5	Remuneration of Directors

 

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

 

13.6	Reimbursement of Expenses of Directors

 

The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

 

13.7	Special Remuneration for Directors

 

If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

 

13.8	Gratuity, Pension or Allowance on Retirement of Director

 

Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

 

Article 14
ELECTION AND REMOVAL OF DIRECTORS

 

14.1	Election at Annual General Meeting

 

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

 

(a)

the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

 

(b)

all the directors cease to hold office immediately before the election or appointment of directors under Article 14.1(a), but are eligible for re-election or re appointment.

 

14.2	Consent to be a Director

 

No election, appointment or designation of an individual as a director is valid unless:

 

(a)

that individual consents to be a director in the manner provided for in the Act;

 

(b)

that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or

 

(c)

with respect to first directors, the designation is otherwise valid under the Act.

 

 

14.3	Failure to Elect or Appoint Directors

 

If:

 

(a)

the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Act; or

 

(b)

the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

 

then each director then in office continues to hold office until the earlier of:

 

(c)

the date on which his or her successor is elected or appointed; and

 

(d)

the date on which he or she otherwise ceases to hold office under the Act or these Articles.

 

14.4	Places of Retiring Directors Not Filled

 

If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of the shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

 

14.5	Directors May Fill Casual Vacancies

 

Any casual vacancy occurring in the board of directors may be filled by the directors.

 

14.6	Remaining Directors Power to Act

 

The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Act, for any other purpose.

 

14.7	Shareholders May Fill Vacancies

 

If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

 

 

14.8	Additional Directors

 

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

 

(a)

one third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

 

(b)

in any other case, one third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

 

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(a), but is eligible for re-election or re appointment.

 

14.9	Ceasing to be a Director

 

A director ceases to be a director when:

 

(a)

the term of office of the director expires;

 

(b)

the director dies;

 

(c)

the director resigns as a director in the manner required by the Act; or

 

(d)

the director is removed from office pursuant to Article 14.10 or 14.11.

 

14.10

Removal of Director by Shareholders

 

The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

 

14.11

Removal of Director by Directors

 

The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

 

 

Article 15
ALTERNATE DIRECTORS

 

15.1	Appointment of Alternate Director

 

Any director (an “appointor”) may by notice in writing received by the Company appoint any person (an “appointee”) who is qualified to act as a director, or who is qualified to serve on each of the committees of the directors of which the appointer is a member, to be his or her alternate to act in his or her place at meetings of the directors or committees of the directors, as the case may be, at which the appointor is not present, unless (in the case of an appointee who is not a director) the directors have reasonably disapproved the appointment of such person as an alternate director and have given notice to that effect to his or her appointor within a reasonable time after the notice of appointment is received by the Company.

 

15.2	Notice of Meetings

 

Every alternate director so appointed is entitled to notice of meetings of the directors and of committees of the directors of which his or her appointor is a member and to attend and vote as a director at any such meetings at which his or her appointor is not present.

 

15.3	Alternate for More Than One Director Attending Meetings

 

A person may be appointed as an alternate director by more than one director, and an alternate director:

 

(a)

will be counted in determining the quorum for a meeting of directors once for each of his or her appointors and, in the case of an appointee who is also a director, once more in that capacity;

 

(b)

has a separate vote at a meeting of directors for each of his or her appointors and, in the case of an appointee who is also a director, an additional vote in that capacity;

 

(c)

will be counted in determining the quorum for a meeting of a committee of directors once for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, once more in that capacity; and

 

(d)

has a separate vote at a meeting of a committee of directors for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, an additional vote in that capacity.

 

15.4	Consent Resolutions

 

Every alternate director, if authorized by the notice appointing him or her, may sign in place of his or her appointor any resolutions to be consented to in writing.

 

15.5	Alternate Director Not an Agent

 

Every alternate director is deemed not to be the agent of his or her appointor.

 

15.6	Revocation of Appointment of Alternate Director

 

An appointor may at any time, by notice in writing received by the Company, revoke the appointment of an alternate director appointed by him or her.

 

 

15.7	Ceasing to be an Alternate Director

 

The appointment of an alternate director ceases when:

 

(a)

his or her appointor ceases to be a director and is not promptly re-elected or re-appointed;

 

(b)

the alternate director dies;

 

(c)

the alternate director resigns as an alternate director in the manner required by the Act;

 

(d)

the alternate director ceases to be qualified to act as a director; or

 

(e)

his or her appointor revokes the appointment of the alternate director.

 

15.8	Remuneration and Expenses of Alternate Director

 

The Company may reimburse an alternate director for the reasonable expenses that would be properly reimbursed if he or she were a director, and the alternate director is entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the appointor as the appointor may from time to time direct.

 

Article 16
POWERS AND DUTIES OF DIRECTORS

 

16.1	Powers of Management

 

The directors must, subject to the Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Act or by these Articles, required to be exercised by the shareholders of the Company.

 

16.2	Appointment of Attorney of Company

 

The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

 

 

Article 17
DISCLOSURE OF INTEREST OF DIRECTORS

 

17.1	Obligation to Account for Profits

 

A director or senior officer who holds a disclosable interest (as that term is used in the Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Act.

 

17.2	Restrictions on Voting by Reason of Interest

 

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

 

17.3	Interested Director Counted in Quorum

 

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

 

17.4	Disclosure of Conflict of Interest or Property

 

A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Act.

 

17.5	Director Holding Other Office in the Company

 

A director may hold any office, employment or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

 

17.6	No Disqualification

 

No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office, employment or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

 

17.7	Professional Services by Director or Officer

 

Subject to the Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

 

 

17.8	Director or Officer in Other Corporations

 

A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

 

Article 18
PROCEEDINGS OF DIRECTORS

 

18.1	Meetings of Directors

 

The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

 

18.2	Voting at Meetings

 

Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

 

18.3	Chair of Meetings

 

The following individual is entitled to preside as chair at a meeting of directors:

 

(a)

the chair of the board, if any;

 

(b)

in the absence of the chair of the board, the vice chair of the board, if any;

 

(c)

in the absence of the vice chair of the board, the chief executive officer, if any, provided the chief executive officer is a director, unless the board has determined otherwise;

 

(d)

in the absence of the chief executive officer, the president, if any, provided the president is a director, unless the board has determined otherwise; or

 

(e)

any other director chosen by the directors if:

 

(i)

neither the chair of the board, the vice chair of the board, the chief executive officer (if a director, unless the board has determined otherwise), nor the president (if a director, unless the board has determined otherwise), is present at the meeting within 15 minutes after the time set for holding the meeting;

 

(ii)

neither the chair of the board, the vice chair of the board, the chief executive officer (if a director, unless the board has determined otherwise), nor the president (if a director, unless the board has determined otherwise), is willing to chair the meeting; or

 

(iii)

the chair of the board, the vice chair of the board, the chief executive officer (if a director, unless the board has determined otherwise), and the president (if a director, unless the board has determined otherwise), have advised the secretary, if any, or any other director, that they will not be present at the meeting.

 

 

18.4	Meetings by Telephone or Other Communications Medium

 

A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

 

18.5	Calling of Meetings

 

A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

 

18.6	Notice of Meetings

 

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18.1, notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors and the alternate directors at least 48 hours before the time appointed for holding the meeting or such lesser time as may be reasonable under the circumstances, by any method set out in Article 24.1 or orally in person or by telephone.

 

18.7	When Notice Not Required

 

It is not necessary to give notice of a meeting of the directors to a director or an alternate director if:

 

(a)

the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

 

(b)

the director or alternate director, as the case may be, has waived notice of the meeting.

 

18.8	Meeting Valid Despite Failure to Give Notice

 

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.

 

 

18.9	Waiver of Notice of Meetings

 

Any director or alternate director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director and, unless the director otherwise requires by notice in writing to the Company, to his or her alternate director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director or alternate director.

 

18.10

Quorum

 

The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at a majority of the number of directors for the time being set pursuant to these Articles or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

 

18.11

Validity of Acts Where Appointment Defective

 

Subject to the Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.

 

18.12

Consent Resolutions in Writing

 

A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, e-mail or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 18.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

 

Article 19
EXECUTIVE AND OTHER COMMITTEES

 

19.1	Appointment and Powers of Executive Committee

 

The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:

 

(a)

the power to fill vacancies in the board of directors;

 

(b)

the power to remove a director;

 

(c)

the power to change the membership of, or fill vacancies in, any committee of the directors; and

 

(d)

such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution.

 

 

19.2	Appointment and Powers of Other Committees

 

The directors may, by resolution:

 

(a)

appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

 

(b)

delegate to a committee appointed under Article 19.2(a) any of the directors’ powers, except:

 

(i)

the power to fill vacancies in the board of directors;

 

(ii)

the power to remove a director;

 

(iii)

the power to change the membership of, or fill vacancies in, any committee of the directors; and

 

(iv)

the power to appoint or remove officers appointed by the directors; and

 

(c)

make any delegation referred to in Article 19.2(b) subject to the conditions set out in the resolution or any subsequent directors’ resolution.

 

19.3	Obligations of Committees

 

Any committee appointed under Article 19.1 or 19.2, in the exercise of the powers delegated to it, must:

 

(a)

conform to any rules that may from time to time be imposed on it by the directors;

 

(b)

report every act or thing done in exercise of those powers at such times as the directors may require; and

 

(c)

keep minutes of all meetings of the committee.

 

19.4	Powers of Board

 

The directors may, at any time, with respect to a committee appointed under Article 19.1 or 19.2:

 

(a)

revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

 

(b)

terminate the appointment of, or change the membership of, the committee; and

 

(c)

fill vacancies in the committee.

 

 

19.5	Committee Meetings

 

Subject to Article 19.3(a) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Article 19.1 or 19.2:

 

(a)

the committee may meet and adjourn as it thinks proper;

 

(b)

the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

 

(c)

a majority of the members of the committee constitutes a quorum of the committee;

 

(d)

questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote; and

 

(e)

the committee may make rules for the conduct of its business and may seek such assistance as it may deem necessary.

 

Article 20
OFFICERS

 

20.1	Directors May Appoint Officers

 

The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

 

20.2	Functions, Duties and Powers of Officers

 

The directors may, for each officer:

 

(a)

determine the functions and duties of the officer;

 

(b)

entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

 

(c)

revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

 

20.3	Qualifications

 

No officer may be appointed unless that officer is qualified in accordance with the Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.

 

 

20.4	Remuneration and Terms of Appointment

 

All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors think fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

 

Article 21
INDEMNIFICATION

 

21.1	Definitions

 

In this Article 21:

 

(a)

“associated corporation” means a corporation or entity referred to in paragraph (ii) or (iii) of the definition of “eligible party”;

 

(b)

“eligible party” means an individual who:

 

(i)

is or was a director or alternate director of the Company;

 

(ii)

is or was a director or alternate director of another corporation,

 

(A)

at a time when the corporation is or was an affiliate of the Company; or

 

(B)

at the request of the Company; or

 

(iii)

at the request of the Company, is or was, or holds or held a position equivalent to that of, a director or alternate director of a partnership, trust, joint venture or other unincorporated entity;

 

(c)

“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

 

(d)

“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which an eligible party or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate director of the Company or an associated corporation:

 

(i)

is or may be joined as a party; or

 

(ii)

is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding; and

 

(e)

“expenses” has the meaning set out in the Act.

 

 

21.2	Mandatory Indemnification of Eligible Party

 

Subject to the Act, the Company must indemnify an eligible party and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each eligible party is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.

 

21.3	Indemnification of Other Persons

 

Subject to any restrictions in the Act, the Company may indemnify any person.

 

21.4	Non-Compliance with the Act

 

The failure of an eligible party to comply with the Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Article 21.

 

21.5	Company May Purchase Insurance

 

The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

 

(a)

is or was a director, alternate director, officer, employee or agent of the Company;

 

(b)

is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

 

(c)

at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity; or

 

(d)

at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;

 

against any liability incurred by him or her by reason of being or having been such a director, alternate director, officer, employee or agent or person who holds or held such equivalent position.

 

Article 22
DIVIDENDS

 

22.1	Payment of Dividends Subject to Special Rights

 

The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares of the Company with special rights as to dividends.

 

22.2	Declaration of Dividends

 

Subject to the Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

 

 

22.3	No Notice Required

 

The directors need not give notice to any shareholder of any declaration under Article 22.2.

 

22.4	Record Date

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5:00 p.m. on the date on which the directors pass the resolution declaring the dividend.

 

22.5	Manner of Paying Dividend

 

A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.

 

22.6	Settlement of Difficulties

 

If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

 

(a)

set the value for distribution of specific assets or any part thereof;

 

(b)

determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

 

(c)

vest any such specific assets in trustees for the persons entitled to the dividend.

 

22.7	When Dividend Payable

 

Any dividend may be made payable on such date as is fixed by the directors.

 

22.8	Dividends to be Paid in Accordance With Number of Shares

 

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

 

22.9	Receipt by Joint Shareholders

 

If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

 

22.10

Dividend Bears No Interest

 

No dividend bears interest against the Company.

 

 

22.11

Fractional Dividends

 

If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

 

22.12

Payment of Dividends

 

Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

 

22.13

Capitalization of Surplus

 

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

 

Article 23
FINANCIAL RECORDS AND AUDITS

 

23.1	Recording of Financial Affairs

 

The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Act.

 

23.2	Inspection of Accounting Records

 

Unless the directors determine otherwise, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

 

23.3	Remuneration of Auditor

 

The directors may set the remuneration of the Company’s auditor (if any).

 

 

Article 24
NOTICES

 

24.1	Method of Giving Notice

 

Unless the Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

 

(a)

mail addressed to the person at the applicable address for that person as follows:

 

(i)

for a record mailed to a shareholder, the shareholder’s registered address;

 

(ii)

for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class; and

 

(iii)

in any other case, the mailing address of the intended recipient;

 

(b)

delivery at the applicable address for that person as follows, addressed to the person:

 

(i)

for a record delivered to a shareholder, the shareholder’s registered address;

 

(ii)

for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class; and

 

(iii)

in any other case, the delivery address of the intended recipient;

 

(c)

sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

 

(d)

sending the record by e-mail to the e-mail address provided by the intended recipient for the sending of that record or records of that class;

 

(e)

physical delivery to the intended recipient; or

 

(f)

as otherwise permitted by any securities legislation in any province or territory of Canada or in the federal jurisdiction of the United States or in any states of the United States that is applicable to the Company and all regulations and rules made and promulgated under that legislation and all administrative policy statements, blanket orders and rulings, notices and other administrative directions issued by securities commissions or similar authorities appointed under that legislation.

 

 

24.2	Deemed Receipt of Mailing

 

A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing. A record that is sent to a person by fax or e-mail to the fax number or e-mail address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was faxed or e-mailed on the day, Saturdays, Sundays and holidays excepted, such record was faxed or e-mailed.

 

24.3	Certificate of Sending

 

A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 24.1, prepaid and mailed or otherwise sent as permitted by Article 24.1 is conclusive evidence of that fact.

 

24.4	Notice to Joint Shareholders

 

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.

 

24.5	Notice to Trustees

 

A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

 

(a)

mailing the record, addressed to them:

 

(i)

by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

 

(ii)

at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

 

(b)

if an address referred to in Article 24.5(a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

 

 

Article 25
SEAL

 

25.1	Who May Attest Seal

 

Except as provided in Articles 25.2 and 25.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

 

(a)

any two directors;

 

(b)

any officer, together with any director;

 

(c)

if the Company only has one director, that director; or

 

(d)

any one or more directors or officers or persons as may be determined by the directors.

 

25.2	Sealing Copies

 

For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 25.1, the impression of the seal may be attested by the signature of any director or officer.

 

25.3	Mechanical Reproduction of Seal

 

The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary treasurer, an assistant secretary, an assistant treasurer or an assistant secretary treasurer may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

 

 

Article 26
PROHIBITIONS

 

26.1	Definitions

 

In this Article 26:

 

(a)

“designated security” means:

 

(i)

a voting security of the Company;

 

(ii)

a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

 

(iii)

a security of the Company convertible, directly or indirectly, into a security described in Article 26.1(a)(i) or (ii);

 

(b)

“security” has the meaning assigned in the Securities Act (British Columbia); and

 

(c)

“voting security” means a security of the Company that:

 

(i)

is not a debt security; and

 

(ii)

carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

 

26.2	Application

 

Article 26.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

 

26.3	Consent Required for Transfer of Shares or Designated Securities

 

No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition. 

  

 

EXHIBIT D

 

Directors and Officers of Holdco

 

Directors:

 

Gary Julien

 

 

EXHIBIT E

 

SPAC Warrant Amendment

 

 

ASSIGNMENT, ASSUMPTION AND AMENDMENT AGREEMENT

 

This Assignment, Assumption and Amendment Agreement (this “Agreement”) is made as of [__], 2020, by and among Schultze Special Purpose Acquisition Corp., a Delaware corporation (the “Company”), Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada (“Holdco”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Warrant Agent”).

 

WHEREAS, the Company and the Warrant Agent are parties to that certain Warrant Agreement, dated as of December 10, 2018, and filed with the United States Securities and Exchange Commission on December 14, 2018 (the “Existing Warrant Agreement”; capitalized terms used herein but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Existing Warrant Agreement);

 

WHEREAS, pursuant to the Existing Warrant Agreement, the Company issued (a) 4,150,000 warrants to the Sponsor (collectively, the “Private Warrants”) to purchase shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) simultaneously with the closing of the Public Offering, at a purchase price of $1.00 per Private Warrant, with each Private Warrant being exercisable for one share of Common Stock and with an exercise price of $11.50 per share and (b) 13,000,000 warrants to public investors in the Public Offering (collectively, the “Public Warrants”) to purchase shares of Common Stock, with each Public Warrant being exercisable for one share of Common Stock and with an exercise price of $11.50 per share;

 

WHEREAS, on July 25, 2020, a Business Combination Agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Business Combination Agreement”) was entered into by and among the Company, Holdco, Novel Merger Sub Inc., a Delaware corporation and a wholly owned direct subsidiary of Holdco (“Merger Sub”), and Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada;

 

WHEREAS, all of the Warrants are governed by the Existing Warrant Agreement;

 

WHEREAS, pursuant to the provisions of the Business Combination Agreement, among other things, Merger Sub will merge with and into the Company with the Company surviving such merger as a wholly owned subsidiary of Holdco (the “Merger”), and, as a result of the Merger, all shares of Common Stock shall be converted into the right to receive common shares of Holdco (“Holdco Common Shares”);

 

WHEREAS, upon consummation of the Merger, as provided in Section 4.5 of the Existing Warrant Agreement, each of the issued and outstanding Warrants will no longer be exercisable for shares of Common Stock but instead will be exercisable (subject to the terms and conditions of the Existing Warrant Agreement as amended hereby) for Holdco Common Shares;

 

WHEREAS, the board of directors of the Company has determined that the consummation of the transactions contemplated by the Business Combination Agreement will constitute a Business Combination (as defined in Section 3.2 of the Existing Warrant Agreement);

 

 

WHEREAS, in connection with the Merger, the Company desires to assign all of its right, title and interest in the Existing Warrant Agreement to Holdco and Holdco wishes to accept such assignment; and

 

WHEREAS, Section 9.8 of the Existing Warrant Agreement provides that the Company and the Warrant Agent may amend the Existing Warrant Agreement without the consent of any registered holders for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained therein or adding or changing any other provisions with respect to matters or questions arising under the Existing Warrant Agreement as the Company and the Warrant Agent may deem necessary or desirable and that the Company and the Warrant Agent deem shall not adversely affect the interest of the registered holders.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties hereto hereby agree as follows:

 

1. Assignment and Assumption; Consent.

 

1.1 Assignment and Assumption. The Company hereby assigns to Holdco all of the Company’s right, title and interest in and to the Existing Warrant Agreement (as amended hereby) as of the Merger Effective Time (as defined in the Business Combination Agreement). Holdco hereby assumes, and agrees to pay, perform, satisfy and discharge in full, as the same become due, all of the Company’s liabilities and obligations under the Existing Warrant Agreement (as amended hereby) arising from and after the Merger Effective Time.

 

1.2 Consent. The Warrant Agent hereby consents to the assignment of the Existing Warrant Agreement by the Company to Holdco pursuant to Section 1.1 hereof effective as of the Merger Effective Time, and the assumption of the Existing Warrant Agreement by Holdco from the Company pursuant to Section 1.1 hereof effective as of the Merger Effective Time, and to the continuation of the Existing Warrant Agreement in full force and effect from and after the Merger Effective Time, subject at all times to the Existing Warrant Agreement (as amended hereby) and to all of the provisions, covenants, agreements, terms and conditions of the Existing Warrant Agreement and this Agreement.

 

2. Amendment of Existing Warrant Agreement. The Company and the Warrant Agent hereby amend the Existing Warrant Agreement as provided in this Section 2, effective as of the Merger Effective Time, and acknowledge and agree that the amendments to the Existing Warrant Agreement set forth in this Section 2 are necessary or desirable and that such amendments do not adversely affect the interests of the registered holders:

 

2.1 Preamble. The preamble on page one of the Existing Warrant Agreement is hereby amended by deleting “Schultze Special Acquisition Corp., a Delaware corporation” and replacing it with “Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada”. As a result thereof, all references to the “Company” in the Existing Warrant Agreement shall be references to Clever Leaves Holdings Inc. rather than Schultze Special Acquisition Corp.

 

 

2.2 Recitals. The recitals on pages one and two of the Existing Warrant Agreement are hereby deleted and replaced in their entirety as follows:

 

“WHEREAS, on December 10, 2018, Schultze Special Acquisition Corp. (“Schultze”) entered into that certain Warrant Purchase Agreement, dated December 10, 2018 (the “Warrant Purchase Agreement”), with Schultze Special Purpose Acquisition Sponsor, LLC (the “Sponsor”), pursuant to which the Sponsor agreed to purchase an aggregate of 4,150,000 warrants simultaneously with the closing of the Public Offering (as defined below) bearing the legend set forth in Exhibit B hereto (the “Private Warrants”) at a purchase price of one dollar ($1.00) per Private Warrant; and

 

WHEREAS, on December 13, 2018, Schultze consummated its initial public offering (“Public Offering”) of 13,000,000 units (the “Units”), with each Unit consisting of one share of common stock of Schultze, par value $0.0001 per share (“Schultze Common Stock”), and one warrant, where each warrant entitles the holder to purchase one share of Schultze Common Stock at a price of $11.50 per share (the “Public Warrants” and together with the Private Warrants, the “Schultze Warrants”); and

 

WHEREAS, Schultze filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-1, No. 333-228494 (the “Registration Statement”) and prospectus (the “Prospectus”), for the registration, under the Securities Act of 1933, as amended (the “Act”), of the offering and sale of the Units, the Public Warrants and the Schultze Common Stock included in the Units; and

 

WHEREAS, Schultze, the Company, Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada (“Clever Leaves”), and Novel Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub”) are parties to that certain Business Combination Agreement, dated as of July 25, 2020 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), which, among other things, provides for the merger of Merger Sub with and into Schultze with Schultze surviving such merger as a wholly owned subsidiary of the Company (the “Merger”), and, as a result of the Merger, all shares of Schultze Common Stock shall be converted into and exchanged for the right to receive common shares of the Company (“Company Common Shares”); and

 

WHEREAS, on November 9, 2020, the Company, Schultze, the Sponsor and Clever Leaves entered into that certain Amendment No. 1 to Transaction Support Agreement, pursuant to which the Sponsor agreed to surrender and forfeit a certain amount of Private Warrants immediately prior to the consummation of the Merger; and

 

WHEREAS, on [__], 2020, pursuant to the terms of the Business Combination Agreement, the Company, Schultze and the Warrant Agent entered into an Assignment, Assumption and Amendment Agreement (the “Warrant Assumption Agreement”), pursuant to which Schultze assigned this Agreement to the Company and the Company assumed this Agreement from Schultze; and

 

 

WHEREAS, Schultze may issue up to an additional 750,000 Schultze Warrants (the “Working Capital Warrants”) in satisfaction of the Sponsor Loans (as defined in the Business Combination Agreement) and that certain Promissory Note dated September 13, 2018 issued to Sponsor in the principal amount of $250,000; and

 

WHEREAS, pursuant to the Business Combination Agreement, the Warrant Assumption Agreement and Section 4.5 of this Agreement, effective as of the Merger Effective Time (as defined in the Business Combination Agreement), each of the issued and outstanding Schultze Warrants (including the Working Capital Warrants) were no longer exercisable for shares of Schultze Common Stock but instead became exercisable (subject to the terms and conditions of this Agreement) for Company Common Shares (each a “Warrant” and collectively, the “Warrants”); and

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants; and

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:”

 

2.3 Reference to Company Common Shares. (i) All references to “Common Stock” in the Existing Warrant Agreement (including all Exhibits thereto) shall mean “Company Common Shares” and (ii) all references to “stockholders” shall mean “shareholders.”

 

2.4 Detachability of Warrants. Section 2.5 of the Existing Warrant Agreement is hereby deleted and replaced with the following:

 

“[INTENTIONALLY OMITTED]”

 

Except that the defined term “Business Day” set forth therein shall be retained for all purposes of the Existing Warrant Agreement.

 

2.5 Post IPO Warrants.

 

2.5.1 Section 2.7 of the Existing Warrant Agreement is hereby deleted in its entirety.

 

 

2.5.2 All references to “Post IPO Warrant” in the Existing Warrant Agreement (including all Exhibits thereto) shall be deleted.

 

2.6 Duration of Warrants. The first sentence of Section 3.2 of the Existing Warrant Agreement is hereby deleted and replaced with the following:

 

“A Warrant may be exercised only during the period commencing on the date that is thirty (30) days after the consummation of the transactions contemplated by the Business Combination Agreement (a “Business Combination”), and terminating at 5:00 p.m., New York City time on the earlier to occur of: (x) the date that is five (5) years after the date on which the Business Combination is completed, (y) the liquidation of the Company, or (z) other than with respect to the Private Warrants, the Redemption Date (as defined below) as provided in Section 6.2 hereof (the “Expiration Date”); provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable conditions, as set forth in Subsection 3.3.2 below with respect to an effective registration statement.”

 

2.7 Book-Entry. A new Section 3.3.6 is hereby inserted as follows:

 

“Notwithstanding anything herein to the contrary, any Company Common Share issued upon the exercise of a Warrant may be issued by the Company in uncertificated or book-entry form.”

 

2.8 Replacement of Securities upon Reorganization, etc. The first sentence and the second sentence of Section 4.5 of the Existing Warrant Agreement is hereby amended to include the phrase “amalgamation, plan of arrangement” after the word “merger”.

 

2.9 No Fractional Warrants or Shares. The third sentence of Section 4.7 of the Existing Warrant Agreement is hereby deleted and replaced with the following:

 

“If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round down to the nearest whole number of Company Common Shares to be issued to the Warrant holder.”

 

2.10 Notices.

 

2.10.1 Section 9.2 of the Existing Warrant Agreement is hereby amended in part to change the delivery of notices to the Company to the following:

 

“Clever Leaves Holdings Inc.

489 Fifth Avenue, 27^th Floor,

New York, NY 10017

Attn: CEO

Email: [email protected]”

 

 

2.10.2 Section 9.2 of the Existing Warrant Agreement is hereby further amended in part to change the delivery of a copy of notices sent to Greenberg Traurig, LLP to be replaced with the following:

 

“Freshfields Bruckhaus Deringer US LLP

601 Lexington Avenue, 31st Floor

New York, NY 10022

Attn: Sebastian L. Fain, Esq.

 Pam L. Marcogliese, Esq.

Email: [email protected]

 [email protected]”

 

2.11 Currency. A new Section 9.11 is hereby inserted as follows:

 

“Currency. Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean U.S. dollars (USD) and all payments hereunder shall be made in U.S. dollars (USD).”

 

2.12 Exhibit A to the Existing Warrant Agreement is hereby amended by deleting Exhibit A in its entirety and replacing it with new Exhibit A attached hereto.

 

3. Miscellaneous Provisions.

 

3.1 Effectiveness of Warrant. Each of the parties hereto acknowledges and agrees that the effectiveness of this Agreement shall be expressly subject to the occurrence of the Merger (as defined in the Business Combination Agreement) and shall automatically be terminated and shall be null and void if the Business Combination Agreement shall be terminated for any reason.

 

3.2 Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

 

3.3 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

3.4 Applicable Law. The validity, interpretation and performance of this Agreement shall be governed in all respects by the laws of the State of New York, without giving effect to conflict of law principles that would result in the application of the substantive laws of another jurisdiction. The parties hereby agree that any action, proceeding or claim against a party arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

 

 

3.5 Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

 

3.6 Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Signatures to this Agreement transmitted by electronic mail in PDF form, or by any other electronic means designed to preserve the original graphic and pictorial appearance of a document (including DocuSign), will be deemed to have the same effect as physical delivery of the paper document bearing the original signatures.

 

3.7 Effect of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation thereof.

 

3.8 Reference to and Effect on Agreements; Entire Agreement.

 

3.8.1 Any references to “this Agreement” in the Existing Warrant Agreement will mean the Existing Warrant Agreement as amended by this Agreement. Except as specifically amended by this Agreement, the provisions of the Existing Warrant Agreement shall remain in full force and effect.

 

3.8.2  This Agreement and the Existing Warrant Agreement, as modified by this Agreement, constitutes the entire understanding of the parties and supersedes all prior agreements, understandings, arrangements, promises and commitments, whether written or oral, express or implied, relating to the subject matter hereof, and all such prior agreements, understandings, arrangements, promises and commitments are hereby canceled and terminated.

 

[Remainder of page intentionally left blank.]

 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed as of the date first above written.

 

	Schultze Special Purpose Acquisition Corp.
	By:
	Name:
	Title:
	CLEVER LEAVES HOLDINGS INC.
	By:
	Name:
	Title:
	CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent
	By:
	Name:
	Title:

 

[Signature Page to Assignment, Assumption and Amendment Agreement]

 

 

EXHIBIT A

 

See attached.

 

 

EXHIBIT F

 

Sample Calculation of Arrangement Consideration, Exchange Ratio and

Option and Warrant Value

 

 

EXHIBIT G

 

Amended and Restated Holdco Articles

 

 

FORM OF ARTICLES

 

clever leaves holdings inc.

 

(the “Company”)

 

The Company has as its Articles the following Articles.

 

Incorporation Number: ______________

 

TABLE OF CONTENTS

 

Article 1 INTERPRETATION	1
1.1 Definitions	1
1.2 Statutory Definitions Applicable	1
Article 2 SHARES AND SHARE CERTIFICATES	1
2.1 Authorized Share Structure	1
2.2 Shares may be Certificated or Uncertificated	1
2.3 Shareholder Entitled to Certificate or Acknowledgment	2
2.4 Delivery by Mail	2
2.5 Replacement of Worn Out or Defaced Certificate or Acknowledgment	2
2.6 Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment	2
2.7 Recovery of New Share Certificate	3
2.8 Splitting Share Certificates	3
2.9 Certificate Fee	3
2.10 Recognition of Trusts	3
Article 3 ISSUE OF SHARES	3
3.1 Directors Authorized	3
3.2 Commissions and Discounts	3
3.3 Brokerage	4
3.4 Conditions of Issue	4
3.5 Share Purchase Warrants and Rights	4
Article 4 SHARE REGISTERS	4
4.1 Central Securities Register	4
4.2 Appointment of Agent	4
4.3 Closing Register	4
4.4 Branch Registers	5

 

 

Article 5 SHARE TRANSFERS	5
5.1 Registering Transfers	5
5.2 Form of Instrument of Transfer	5
5.3 Transferor Remains Shareholder	5
5.4 Signing of Instrument of Transfer	5
5.5 Enquiry as to Title Not Required	6
5.6 Transfer Fee	6
5.7 Transfer Agreements	6
Article 6 TRANSMISSION OF SHARES	6
6.1 Recognition on Death	6
6.2 Rights of Legal Personal Representative or Trustee in Bankruptcy	6
Article 7 PURCHASE OF Company SHARES	7
7.1 Company Authorized to Purchase Shares	7
7.2 Purchase When Insolvent	7
7.3 Sale and Voting of Purchased Shares	7
Article 8 BORROWING POWERS	7
8.1 Borrowing Powers	7
8.2 Special Privileges for Debt Obligations	8
8.3 Signing of Debt Obligations	8
Article 9 ALTERATIONS	8
9.1 Alteration of Authorized Share Structure	8
9.2 Special Rights or Restrictions	9
9.3 No Interference with Class or Series Rights without Consent	9
9.4 Change of Name	9
9.5 Other Alterations	9
Article 10 MEETINGS OF SHAREHOLDERS	9
10.1 Annual General Meetings	9
10.2 Resolution Instead of Annual General Meeting	10
10.3 Calling of Meetings of Shareholders	10
10.4 Notice for Meetings of Shareholders	10
10.5 Record Date for Notice	10
10.6 Record Date for Voting	11
10.7 Failure to Give Notice and Waiver of Notice	11
10.8 Notice of Special Business at Meetings of Shareholders	11
10.9 Advance Notice for Nomination of Directors	11
Article 11 PROCEEDINGS AT MEETINGS OF SHAREHOLDERS	14
11.1 Special Business	14
11.2 Special Majority	14
11.3 Quorum	14
11.4 One Shareholder May Constitute Quorum	15
11.5 Other Persons May Attend	15

 

 

11.6 Requirement of Quorum	15
11.7 Lack of Quorum	15
11.8 Lack of Quorum at Succeeding Meeting	15
11.9 Chair	15
11.10 Selection of Alternate Chair	16
11.11 Adjournments	16
11.12 Notice of Adjourned Meeting	16
11.13 Electronic Voting	16
11.14 Decisions by Show of Hands or Poll	16
11.15 Declaration of Result	16
11.16 Motion Need Not be Seconded	17
11.17 Casting Vote	17
11.18 Manner of Taking Poll	17
11.19 Demand for Poll on Adjournment	17
11.20 Chair Must Resolve Dispute	17
11.21 Casting of Votes	17
11.22 No Demand for Poll	17
11.23 Demand for Poll Not to Prevent Continuance of Meeting	18
11.24 Retention of Ballots and Proxies	18
11.25 Ordinary Resolution	18
Article 12 VOTES OF SHAREHOLDERS	18
12.1 Number of Votes by Shareholder or by Shares	18
12.2 Votes of Persons in Representative Capacity	18
12.3 Votes by Joint Holders	18
12.4 Legal Personal Representatives as Joint Shareholders	19
12.5 Representative of a Corporate Shareholder	19
12.6 When Proxy Provisions Do Not Apply to the Company	19
12.7 Appointment of Proxy Holders	20
12.8 Alternate Proxy Holders	20
12.9 Who May Act as Proxy Holder	20
12.10 Deposit of Proxy	20
12.11 Validity of Proxy Vote	20
12.12 Form of Proxy	21
12.13 Revocation of Proxy	21
12.14 Revocation of Proxy Must be Signed	21
12.15 Chair May Determine Validity of Proxy	22
12.16 Production of Evidence of Authority to Vote	22
Article 13 DIRECTORS	22
13.1 First Directors; Number of Directors	22
13.2 Change in Number of Directors	22
13.3 Directors’ Acts Valid Despite Vacancy	23
13.4 Qualifications of Directors	23
13.5 Remuneration of Directors	23
13.6 Reimbursement of Expenses of Directors	23
13.7 Special Remuneration for Directors	23
13.8 Gratuity, Pension or Allowance on Retirement of Director	23

 

 

Article 14 ELECTION AND REMOVAL OF DIRECTORS	23
14.1 Election at Annual General Meeting	23
14.2 Consent to be a Director	24
14.3 Failure to Elect or Appoint Directors	24
14.4 Board May Fill Casual Vacancies	24
14.5 Remaining Directors Power to Act	24
14.6 Shareholders May Fill Vacancies	24
14.7 Additional Directors	25
14.8 Ceasing to be a Director	25
14.9 Removal of Director by Shareholders	25
14.10 Removal of Director by Directors	25
Article 15 POWERS AND DUTIES OF DIRECTORS	26
15.1 Powers of Management	26
15.2 Appointment of Attorney of Company	26
Article 16 DISCLOSURE OF INTEREST OF DIRECTORS	26
16.1 Obligation to Account for Profits	26
16.2 Restrictions on Voting by Reason of Interest	26
16.3 Interested Director Counted in Quorum	26
16.4 Disclosure of Conflict of Interest or Property	26
16.5 Director Holding Other Office in the Company	27
16.6 No Disqualification	27
16.7 Professional Services by Director or Officer	27
16.8 Director or Officer in Other Corporations	27
Article 17 PROCEEDINGS OF DIRECTORS	27
17.1 Meetings of Directors	27
17.2 Voting at Meetings	27
17.3 Chair of Meetings	27
17.4 Meetings by Telephone or Other Communications Medium	28
17.5 Calling of Meetings	28
17.6 Notice of Meetings	29
17.7 When Notice Not Required	29
17.8 Meeting Valid Despite Failure to Give Notice	29
17.9 Waiver of Notice of Meetings	29
17.10 Quorum	29
17.11 Validity of Acts Where Appointment Defective	29
17.12 Consent Resolutions in Writing	30

 

 

Article 18 EXECUTIVE AND OTHER COMMITTEES	30
18.1 Appointment and Powers of Executive Committee	30
18.2 Appointment and Powers of Other Committees	30
18.3 Obligations of Committees	31
18.4 Powers of Board	31
18.5 Committee Meetings	31
Article 19 OFFICERS	32
19.1 Directors May Appoint Officers	32
19.2 Functions, Duties and Powers of Officers	32
19.3 Qualifications	32
19.4 Remuneration and Terms of Appointment	32
Article 20 INDEMNIFICATION	32
20.1 Definitions	32
20.2 Mandatory Indemnification of Eligible Party	33
20.3 Indemnification of Other Persons	33
20.4 Non-Compliance with the Act	33
20.5 Company May Purchase Insurance	33
Article 21 DIVIDENDS	34
21.1 Payment of Dividends Subject to Special Rights	34
21.2 Declaration of Dividends	34
21.3 No Notice Required	34
21.4 Record Date	34
21.5 Manner of Paying Dividend	34
21.6 Settlement of Difficulties	34
21.7 When Dividend Payable	35
21.8 Dividends to be Paid in Accordance With Number of Shares	35
21.9 Receipt by Joint Shareholders	35
21.10 Dividend Bears No Interest	35
21.11 Fractional Dividends	35
21.12 Payment of Dividends	35
21.13 Capitalization of Surplus	35
Article 22 FINANCIAL RECORDS AND AUDITS	36
22.1 Recording of Financial Affairs	36
22.2 Inspection of Accounting Records	36
22.3 Remuneration of Auditor	36
Article 23 NOTICES	36
23.1 Method of Giving Notice	36
23.2 Deemed Receipt of Mailing	37
23.3 Certificate of Sending	37
23.4 Notice to Joint Shareholders	37
23.5 Notice to Trustees	38

 

 

Article 24 SEAL	38
24.1 Who May Attest Seal	38
24.2 Sealing Copies	38
24.3 Mechanical Reproduction of Seal	38
Article 25 PROHIBITIONS	39
25.1 Definitions	39
25.2 Application	39
25.3 Consent Required for Transfer of Shares or Designated Securities	39
Article 26 FORUM SELECTION	40
26.1 Forum for Adjudication of Certain Disputes	40
Article 27 SPECIAL RIGHTS OR RESTRICTIONS ATTACHED TO COMMON SHARES	40
27.1 Voting	40
27.2 Dividends	40
27.3 Liquidation, Dissolution and Winding-up	41
Article 28 SPECIAL RIGHTS OR RESTRICTIONS ATTACHED TO Non-voting COMMON SHARES	41
28.1 Voting	41
28.2 Dividends	41
28.3 Liquidation, Dissolution and Winding-up	42
28.4 Conversion	42
28.5 Beneficial Ownership Limitation	44
28.6 Adjustments to Conversion Ratio	46
28.7 Transfer Restrictions	46
28.8 Cancellation of Non-Voting Common Shares	46
Article 29 SPECIAL RIGHTS OR RESTRICTIONS ATTACHED TO PREFERRED SHARES	47
29.1 Issuable in Series	47

  

 

Article 1
INTERPRETATION

 

1.1	Definitions

 

In these Articles, unless the context otherwise requires:

 

“Act” means the Business Corporations Act, S.B.C. 2002, c. 57, as amended from time to time, as well as any successor legislation, and includes any regulations made thereunder.

 

“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being.

 

“Interpretation Act” means the Interpretation Act, R.S.B.C. 1996, c. 238, as amended from time to time, as well as any successor legislation, and includes any regulations made thereunder.

 

“legal personal representative” means the personal or other legal representative of the shareholder.

 

“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register.

 

“seal” means the seal of the Company, if any.

 

1.2	Statutory Definitions Applicable

 

The definitions in the Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Act, the Act will prevail.

 

Article 2
SHARES AND SHARE CERTIFICATES

 

2.1	Authorized Share Structure

 

The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

 

2.2	Shares may be Certificated or Uncertificated

 

The Company may issue certificated or uncertificated shares, and the directors may, by resolution, provide that specific shares, classes of shares, or series of shares be certificated or uncertificated. A share certificate issued by the Company must comply with, and be signed as required by, the Act.

 

 

2.3	Shareholder Entitled to Certificate or Acknowledgment

 

Unless the shares of which the shareholder is the registered owner are uncertificated shares within the meaning of the Act, each shareholder is entitled, without charge, to one share certificate representing the shares of each class or series of shares registered in the shareholder’s name. At its option, the Company may, in lieu of a share certificate, issue to the shareholder a non-transferable written acknowledgment of the shareholder’s right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate or acknowledgment and delivery of a share certificate or an acknowledgment to one of several joint shareholders or to a duly authorized agent or one of the shareholders’ duly authorized agents will be sufficient delivery to all.

 

2.4	Delivery by Mail

 

Any share certificate or non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company (including the Company’s legal counsel or transfer agent) is liable for any loss to the shareholder because the share certificate or acknowledgment is lost in the mail or stolen.

 

2.5	Replacement of Worn Out or Defaced Certificate or Acknowledgment

 

If the Company is satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate is worn out or defaced, it must, on production to it of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as it thinks fit:

 

(a)

order the share certificate or acknowledgment, as the case may be, to be cancelled; and

 

(b)

issue a replacement share certificate or acknowledgment, as the case may be.

 

2.6	Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment

 

If a share certificate or a non-transferable written acknowledgment of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, if the directors receive:

 

(a)

proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and

 

(b)

any indemnity the directors consider adequate.

 

Subject to the Act, a person entitled to a share certificate may not assert against the Company a claim for a new share certificate where a share certificate has been lost, apparently destroyed or wrongfully taken if that person fails to notify the Company of that fact within a reasonable time after that person has notice of it and the Company registers a transfer of the shares represented by the certificate before receiving a notice of the loss, apparent destruction or wrongful taking of the share certificate.

 

 

2.7	Recovery of New Share Certificate

 

Subject to the Act, if, after the issue of a new share certificate, a protected purchaser of the original share certificate presents the original share certificate for the registration of transfer, then in addition to any rights under any indemnity bond, the Company may recover the new share certificate from a person to whom it was issued or any person taking under that person other than a protected purchaser.

 

2.8	Splitting Share Certificates

 

If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

 

2.9	Certificate Fee

 

There must be paid to the Company, in relation to the issue of any share certificate under Article 2.5, 2.6, 2.7 or 2.8, the amount, if any and which must not exceed the amount prescribed under the Act, determined by the Company.

 

2.10	Recognition of Trusts

 

Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as required by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

 

Article 3
ISSUE OF SHARES

 

3.1	Directors Authorized

 

Subject to the Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

 

3.2	Commissions and Discounts

 

The directors may authorize the Company to pay at any time a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person, or procuring or agreeing to procure purchasers for shares of the Company.

 

 

3.3

Brokerage

 

The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

 

3.4	Conditions of Issue

 

Except as provided for by the Act, no share may be issued until it is fully paid. A share is fully paid when:

 

(a)

consideration is provided to the Company for the issue of the share by one or more of the following:

 

(i)

past services performed for the Company;

 

(ii)

property; or

 

(iii)

money; and

 

(b)

the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

 

3.5	Share Purchase Warrants and Rights

 

Subject to the Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

 

Article 4
SHARE REGISTERS

 

4.1	Central Securities Register

 

As required by and subject to the Act, the Company must maintain its central securities register at its records office or at any other location inside or outside British Columbia designated by the directors, and may maintain its register in electronic form or maintain branch securities registers.

 

4.2	Appointment of Agent

 

The directors may, subject to the Act, appoint an agent to maintain the central securities register and any branch central securities registers. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

 

4.3	Closing Register

 

The Company must not at any time close its central securities register.

 

 

4.4	Branch Registers

 

The Company may keep or cause to be kept one or more branch securities registers.

 

Article 5
SHARE TRANSFERS

 

5.1	Registering Transfers

 

In addition to any other restrictions set forth in these Articles, a transfer of a share of the Company must not be registered unless:

 

(a)

a duly signed instrument of transfer in respect of the share has been received by the Company or its agent;

 

(b)

if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company or its agent;

 

(c)

if a non-transferable written acknowledgment of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment has been surrendered to the Company or its agent; and

 

(d)

such other evidence, if any, as the Company or its agent may require to prove the title of the transferor or the transferor’s right to transfer the shares and the right to the transferee to have the transfer registered.

 

5.2	Form of Instrument of Transfer

 

The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form satisfactory to the Company or the transfer agent for the class or series of shares to be transferred.

 

5.3	Transferor Remains Shareholder

 

Except to the extent that the Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company as the registered owner of the transferred shares.

 

5.4	Signing of Instrument of Transfer

 

If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgments deposited with the instrument of transfer:

 

(a)

in the name of the person named as transferee in that instrument of transfer; or

 

(b)

if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

 

 

5.5	Enquiry as to Title Not Required

 

Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares. A transfer, when entered in a securities register of the Company, shall confer upon the person whose name the shares have been entered into valid title to such shares.

 

5.6	Transfer Fee

 

There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors from time to time, subject to the applicable rules of any stock exchange on which the shares of the Company may be listed.

 

5.7	Transfer Agreements

 

The Company will have the power to enter into and perform any agreement with any number of shareholders of any one or more classes of shares of the Company to restrict the transfer of shares of the Company of any one or more classes owned by such shareholders in any manner not prohibited by the Act or applicable law.

 

Article 6
TRANSMISSION OF SHARES

 

6.1	Recognition on Death

 

In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

 

6.2	Rights of Legal Personal Representative or Trustee in Bankruptcy

 

The legal personal representative or trustee in bankruptcy of a shareholder, as the case may be, has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Act and the directors have been deposited with the Company. Subject to the Act and Article 6.1, this Article 6.2 does not apply in the case of the death of a shareholder with respect to shares registered in the shareholder’s name and the name of another person in joint tenancy.

 

 

Article 7
PURCHASE OF Company SHARES

 

7.1	Company Authorized to Purchase Shares

 

Subject to Article 7.2, the special rights or restrictions attached to the shares of any class or series, and the Act, the Company may, if authorized by the directors, make one or more purchases or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

 

7.2	Purchase When Insolvent

 

The Company must not make a payment or provide any other consideration to purchase, redeem or otherwise acquire any of its shares if there are reasonable grounds for believing that:

 

(a)

the Company is insolvent; or

 

(b)

making the payment or providing the consideration would render the Company insolvent.

 

7.3	Sale and Voting of Purchased Shares

 

If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

 

(a)

is not entitled to vote the share at a meeting of its shareholders;

 

(b)

must not pay a dividend in respect of the share; and

 

(c)

must not make any other distribution in respect of the share.

 

Article 8
BORROWING POWERS

 

8.1	Borrowing Powers

 

The Company, if authorized by the directors, may:

 

(a)

borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;

 

(b)

issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the directors consider appropriate;

 

(c)

guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

 

(d)

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

 

 

8.2	Special Privileges for Debt Obligations

 

Any bonds, debentures or other debt obligations of the Company may be issued with any special privileges as to redemption, surrender, drawing, allotment of or conversion into or exchange for shares or other securities, attending and voting at general meetings of the Company, appointment of directors or otherwise and may, by their terms, be assignable free from any equities between the Company and the person to whom they were issued or any subsequent holder thereof, all as the directors may determine.

 

8.3	Signing of Debt Obligations

 

Every bond, debenture or other debt obligation of the Company shall be manually or electronically signed or mechanically reproduced by at least one director or officer of the Company or by or on behalf of the agent or trustee for the bond, debenture, or other debt obligation appointed by the Company or under any instrument under which the bond, debenture, or other debt obligation is issued. A bond, debenture, or other debt obligation so electronically signed or mechanically reproduced is as valid as if signed manually notwithstanding that any person whose signature is so printed or mechanically reproduced shall have ceased to hold the office that he or she is stated on such bond, debenture, or other debt obligation to hold at the date of issue thereof.

 

Article 9
ALTERATIONS

 

9.1	Alteration of Authorized Share Structure

 

Subject to Article 9.2, the special rights or restrictions attached to the shares of any class or series of shares and the Act, the Company may:

 

(a)

by ordinary resolution:

 

(i)

create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

 

(ii)

increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

 

(iii)

subdivide or consolidate all or any of its unissued, or fully paid issued, shares;

 

(iv)

if the Company is authorized to issue shares of a class of shares with par value:

 

(A)

decrease the par value of those shares; or

 

(B)

if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

 

(v)

change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;

 

 

(vi)

alter the identifying name of any of its shares; or

 

(vii)

otherwise alter its shares or authorized share structure when required or permitted to do so by the Act;

 

and, if applicable, alter its Notice of Articles and, if applicable, its Articles, accordingly; or

 

(b)

by directors’ resolution, subdivide or consolidate all or any of its unissued, or fully paid issued, shares and if applicable, alter its Notice of Articles and, if applicable, its Articles accordingly.

 

9.2	Special Rights or Restrictions

 

Subject to the special rights or restrictions attached to the shares of any class or series of shares and the Act, the Company may by ordinary resolution:

 

(a)

create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

 

(b)

vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued;

 

and alter its Articles and Notice of Articles accordingly.

  

9.3	No Interference with Class or Series Rights without Consent

 

A right or special right attached to issued shares must not be prejudiced or interfered with under the Act, the Notice of Articles or these Articles unless the holders of shares of the class or series of shares to which the right or special right is attached consent by a special separate resolution of the holders of such class or series of shares.

  

9.4	Change of Name

 

The Company may by directors' resolution or ordinary resolution authorize an alteration to its Notice of Articles in order to change its name.

 

9.5	Other Alterations

 

If the Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by ordinary resolution alter these Articles.

 

Article 10
MEETINGS OF SHAREHOLDERS

 

10.1	Annual General Meetings

 

Unless an annual general meeting is deferred or waived in accordance with the Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and location, within or outside British Columbia, as may be determined by the directors, and including a place or location that is entirely virtual such that the annual general meeting is held electronically without a physical location or place in accordance with Article 11.13, in which case the deemed location of the virtual meeting, if any is so required for compliance with the Act or applicable law, shall be Vancouver, British Columbia.

 

 

10.2	Resolution Instead of Annual General Meeting

 

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

 

10.3	Calling of Meetings of Shareholders

 

The directors may, whenever they think fit, call a meeting of shareholders. Any meeting of shareholders may be held at such time and location, within or outside of British Columbia, including locations outside North America, as may be determined by the directors, and including a place or location that is entirely virtual such that the meeting is held electronically without a physical location or place in accordance with Article 11.13, in which case the deemed location of the virtual meeting, if any is so required for compliance with the Act or applicable law, shall be Vancouver, British Columbia.

 

10.4	Notice for Meetings of Shareholders

 

The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

 

(a)

if and for so long as the Company is a public company, 21 days; or

 

(b)

otherwise, 10 days.

 

10.5	Record Date for Notice

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

 

(a)

if and for so long as the Company is a public company, 21 days; or

 

(b)

otherwise, 10 days.

 

If no record date is set, the record date is 5:00 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

 

 

10.6	Record Date for Voting

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Act, by more than four months. If no record date is set, the record date is 5:00 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

 

10.7	Failure to Give Notice and Waiver of Notice

 

The accidental omission to send notice of any meeting of shareholders to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive that entitlement or agree to reduce the period of notice of that notice. Subject to the Act, attendance of a person at a meeting of shareholders is a waiver of entitlement to notice of the meeting unless that person attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

 

10.8	Notice of Special Business at Meetings of Shareholders

 

If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must state the general nature of the special business. If the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, then, in lieu of attaching a copy of the document to the notice of meeting, the notice may state that a copy of the document will be available for inspection by shareholders who are entitled to vote at the meeting:

 

(a)

at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

 

(b)

during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

 

10.9	Advance Notice for Nomination of Directors

 

If and for so long as the Company is a public company, subject only to the Act and these Articles, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Company. Nominations of persons for election to the board of directors at any annual meeting of shareholders, or at any special meeting of shareholders called for the purpose of electing directors as set forth in the Company’s notice of such special meeting, may be made (i) by or at the direction of the board of directors, including pursuant to a notice of meeting, (ii) by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the Act or, (iii) by any shareholder of the Company (a “Nominating Shareholder”) who, at the close of business on the date of the giving of the notice provided for below in this Article 10.9 and on the record date for notice of such meeting, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting, and who complies with the notice procedures set forth in this Article 10.9:

 

(a)

In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, such person must have given timely notice thereof in proper written form to the CFO of the Company in accordance with this Article 10.9;

 

 

(b)

To be timely, a Nominating Shareholder’s notice must be received by the CFO of the Company (i) in the case of an annual meeting, not less than 30 days or more than 65 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made (the “Meeting Notice Date”), the Nominating Shareholder’s notice must be so received not later than the close of business on the 10th day following the Meeting Notice Date; and (ii) in the case of a special meeting of shareholders (which is not also an annual meeting) called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the 10th day following the day on which public announcement of the date of the special meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting or special meeting commence a new time period for the giving of a Nominating Shareholder’s notice as described in this Article 10.9;

 

(c)

To be in proper written form, a Nominating Shareholder’s notice must set forth:

 

(i)

As to the Nominating Shareholder, any other person on whose behalf the nomination is made, and each person whom the Nominating Shareholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of the Company which are owned or controlled, directly or indirectly, and (D) any other information relating to the person that would be required to be disclosed in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws (defined below);

 

(ii)

A certification signed by each such nominee consenting to being named in the proxy circular as a nominee and that such nominee intends to serve as a director of the Company for the full term if so elected; and

 

(iii)

As to the Nominating Shareholder and any other person on whose behalf the nomination is made, any proxy, contract, arrangement, understanding or relationship pursuant to which such Nominating Shareholder has a right to vote any shares of the Company and any other information relating to such Nominating Shareholder that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws;

 

(d)

The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such proposed nominee;

 

 

(e)

All information to be provided pursuant to this Article 10.9 shall be provided as of the date of such notice. The Nominating Shareholder shall provide the Company with a supplement to such information describing any changes such that the Company has received true and correct information in all material respects as of the date that is 10 business days before the date of the meeting, or any adjournment, or postponement thereof;

 

(f)

No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in this Article 10.9; provided, however, that nothing in this Article 10.9 shall be deemed to preclude a shareholder from discussing (as distinct from nominating directors) at a meeting of shareholders any matter in respect of which the shareholder would have been entitled to submit a proposal pursuant to the provisions of the Act. The chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded;

 

(g)

Despite any other provision in this Article 10.9, if the Nominating Shareholder (or its proxy holder) does not attend the meeting of shareholders of the Company to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Company;

 

(h)

For purposes of this Article 10.9, (i) “public announcement” shall mean disclosure in a press release disseminated by a nationally recognized news service in the United Sates and Canada, or in a document publicly filed by the Company under its profile on the Electronic Data Gathering Analysis and Retrieval (EDGAR) system at www.sec.gov or the System of Electronic Document Analysis and Retrieval at www.sedar.com; and (ii) “Applicable Securities Laws” means the applicable securities legislation in the United States and each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commission and similar regulatory authority of the United States and each province and territory of Canada;

 

(i)

Notice given to the CFO of the Company pursuant to this Article 10.9 may only be given by personal delivery, facsimile transmission or by email (at such email address as stipulated from time to time by the CFO of the Company for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery, email (at the address aforesaid) or sent by facsimile transmission (provided the receipt of confirmation of such transmission has been received) to the CFO at the address of the principal executive offices of the Company; provided that if such delivery or electronic communication is made on a day which is not a business day or later than 5:00 p.m. (Vancouver time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been on the subsequent day that is a business day; and

 

(j)

Notwithstanding the foregoing, the board may, in its sole discretion, waive any requirement in this Article 10.9.

 

 

Article 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

 

11.1	Special Business

 

At a meeting of shareholders, the following business is special business:

 

(a)

at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting; and

 

(b)

at an annual general meeting, all business is special business except for the following:

 

(i)

business relating to the conduct of or voting at the meeting;

 

(ii)

consideration of any financial statements of the Company presented to the meeting;

 

(iii)

consideration of any reports of the directors or auditor;

 

(iv)

the election or appointment of directors;

 

(v)

the appointment of an auditor;

 

(vi)

the setting of the remuneration of an auditor;

 

(vii)

business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; and

 

(viii)

any other business which, under these Articles or the Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

 

11.2	Special Majority

 

The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

 

11.3

Quorum

 

Subject to the special rights or restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is one or more persons who are, or who represent by proxy, one or more shareholders who, in the aggregate, hold at least 25% of the issued shares of the Company entitled to be voted at the meeting.

 

 

11.4	One Shareholder May Constitute Quorum

 

If there is only one shareholder entitled to vote at a meeting of shareholders:

 

(a)

the quorum is one person who is, or who represents by proxy, that shareholder; and

 

(b)

that shareholder, present in person or by proxy, may constitute the meeting.

 

11.5	Other Persons May Attend

 

The directors, the chief executive officer (if any), the president (if any), the secretary (if any), the assistant secretary (if any and only in the absence of the secretary), the auditor of the Company (if any), and any other persons invited by the directors or otherwise required to be given notice of the meeting pursuant to these Articles are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder otherwise entitled to vote at the meeting.

 

11.6	Requirement of Quorum

 

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

 

11.7	Lack of Quorum

 

If, within one half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

 

(a)

in the case of a meeting requisitioned by shareholders, the meeting is dissolved; and

 

(b)

in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

 

11.8	Lack of Quorum at Succeeding Meeting

 

If, at the meeting to which the meeting referred to in Article 11.7(b) was adjourned, a quorum is not present within one half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

 

11.9

Chair

 

The following individual is entitled to preside as chair at a meeting of shareholders:

 

(a)

the chair of the board, if any;

 

(b)

if the chair of the board is absent or unwilling to act as chair of the meeting, the vice chair of the board, if any;

 

(c)

if the vice chair of the board is absent or unwilling to act as chair of the meeting, the chief executive officer, if any; or

 

(d)

if the chief executive officer is absent or unwilling to act as chair of the meeting, the president, if any.

 

 

11.10

Selection of Alternate Chair

 

If, at any meeting of shareholders, there is no chair of the board, vice chair of the board, chief executive officer or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board, vice chair of the board, chief executive officer and president are unwilling to act as chair of the meeting, or if the chair of the board, vice chair of the board, chief executive officer and president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present may choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

 

11.11

Adjournments

 

The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

 

11.12

Notice of Adjourned Meeting

 

It is not necessary to give any notice of an adjourned meeting of shareholders or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

 

11.13

Electronic Voting

 

Any vote at a meeting of shareholders may be held entirely or partially by means of telephonic, electronic or other communications facilities if the directors determine to make them available whether or not persons entitled to attend participate in the meeting by means of telephonic, electronic or other communications facilities.

 

11.14

Decisions by Show of Hands or Poll

 

Subject to the Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands or the functional equivalent of a show of hands by means of telephonic, electronic or other communications facilities, unless a poll, before or on the declaration of the result of the vote by show of hands (or its functional equivalent), is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

 

11.15

Declaration of Result

 

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands (or its functional equivalent) or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.14, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

 

 

11.16

Motion Need Not be Seconded

 

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

 

11.17

Casting Vote

 

In the case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

 

11.18

Manner of Taking Poll

 

Subject to Article 11.19, if a poll is duly demanded at a meeting of shareholders:

 

(a)

the poll must be taken:

 

(i)

at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

 

(ii)

in the manner, at the time and at the place that the chair of the meeting directs;

 

(b)

the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

 

(c)

the demand for the poll may be withdrawn by the person who demanded it.

 

11.19

Demand for Poll on Adjournment

 

A poll demanded by a shareholder or proxy holder entitled to vote at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

 

11.20

Chair Must Resolve Dispute

 

In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

 

11.21

Casting of Votes

 

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

 

11.22

No Demand for Poll

 

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

 

 

11.23

Demand for Poll Not to Prevent Continuance of Meeting

 

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

 

11.24

Retention of Ballots and Proxies

 

The Company must, for at least three months after a meeting of shareholders, keep at its record office each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

 

11.25

Ordinary Resolution

 

Unless the Act or these Articles otherwise provide, any action that must or may be taken or authorized by the shareholders may be taken or authorized by ordinary resolution.

 

Article 12
VOTES OF SHAREHOLDERS

 

12.1	Number of Votes by Shareholder or by Shares

 

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

 

(a)

on a vote by show of hands (or its functional equivalent), every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

 

(b)

on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

 

12.2	Votes of Persons in Representative Capacity

 

A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

 

12.3	Votes by Joint Holders

 

If there are joint shareholders registered in respect of any share:

 

(a)

any one of the joint shareholders may vote at any meeting of shareholders, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

 

(b)

if more than one of the joint shareholders is present at any meeting of shareholders, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

 

 

12.4	Legal Personal Representatives as Joint Shareholders

 

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders registered in respect of that share.

 

12.5	Representative of a Corporate Shareholder

 

If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

 

(a)

for that purpose, the instrument appointing a representative must:

 

(i)

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting or any adjourned or postponed meeting; or

 

(ii)

if the notice so provides, be provided at the meeting to the chair of the meeting or to a person designated by the chair of the meeting;

 

(b)

if a representative is appointed under this Article 12.5:

 

(i)

the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

 

(ii)

the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

 

Evidence of the appointment of any such representative may be sent to the Company or its transfer agent by written instrument, fax or any other method of transmitting legibly recorded messages.

 

12.6	When Proxy Provisions Do Not Apply to the Company

 

If and for so long as the Company is a public company, Articles 12.7 to 12.16 apply only insofar as they are not inconsistent with any Canadian securities legislation applicable to the Company, any U.S. securities legislation applicable to the Company or any rules of an exchange on which securities of the Company are listed.

 

 

12.7	Appointment of Proxy Holders

 

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy, including specifying the number of shares each proxy holder shall be entitled to vote.

 

12.8	Alternate Proxy Holders

 

A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

 

12.9	Who May Act as Proxy Holder

 

Any person having attained the age of majority may act as proxy holder whether or not he or she is entitled on his or her own behalf to be present and to vote at the meeting at which he or she acts as proxy holder. The proxy may authorize the person so appointed to act as proxy holder for the appointor for the period, at any meeting or meetings and to the extent permitted by the Act.

 

12.10

Deposit of Proxy

 

A proxy for a meeting of shareholders must:

 

(a)

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting or any adjourned meeting; or

 

(b)

if the notice so provides, be provided at the meeting or adjourned meeting to the chair of the meeting or to a person designated by the chair of the meeting.

 

(c)

be received in any other manner determined by the board or the chair of the meeting.

 

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages and by using available internet or telephone services as may be approved by the directors.

 

12.11

Validity of Proxy Vote

 

A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given or the transfer of the shares in respect of which the proxy is given, unless notice in writing of that death, incapacity, transfer or revocation is received:

 

(a)

at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of revocations, at any time up to and including the last business day before the day set for the holding of the meeting or any adjourned meeting at which the proxy is to be used; or

 

(b)

by the chair of the meeting or any adjourned meeting, before the vote is taken.

 

 

12.12

Form of Proxy

 

A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

 

[ Name of Company ]

 

(the “Company”)

 

The undersigned, being a shareholder of the Company, hereby appoints [ name ] or, failing that person, [ name ], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned [ at the meeting of shareholders of the Company to be held on [ month, day, year ] and at any adjournment of that meeting. ] [ at any and all general meetings of the Company to be held between [ month, day, year ] and [ month, day, year ], and at any adjournment of any such meeting to be held within that period of time. ]

 

Number and class of shares in respect of which this proxy is given (if no number or class is specified, then this proxy if given in respect of all shares registered in the name of the shareholder): __________________________

 

	Signed [ month, day, year ]
	[ Signature of Shareholder ]
	[ Name of Shareholder – printed ]

 

12.13

Revocation of Proxy

 

Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:

 

(a)

received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of revocations, at any time up to and including the last business day before the day set for the holding of the meeting or any adjourned meeting at which the proxy is to be used;

 

(b)

provided, at the meeting or any adjourned meeting, to the chair of the meeting before any vote in respect of which the proxy used shall have been taken; or

 

(c)

in any manner provided by law.

 

12.14

Revocation of Proxy Must be Signed

 

An instrument referred to in Article 12.13 must be signed as follows:

 

(a)

if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy; and

 

(b)

if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

 

 

12.15

Chair May Determine Validity of Proxy

 

The chair of any meeting of shareholders may determine whether or not a proxy deposited for use at the meeting, which may not strictly comply with the requirements of this Article 12 as to form, execution, accompanying documentation, time of filing or otherwise, shall be valid for use at the meeting, and any such determination made in good faith shall be final, conclusive and binding upon the meeting.

 

12.16

Production of Evidence of Authority to Vote

 

The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

 

Article 13
DIRECTORS

 

13.1	First Directors; Number of Directors

 

The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Act. The number of directors, excluding additional directors appointed under Article 14.7, is set at:

 

(a)

subject to Articles, 13.1(b), and 13.1(c), the number of directors that is equal to the number of the Company’s first directors;

 

(b)

if the Company is a public company, the greater of three and the number set by directors resolution; and

 

(c)

if the Company is not a public company, the greater of one and the number set by directors resolution.

 

13.2	Change in Number of Directors

 

If the number of directors is set under Article 13.1(b) or 13.1(c):

 

(a)

the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number; and

 

(b)

if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number at the first meeting of shareholders following the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

 

 

13.3	Directors’ Acts Valid Despite Vacancy

 

An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

 

13.4	Qualifications of Directors

 

A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Act to become, act or continue to act as a director.

 

13.5	Remuneration of Directors

 

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine.

 

13.6	Reimbursement of Expenses of Directors

 

The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

 

13.7	Special Remuneration for Directors

 

If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

 

13.8	Gratuity, Pension or Allowance on Retirement of Director

 

Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

 

Article 14
ELECTION AND REMOVAL OF DIRECTORS

 

14.1	Election at Annual General Meeting

 

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

 

(a)

the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

 

(b)

all the directors cease to hold office immediately before the election or appointment of directors under Article 14.1(a), but are eligible for re-election or re appointment.

 

 

14.2	Consent to be a Director

 

No election, appointment or designation of an individual as a director is valid unless:

 

(a)

that individual consents to be a director in the manner provided for in the Act;

 

(b)

that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director.

 

(c)

with respect to first directors, the designation is otherwise valid under the Act.

 

14.3	Failure to Elect or Appoint Directors

 

If:

 

(a)

the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Act; or

 

(b)

the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

 

then each director then in office continues to hold office until the earlier of:

 

(c)

the date on which his or her successor is elected or appointed; and

 

(d)

the date on which he or she otherwise ceases to hold office under the Act or these Articles.

 

14.4	Board May Fill Casual Vacancies

 

Any casual vacancy occurring in the board of directors may be filled by the remaining directors. For greater certainty, the appointment of a director to fill a casual vacancy as contemplated by this section is not the appointment of an additional director for the purposes of Article 14.7.

 

14.5	Remaining Directors Power to Act

 

The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Act, for any other purpose.

 

14.6	Shareholders May Fill Vacancies

 

If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders entitled to vote may elect or appoint directors to fill any vacancies on the board of directors.

 

 

14.7	Additional Directors

 

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.7 must not at any time exceed:

 

(a)

one third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

 

(b)

in any other case, one third of the number of the current directors who were elected or appointed as directors other than under this Article 14.7.

 

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(a), but is eligible for re-election or re appointment.

 

14.8	Ceasing to be a Director

 

A director ceases to be a director when:

 

(a)

the term of office of the director expires;

 

(b)

the director dies;

 

(c)

the director resigns as a director in the manner required by the Act; or

 

(d)

the director is removed from office pursuant to Article 14.9 or 14.10.

 

14.9	Removal of Director by Shareholders

 

The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders entitled to vote may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders entitled to vote do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders entitled to vote may elect, or appoint by ordinary resolution, a director to fill that vacancy.

 

14.10

Removal of Director by Directors

 

The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

 

 

Article 15
POWERS AND DUTIES OF DIRECTORS

 

15.1	Powers of Management

 

The directors must, subject to the Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Act or by these Articles, required to be exercised by the shareholders of the Company.

 

15.2	Appointment of Attorney of Company

 

The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

 

Article 16
DISCLOSURE OF INTEREST OF DIRECTORS

 

16.1	Obligation to Account for Profits

 

A director or senior officer who holds a disclosable interest (as that term is used in the Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Act.

 

16.2	Restrictions on Voting by Reason of Interest

 

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

 

16.3	Interested Director Counted in Quorum

 

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

 

16.4	Disclosure of Conflict of Interest or Property

 

A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Act.

 

 

16.5	Director Holding Other Office in the Company

 

A director may hold any office, employment or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

 

16.6	No Disqualification

 

No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office, employment or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

 

16.7	Professional Services by Director or Officer

 

Subject to the Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

 

16.8	Director or Officer in Other Corporations

 

A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

 

Article 17
PROCEEDINGS OF DIRECTORS

 

17.1	Meetings of Directors

 

The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

 

17.2	Voting at Meetings

 

Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

 

17.3	Chair of Meetings

 

The following individual is entitled to preside as chair at a meeting of directors:

 

(a)

the chair of the board, if any;

 

(b)

in the absence of the chair of the board, the vice chair of the board, if any;

 

 

(c)

in the absence of the vice chair of the board, the chief executive officer, if any, provided the chief executive officer is a director, unless the board has determined otherwise;

 

(d)

in the absence of the chief executive officer, the president, if any, provided the president is a director, unless the board has determined otherwise; or

 

(e)

any other director chosen by the directors if:

 

(i)

neither the chair of the board, the vice chair of the board, the chief executive officer (if a director, unless the board has determined otherwise), nor the president (if a director, unless the board has determined otherwise), is present at the meeting within 15 minutes after the time set for holding the meeting;

 

(ii)

neither the chair of the board, the vice chair of the board, the chief executive officer (if a director, unless the board has determined otherwise), nor the president (if a director, unless the board has determined otherwise), is willing to chair the meeting; or

 

(iii)

the chair of the board, the vice chair of the board, the chief executive officer (if a director, unless the board has determined otherwise), and the president (if a director, unless the board has determined otherwise), have advised the secretary, if any, or any other director, that they will not be present at the meeting.

 

17.4	Meetings by Telephone or Other Communications Medium

 

A director may participate in a meeting of the directors:

 

(a)

in person;

 

(b)

by telephone; or

 

(c)

by online teleconferencing programs; or

 

(d)

with the consent of all directors who wish to participate in the meeting, by other communication means

 

if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director who participates in a meeting in a manner contemplated by this Article 17.4 is deemed for all purposes of the Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

 

17.5	Calling of Meetings

 

A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

 

 

17.6	Notice of Meetings

 

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 17.1, notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors at least 48 hours before the time appointed for holding the meeting or such lesser time as may be reasonable under the circumstances, by any method set out in Article 23.1 or orally in person or by telephone.

 

17.7	When Notice Not Required

 

It is not necessary to give notice of a meeting of the directors to a director if:

 

(a)

the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

 

(b)

the director, as the case may be, has waived notice of the meeting.

 

17.8	Meeting Valid Despite Failure to Give Notice

 

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director, does not invalidate any proceedings at that meeting.

 

17.9	Waiver of Notice of Meetings

 

Any director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director.

 

Attendance of a director at a meeting of the directors is a waiver of notice of the meeting, unless that director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

 

17.10

Quorum

 

The quorum necessary for the transaction of the business is a majority of the number of directors in office.

 

17.11

Validity of Acts Where Appointment Defective

 

Subject to the Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.

 

 

17.12

Consent Resolutions in Writing

 

A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, e-mail or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 17.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

 

Article 18
EXECUTIVE AND OTHER COMMITTEES

 

18.1	Appointment and Powers of Executive Committee

 

The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:

 

(a)

the power to fill vacancies in the board of directors;

 

(b)

the power to remove a director;

 

(c)

the power to change the membership of, or fill vacancies in, any committee of the directors; and

 

(d)

such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution.

 

18.2	Appointment and Powers of Other Committees

 

The directors may, by resolution:

 

(a)

appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

 

(b)

delegate to a committee appointed under Article 18.2(a) any of the directors’ powers, except:

 

(i)

the power to fill vacancies in the board of directors;

 

(ii)

the power to remove a director;

 

(iii)

the power to change the membership of, or fill vacancies in, any committee of the directors; and

 

(iv)

the power to appoint or remove officers appointed by the directors; and

 

(c)

make any delegation referred to in Article 18.2(b) subject to the conditions set out in the resolution or any subsequent directors’ resolution.

 

 

18.3	Obligations of Committees

 

Any committee appointed under Article 18.1 or 18.2, in the exercise of the powers delegated to it, must:

 

(a)

conform to any rules that may from time to time be imposed on it by the directors;

 

(b)

report every act or thing done in exercise of those powers at such times as the directors may require; and

 

(c)

keep minutes of all meetings of the committee.

 

18.4	Powers of Board

 

The directors may, at any time, with respect to a committee appointed under Article 18.1 or 18.2:

 

(a)

revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

 

(b)

terminate the appointment of, or change the membership of, the committee; and

 

(c)

fill vacancies in the committee.

 

18.5	Committee Meetings

 

Subject to Article 18.3(a) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Article 18.1 or 18.2:

 

(a)

the committee may meet and adjourn as it thinks proper;

 

(b)

the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

 

(c)

a majority of the members of the committee constitutes a quorum of the committee;

 

(d)

questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote; and

 

(e)

the committee may make rules for the conduct of its business and may seek such assistance as it may deem necessary.

 

 

Article 19
OFFICERS

 

19.1	Directors May Appoint Officers

 

The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

 

19.2	Functions, Duties and Powers of Officers

 

The directors may, for each officer:

 

(a)

determine the functions and duties of the officer;

 

(b)

entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

 

(c)

revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

 

19.3	Qualifications

 

No officer may be appointed unless that officer is qualified in accordance with the Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.

 

19.4	Remuneration and Terms of Appointment

 

All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors think fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

 

Article 20
INDEMNIFICATION

 

20.1	Definitions

 

In this Article 20:

 

(a)

“associated corporation” means a corporation or entity referred to in paragraph (ii) or (iii) of the definition of “eligible party”;

 

(b)

“eligible party” means an individual who:

 

(i)

is or was a director of the Company;

 

 

(ii)

is or was a director of another corporation,

 

(A)

at a time when the corporation is or was an affiliate of the Company; or

 

(B)

at the request of the Company;

 

(iii)

at the request of the Company, is or was, or holds or held a position equivalent to that of, a director of a partnership, trust, joint venture or other unincorporated entity;

 

(iv)

is or was an officer of the Company

 

(c)

“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

 

(d)

“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which an eligible party or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or officer of the Company:

 

(i)

is or may be joined as a party; or

 

(ii)

is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding; and

 

(e)

“expenses” has the meaning set out in the Act.

 

20.2	Mandatory Indemnification of Eligible Party

 

Subject to the Act, the Company must indemnify an eligible party and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each eligible party is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 20.2.

 

20.3	Indemnification of Other Persons

 

Subject to any restrictions in the Act, the Company may indemnify any person.

 

20.4	Non-Compliance with the Act

 

The failure of an eligible party to comply with the Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Article 20.

 

20.5	Company May Purchase Insurance

 

The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

 

(a)

is or was a director, officer, employee or agent of the Company;

 

 

(b)

is or was a director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

 

(c)

at the request of the Company, is or was a director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity; or

 

(d)

at the request of the Company, holds or held a position equivalent to that of a director, or officer of a partnership, trust, joint venture or other unincorporated entity;

 

against any liability incurred by him or her by reason of being or having been such a director, officer, employee or agent or person who holds or held such equivalent position.

 

Article 21
DIVIDENDS

 

21.1	Payment of Dividends Subject to Special Rights

 

The provisions of this Article 21 are subject to the rights, if any, of shareholders holding shares of the Company with special rights as to dividends.

 

21.2	Declaration of Dividends

 

Subject to the Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

 

21.3	No Notice Required

 

The directors need not give notice to any shareholder of any declaration under Article 21.2.

 

21.4	Record Date

 

The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5:00 p.m. on the date on which the directors pass the resolution declaring the dividend.

 

21.5	Manner of Paying Dividend

 

A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.

 

21.6	Settlement of Difficulties

 

If any difficulty arises in regard to a distribution under Article 21.5, the directors or the Company may settle the difficulty as they deem advisable, and, in particular, may:

 

(a)

set the value for distribution of specific assets or any part thereof;

 

(b)

determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

 

(c)

vest any such specific assets in trustees for the persons entitled to the dividend.

 

 

21.7	When Dividend Payable

 

Any dividend may be made payable on such date as is fixed by the directors.

 

21.8	Dividends to be Paid in Accordance With Number of Shares

 

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

 

21.9	Receipt by Joint Shareholders

 

If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

 

21.10

Dividend Bears No Interest

 

No dividend bears interest against the Company.

 

21.11

Fractional Dividends

 

If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

 

21.12

Payment of Dividends

 

Any dividend or other distribution payable in cash in respect of shares may be paid

 

(a)

by cheque, made payable to the order of the person to whom it is sent, and mailed to the registered address of the shareholder, or in the case of joint shareholders, to the registered address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing; or

 

(b)

the mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

 

21.13

Capitalization of Surplus

 

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

 

 

Article 22
FINANCIAL RECORDS AND AUDITS

 

22.1	Recording of Financial Affairs

 

The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Act.

 

22.2	Inspection of Accounting Records

 

Unless the directors determine otherwise, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

 

22.3	Remuneration of Auditor

 

The directors may set the remuneration of the Company’s auditor (if any).

 

Article 23
NOTICES

 

23.1	Method of Giving Notice

 

Unless the Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

 

(a)

mail addressed to the person at the applicable address for that person as follows:

 

(i)

for a record mailed to a shareholder, the shareholder’s registered address;

 

(ii)

for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class; and

 

(iii)

in any other case, the mailing address of the intended recipient;

 

(b)

delivery at the applicable address for that person as follows, addressed to the person:

 

(i)

for a record delivered to a shareholder, the shareholder’s registered address;

 

(ii)

for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class; and

 

(iii)

in any other case, the delivery address of the intended recipient;

 

 

(c)

sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

 

(d)

sending the record by e-mail to the e-mail address provided by the intended recipient for the sending of that record or records of that class;

 

(e)

physical delivery to the intended recipient;

 

(f)

creating and providing a record posted on or made available through a general accessible electronic source and providing written notice by any of the foregoing methods as to the availability of such record; or

 

(g)

as otherwise permitted by any securities legislation in any province or territory of Canada or in the federal jurisdiction of the United States or in any states of the United States that is applicable to the Company and all regulations and rules made and promulgated under that legislation and all administrative policy statements, blanket orders and rulings, notices and other administrative directions issued by securities commissions or similar authorities appointed under that legislation.

 

23.2	Deemed Receipt of Mailing

 

A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 23.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing. A record that is sent to a person by fax or e-mail to the fax number or e-mail address for that person referred to in Article 23.1 is deemed to be received by the person to whom it was faxed or e-mailed on the day, Saturdays, Sundays and holidays excepted, such record was faxed or e-mailed.

 

23.3	Certificate of Sending

 

A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 23.1, prepaid and mailed or otherwise sent as permitted by Article 23.1 is conclusive evidence of that fact.

 

23.4	Notice to Joint Shareholders

 

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.

 

 

23.5	Notice to Trustees

 

A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

 

(a)

mailing the record, addressed to them:

 

(i)

by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

 

(ii)

at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

 

if an address referred to in Article 23.5(a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

 

Article 24
SEAL

 

24.1	Who May Attest Seal

 

Except as provided in Articles 24.2 and 24.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

 

(a)

any two directors;

 

(b)

any officer, together with any director;

 

(c)

if the Company only has one director, that director; or

 

(d)

any one or more directors or officers or persons as may be determined by the directors.

 

24.2	Sealing Copies

 

For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 24.1, the impression of the seal may be attested by the signature of any director or officer or the signature of any other person as may be determined by the directors.

 

24.3	Mechanical Reproduction of Seal

 

The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and such persons as are authorized under Article 24.1 to attest the Company’s seal may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

 

 

Article 25
PROHIBITIONS

 

25.1	Definitions

 

In this Article 25:

 

(a)

“designated security” means:

 

(i)

a voting security of the Company;

 

(ii)

a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

 

(iii)

a security of the Company convertible, directly or indirectly, into a security described in Article 25.1(a)(i) or (ii);

 

(b)

“security” has the meaning assigned in the Securities Act (British Columbia); and

 

(c)

“voting security” means a security of the Company that:

 

(i)

is not a debt security; and

 

(ii)

carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

 

25.2	Application

 

Article 25.3 does not apply to the Company if and for so long as it is a public company.

 

25.3	Consent Required for Transfer of Shares or Designated Securities

 

No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition. 

 

 

Article 26
FORUM SELECTION

 

26.1	Forum for Adjudication of Certain Disputes

 

Subject to the Act, unless the Company consents in writing to the selection of an alternative forum, the Supreme Court of the Province of British Columbia, Canada and the appellate courts therefrom, shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of the Company to the Company; (iii) any action or proceeding asserting a claim arising pursuant to any provision of the Act or these Articles (as either may be amended from time to time); or (iv) any action or proceeding asserting a claim otherwise related to the relationships among the Company, its affiliates and their respective shareholders, directors and/or officers, but this paragraph (iv) does not include claims related to the business carried on by the Company or such affiliates. Article 26.1 paragraphs (i) through (iv) does not include claims for which such court does not have subject matter jurisdiction. If any action or proceeding the subject matter of which is within the scope of the preceding sentence is filed in a Court other than the Supreme Court of the Province of British Columbia, Canada and the appellate courts therefrom (a “Foreign Action”) in the name of any securityholder, such securityholder shall be deemed to have consented to (i) the personal jurisdiction of the Supreme Court of the Province of British Columbia, Canada and the appellate courts therefrom, in connection with any action or proceeding brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such securityholder in any such action or proceeding by service upon such securityholder’s counsel in the Foreign Action as agent for such securityholder. For the avoidance of doubt, this Article 26.1 shall not apply to any action brought to enforce a duty or liability created by the U.S. Securities Act of 1933, as amended, or the U.S. Securities Exchange Act of 1934, as amended. Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the U.S. Securities Act of 1933, as amended. Any person or entity purchasing or otherwise acquiring any interest in any security of the Company shall be deemed to have notice of and consented to the provisions of this Article 26.1.

 

Article 27
SPECIAL RIGHTS OR RESTRICTIONS ATTACHED TO COMMON SHARES

 

27.1

Voting

 

Each Common share shall entitle its holder to one (1) vote at all meetings of the shareholders of the Company (except meetings at which only holders of another specified class of shares are entitled to vote pursuant to the provisions hereof or pursuant to the provisions of the Act).

 

27.2

Dividends

 

Subject to the special rights or restrictions attached to the Preferred shares of any series, the holders of Common shares shall be entitled to receive, and the Company shall pay thereon such non cumulative dividends as the directors may from time to time declare in their absolute discretion; provided, however, that no dividend on the Common shares shall be declared unless contemporaneously therewith the board of directors shall declare a dividend, payable at the same time as such dividend on the Common shares, on each Non-Voting Common share. All dividends which the directors may declare on the Common shares and the Non-Voting Common shares shall be declared and paid on a pari passu basis on all Common shares and Non-Voting Common shares (on an as-converted basis, assuming conversion of all Non-Voting Common shares at the Conversion Ratio then in effect) at the time outstanding. Any dividends shall be paid in accordance with Article 21.

 

 

27.3	Liquidation, Dissolution and Winding-up

 

Subject to the special rights or restrictions attached to the Preferred shares of any series, the holders of Common shares shall be entitled to receive, pari passu with the holders of Non-Voting Common shares (on an as-converted basis, assuming conversion of all Non-Voting Common shares at the Conversion Ratio then in effect), the remaining property of the Company in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon any other return of capital or distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs.

 

Article 28
SPECIAL RIGHTS OR RESTRICTIONS ATTACHED TO Non-voting COMMON SHARES

 

28.1

Voting

 

Except as required by the Act and except for the right to vote on all special resolutions and exceptional resolutions, the Non-Voting Common shares shall not have any voting rights; provided, however, the holders of Non-Voting Common shares shall be entitled to receive notice of and to attend any annual or special general meeting of the shareholders of the Company (in an observatory capacity, except with respect to any vote on special resolutions or exceptional resolutions). Each Non-Voting Common share shall entitle its holder to one (1) vote (voting together with the Common shares as a single class on an as-converted basis) with respect to all special resolutions and exceptional resolutions presented to the shareholders of the Company (except where only holders of another specified class of shares are entitled to vote pursuant to the provisions hereof or pursuant to the provisions of the Act).

 

28.2

Dividends

 

(a)

Subject to the special rights or restrictions attached to the Preferred shares of any series, the holders of Non-Voting Common shares shall be entitled to receive, and the Company shall pay thereon such non cumulative dividends as the directors may from time to time declare in their absolute discretion; provided, however, that no dividend on the Non-Voting Common shares shall be declared unless contemporaneously therewith the board of directors shall declare a dividend, payable at the same time as such dividend on the Non-Voting Common shares, on each Common share. All dividends which the directors may declare on the Non-Voting Common shares and the Common shares shall be declared and paid on a pari passu basis on all Non-Voting Common shares (on an as-converted basis, assuming conversion of all Non-Voting Common shares at the Conversion Ratio then in effect) and Common shares at the time outstanding. Any dividends shall be paid in accordance with Article 21.

 

(b)

A holder of Non-Voting Common shares on the record date for the determination of holders of Non-Voting Common shares entitled to receive a dividend declared payable on the Non-Voting Common shares will be entitled to such dividend notwithstanding that such share is converted, in accordance with this Article 28, after such record date and before the payment date of such dividend, and the holders of any Common shares resulting from any conversion shall rank pari passu with the holders of all other Common shares in respect of all dividends declared payable to holders of Common shares of record on any date on or after the date of conversion.

 

 

28.3	Liquidation, Dissolution and Winding-up

 

Subject to the special rights or restrictions attached to the Preferred shares of any series, the holders of Non-Voting Common shares shall be entitled to receive, pari passu (on an as-converted basis, assuming conversion of all Non-Voting Common shares at the Conversion Ratio then in effect) with the holders of Common shares, the remaining property of the Company in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon any other return of capital or distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs.

 

28.4	Conversion

 

(a)

Each Non-Voting Common share shall be convertible, at the option of the holder thereof at any time after the date of issuance of such share, into one fully paid and non-assessable Common share, subject to adjustment pursuant to Article 28.6 below (the “Conversion Ratio”), in accordance with Article 28.4(b), subject to the limitations set forth in Article 28.5.

 

(b)

Before any holder of Non-Voting Common shares shall be entitled to convert any Non-Voting Common shares into Common shares pursuant to Article 28.4(a), the holder thereof shall: (i) provide written notice (a “Notice of Conversion”) by electronic mail to the Company’s transfer agent, together with any appropriate documentation that may be reasonably required by the Company and/or its transfer agent, with a copy of such Notice of Conversion and documentation to the Company’s general counsel by electronic mail, of such holder’s election to convert all or any portion of its Non-Voting Common shares (subject to the limitations set forth in Article 28.5), and such Notice of Conversion shall set out (A) the name and address of such holder, (B) the number of Non-Voting Common shares being converted, and (C) the aggregate number of Common shares that such holder, together with its Attribution Parties (as defined below) (if any), will beneficially own in accordance with the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as of the Conversion Date (after giving effect to the conversion of the number of Non-Voting Common shares specified in such Notice of Conversion), as determined by such holder in its sole discretion in accordance with Article 28.5; and (ii) if such Non-Voting Common shares are in certificated form, surrender the certificate or certificates therefor, duly endorsed, at the office of the transfer agent for the Non-Voting Common shares. Upon receipt of such Notice of Conversion the Company shall, or shall cause its transfer agent to, issue to and in the name of such registered holder of the Non-Voting Common shares being converted (as specified in such Notice of Conversion), that number of Common shares issuable upon such conversion in accordance with these provisions and deliver to such holder a written notice of uncertificated shares in respect of the Common shares so issued containing that information as required by the Act. Such conversion shall be effected as soon as reasonably practicable (but in no event more than five business days) after delivery of such Notice of Conversion (the date such conversion is effected, the “Conversion Date”), and the Company or its transfer agent shall give such holder written notice by electronic mail of the Conversion Date within one business day thereafter. The registered holder entitled to receive the Common shares issuable upon such conversion shall be treated for all purposes as the registered holder of such Common shares on and as of the Conversion Date, and will be entitled to receive dividends declared on such Common shares with a record date on or after the Conversion Date.

 

 

(c)

All Non-Voting Common shares converted in accordance with a Notice of Conversion will be cancelled as of the Conversion Date. All rights with respect to such shares will immediately cease and terminate upon surrender for conversion except for the right of the holder thereof to receive, on the Conversion Date, Common shares in exchange therefor and to receive, if applicable, payment of any dividends declared but unpaid on such Non-Voting Common shares prior to the Conversion Date. Notwithstanding the above, such holder will not be entitled to receive dividends declared on such Non-Voting Common shares with a record date on or after the Conversion Date.

 

(d)

Notwithstanding any other provision of this Article 28.4 or Article 28.5, if, at any time while any Non-Voting Common shares remain outstanding, (i) an acquisition of the Company is effected by means of merger, consolidation, amalgamation, plan of arrangement or other form of corporate reorganization in which more than 50% of the outstanding Common shares of the Company are exchanged for securities or other consideration issued or provided, or caused to be issued or provided, by the acquiring entity or its subsidiary, directly or indirectly, in one transaction or a series of related transactions, (ii) a sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company is effected, directly or indirectly, in one transaction or a series of related transactions, or (iii) a stock or share purchase or other business combination (including, without limitation, a reorganization, recapitalization, amalgamation, spin-off or plan of arrangement) between the Company and one or more other persons is effected whereby such other person(s) acquire more than 50% of the outstanding Common shares, directly or indirectly, in one transaction or a series of related transactions (each such event, individually, a “Merger Event”), then the Company (or its successor in such Merger Event) shall ensure that the terms of such Merger Event provide for the payment or distribution to each holder of outstanding Non-Voting Common shares, with respect to each Common share that would be issuable upon conversion of all of such holder’s Non-Voting Common shares (without taking into account the Beneficial Ownership Limitation under Article 28.5) immediately prior to the consummation of such Merger Event based on the Conversion Ratio (as adjusted pursuant to Article 28.6), the same amount of the proceeds of such Merger Event (including, without limitation, shares, securities, cash and other property or assets) (collectively, “Proceeds”), in the same form and at the same time, as the amount of Proceeds paid or distributed with respect to each outstanding Common share. Notwithstanding the foregoing, in the event the aggregate Proceeds that would be paid or distributed to a holder of Non-Voting Common shares pursuant to this Article 28.4(d) would result in such holder, together with its Attribution Parties (if any), beneficially owning more than 9.99% of the issued and outstanding shares of a class of voting securities registered under Section 12 of the U.S. Securities Exchange Act of 1934, as amended (“Registered Shares”), then the Company shall use reasonable efforts to ensure that such holder of Non-Voting Common shares is distributed convertible non-voting shares of the applicable issuer with conversion terms analogous to those set forth in Article 28 in lieu of such number of such Registered Shares as necessary for such holder, together with its Attribution Parties (if any), to beneficially own a number of Registered Shares equal to, or as close thereto as possible without exceeding, 9.99% of the issued and outstanding Registered Shares; provided, however, that the Company shall not be required to take any actions pursuant to this sentence if the board of directors determines in good faith that such actions could reasonably be expected to be detrimental to the Company’s negotiations with respect to a proposed Merger Event.

 

 

28.5	Beneficial Ownership Limitation

 

(a)

In this Article 28.5:

 

(i)

“Attribution Parties” means, with respect to a holder of Non-Voting Common shares, its affiliates (within the meaning of Rule 144(a) under the U.S. Securities Act of 1933, as amended) and any other persons whose beneficial ownership of Common shares would be aggregated with that of such holder, including any “group” of which such holder is a member, for the purposes of, and as determined in accordance with, Section 13(d) of the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; and

 

(ii)

“Beneficial Ownership Limitation” means 9.99% of the number of Common shares issued and outstanding at any time.

 

(b)

The Company shall not effect any conversion of Non-Voting Common shares, and a holder of Non-Voting Common shares shall not have the right to convert any portion of its Non-Voting Common shares, to the extent that, after giving effect to the conversion of the number of Non-Voting Common shares specified in the applicable Notice of Conversion, such holder (together with its Attribution Parties, if any) would beneficially own a number of Common shares in excess of the Beneficial Ownership Limitation. For purposes of calculating a holder’s beneficial ownership pursuant to this Article 28.5, the number of Common shares beneficially owned by such holder of Non-Voting Common shares and its Attribution Parties (if any), and the number of Common shares then issued and outstanding, shall include the number of Common shares issuable upon conversion of the Non-Voting Common shares with respect to which such determination is being made, but shall exclude the number of Common shares which would be issuable upon (i) conversion of the remaining, non-converted portion of the Non-Voting Common shares beneficially owned by such holder or any of its Attribution Parties and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company that are subject to a limitation preventing any conversion or exercise that would result in such holder and its Attribution Parties beneficially owning Common shares in excess of the Beneficial Ownership Limitation. Except as set forth in the preceding sentence, for purposes of this Article 28.5, beneficial ownership shall be calculated in accordance with Section 13(d) of the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(c)

The determination of whether the conversion of Non-Voting Common shares into Common shares is permitted under this Article 28.5 shall be made by the registered holder of such Non-Voting Common shares in such registered holder’s sole discretion, and the submission of a Notice of Conversion shall be conclusively deemed to constitute such registered holder’s determination that the conversion of the Non-Voting Common shares identified in such Notice of Conversion is permitted under this Article 28.5, and the Company shall have no obligation to verify or confirm the accuracy of such determination and will be entitled to rely solely upon the statements in such Notice of Conversion for the purpose of fulfilling its obligations to any such registered holder (including its obligation under Article 28.5(b) not to effect any conversion of Non-Voting Common shares that would result in such holder (together with its Attribution Parties, if any) beneficially owning a number of Common shares in excess of the Beneficial Ownership Limitation), and the Company shall also be entitled to rely, without verification or confirmation of the accuracy of the statements in such Notice of Conversion, on the information in such Notice of Conversion for the purpose of its public disclosure and regulatory compliance. The limitations contained in this Article 28.5 shall apply to a successor holder of Non-Voting Common shares.

 

 

(d)

For purposes of this Article 28.5, in determining the number of outstanding Common shares, a holder of Non-Voting Common shares may rely on the number of outstanding Common shares as stated in the most recent of the following: (i) the Company’s most recent quarterly or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or its transfer agent setting forth the number of Common shares outstanding. Upon the written request by a holder of Non-Voting Common shares delivered (including by electronic mail) to the Company’s general counsel, the Company shall confirm in writing (including by electronic mail) to such holder the number of Common shares issued and outstanding at such time. The Company shall respond promptly, and in any case within two business days, in writing (including by electronic mail).

 

(e)

In the event that a registered holder of Non-Voting Common shares at any time determines in its sole discretion that such holder, together with its Attribution Parties (if any), beneficially owns less than 8.99% of the number of Common shares issued and outstanding (calculated in accordance with this Article 28.5, after giving effect to any conversion of Non-Voting Common shares specified in a Notice of Conversion delivered by such holder), such holder shall promptly submit a Notice of Conversion requesting conversion of a number of Non-Voting Common shares into Common shares so that, following such conversion, such holder, together with its Attribution Parties (if any), will beneficially own that whole number of Common shares equal to, or as close thereto as possible without exceeding, the Beneficial Ownership Limitation.

 

(f)

Upon the written request (including by electronic mail) of the Company (which shall not be made more than once in any 30-day period), which written request shall set forth the number of Common shares then issued and outstanding, a holder of Non-Voting Common shares shall promptly confirm in writing (including by electronic mail) to the Company the number of Common shares that such holder, together with its Attribution Parties (if any), beneficially owns at such time (calculated in accordance with this Article 28.5), as determined by such holder in its sole discretion (a “Confirmation Notice”).

 

(g)

In the event a holder of Non-Voting Common shares provides a Confirmation Notice pursuant to Article 28.5(f), and such Confirmation Notice discloses that such holder, together with its Attribution Parties (if any), beneficially owns less than 8.99% of the number of Common shares then issued and outstanding (calculated in accordance with this Article 28.5, after giving effect to any conversion of Non-Voting Common shares specified in a Notice of Conversion delivered by such holder), then if such holder does not submit a Notice of Conversion in accordance with Article 28.5(e) within 2 business days following the delivery of such Confirmation Notice, such holder shall be deemed to have submitted a Notice of Conversion in accordance with Article 28.5(e), and the Company shall be entitled to rely on such deemed Notice of Conversion and the beneficial ownership amount disclosed in such Confirmation Notice (for purposes of calculating the number of Non-Voting Common shares to be converted) to the same extent as it would be entitled to rely on a Notice of Conversion in accordance with Article 28.5(c).

 

 

28.6	Adjustments to Conversion Ratio

 

(a) If the Company, at any time or from time to time, subdivides the outstanding Common shares without completing an equivalent subdivision of the Non-Voting Common shares, the Conversion Ratio in effect immediately before such subdivision shall be proportionately increased so that the number of Common shares issuable on conversion of each Non-Voting Common share be increased in proportion to such increase in the aggregate number of Common shares outstanding. If the Company, at any time or from time to time, consolidates the outstanding Common shares without completing an equivalent consolidation of the Non-Voting Common shares, the Conversion Ratio in effect immediately before such consolidation shall be proportionately decreased so that the number of Common shares issuable on conversion of each Non-Voting Common share be decreased in proportion to such decrease in the aggregate number of Common shares outstanding. Any adjustment to the Conversion Ratio pursuant to this Article 28.6(a) shall become effective on the date and time that the subdivision or combination becomes effective.

 

(b) If any reorganization, recapitalization, reclassification, arrangement or similar transaction occurs involving the Company in which the Common shares, but not the Non-Voting Common shares, are converted into or exchanged for securities, cash or other property, then, following any such reorganization, recapitalization, reclassification, arrangement or similar transaction, each Non-Voting Common share shall be convertible in lieu of the Common shares into which it was convertible before such event into the kind and amount of securities, cash or other property that a holder of the number of Common shares of the Company issuable upon conversion of one Non-Voting Common share immediately before such reorganization, recapitalization, reclassification, arrangement or similar transaction would have been entitled to receive under such transaction; and, in such case, appropriate adjustment (as determined in good faith by the board of directors) shall be made in the application of this Article 28.6(b) with respect to the rights and interests of the holders of Non-Voting Common shares, including with respect to changes in and other adjustments to the Conversion Ratio, in relation to any securities or other property deliverable upon the conversion of the Non-Voting Common shares; provided, however, that this Article 28.6(b) shall not apply with respect to any of the foregoing that occurs in connection with a Merger Event, except to the extent necessary to ensure that each holder of Non-Voting Common shares outstanding immediately prior to the consummation of such Merger Event receives the same amount of Proceeds for each Common share that would be issuable upon conversion of such holder’s Non-Voting Common shares based on the Conversion Ratio (without taking into account the Beneficial Ownership Limitation under Article 28.5) as each outstanding Common share pursuant to Article 28.5(d).

  

28.7	Transfer Restrictions

 

No holder of Non-Voting Common shares may transfer any of the Non-Voting Common shares, except pursuant to a Merger Event. A holder of Non-Voting Common shares may surrender such shares to the Company at any time or convert such shares in accordance with this Article 28. Any attempt to transfer any shares of Non-Voting Common shares not in compliance with this Article 28 shall be null and void, and the Company shall not, and shall cause its transfer agent not to, give any effect in the Company’s share records to such attempted transfer.

 

28.8	Cancellation of Non-Voting Common Shares

 

Any Non-Voting Common share acquired by the Company by reason of redemption, purchase, conversion, or otherwise shall be immediately cancelled upon acquisition by the Company.

 

 

Article 29
SPECIAL RIGHTS OR RESTRICTIONS ATTACHED TO PREFERRED SHARES

 

29.1	Issuable in Series

 

(a)

The Preferred shares may include one or more series.

 

(b)

Subject to Article 29.1(c) and the Act, from time to time, the directors by resolution or the shareholders by ordinary resolution may, if none of the Preferred shares of any particular series are issued, alter these Articles and authorize the alteration of the Notice of Articles of the Company, as the case may be, to do one or more of the following:

 

(i)

determine the maximum number of shares of any of those series of Preferred shares that the Company is authorized to issue, determine that there is no such maximum number, or alter any determination made under this paragraph (a) or otherwise in relation to a maximum number of those shares;

 

(ii)

create an identifying name by which the shares of any of those series of Preferred shares may be identified, or alter any identifying name created for those shares; and

 

(iii)

attach or alter special rights or restrictions to the shares of any of those series of Preferred shares, including, but without limiting or restricting the generality of the foregoing, special rights or restrictions with respect to:

 

(A)

the rate, amount, method of calculation and payment of any dividends, whether cumulative, partly cumulative or non-cumulative, and whether such rate, amount, method of calculation or payment is subject to change or adjustment in the future;

 

(B)

any rights upon a dissolution, liquidation or winding-up of the Company or upon any other return of capital or distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs;

 

(C)

any rights of redemption, retraction or purchase for cancellation and the prices and terms and conditions of any such rights;

 

(D)

any rights of conversion, exchange or reclassification and the terms and conditions of any such rights;

 

(E)

any rights to vote; and

 

(F)

any other special rights or restrictions, not inconsistent with these share provisions, attaching to such series of Preferred shares.

 

(c)

No special rights or restrictions attached to any series of Preferred shares shall confer upon the shares of such series a priority over the shares of any other series of Preferred shares in respect of dividends or a return of capital in the event of the dissolution of the Company or on the occurrence of any other event that entitles the shareholders holding the shares of all series of the Preferred shares to a return of capital. The Preferred shares of each series shall, with respect to the payment of dividends and the distribution of assets or return of capital in the event of dissolution or on the occurrence of any other event that entitles the shareholders holding the shares of all series of the Preferred shares to a return of capital, rank on a parity with the shares of every other series.

 

 

SCHEDULE A

 

Company Knowledge Parties

 

Kyle Detwiler

 

Andrés Fajardo

 

Gina Rebollar

 

Christopher Sim

 

Amit Pandey

 

Julián Wilches

 

Delroy Wright

 

Joseph Salameh

 

 

SCHEDULE B

 

Key Company Shareholders

 

Kyle Detwiler

 

Silver Swan, LLC

 

Joseph Salameh

 

Delroy Wright

 

Jeremy Coutinho

 

Ghassan Salameh

 

Christina Moran

 

Slawomira M. Salameh Trust

 

Timothy Tully

 

 

SCHEDULE C

 

Eagle Minority Shareholders

 

Gustavo Escobar

 

Andrés Fajardo

 

Julián Wilches

 

Daniel Montana

 

 

 

 

Exhibit 10.2

 

Execution Version

  

AMENDMENT NO. 1, dated as of November 9, 2020 (this “Amendment”), to the TRANSACTION SUPPORT AGREEMENT, dated as of July 25, 2020 (the “Agreement”), by and among SCHULTZE SPECIAL PURPOSE ACQUISITION SPONSOR, LLC, a Delaware limited liability company (“Sponsor”), CLEVER LEAVES INTERNATIONAL INC., a corporation organized under the laws of British Colombia, Canada (the “Company”), CLEVER LEAVES HOLDINGS INC., a corporation organized under the laws of British Columbia, Canada (“Holdco”), and SCHULTZE SPECIAL PURPOSE ACQUISITION CORP., a Delaware corporation (“SPAC”).

 

WITNESSETH:

 

WHEREAS, the parties hereto have entered into the Agreement; and

 

WHEREAS, the parties hereto wish to amend the Agreement as set forth in this Amendment.

 

NOW, THEREFORE, in consideration of the rights and obligations contained herein, and for other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

Section 1. Amendments to the Agreement.

 

(a) Exhibit A to the Agreement is hereby amended by deleting Exhibit A in its entirety and replacing it with new Exhibit A attached hereto.

 

(b) The following “WHEREAS” clause shall be inserted immediately following the second “WHEREAS” clause of the recitals:

 

“WHEREAS, as of the date hereof, Sponsor owns beneficially and of record 4,150,000 SPAC Warrants (the “Sponsor Warrants”), and pursuant to, and in connection with, the Merger, the Sponsor Warrants shall be converted into the right to receive 4,150,000 Holdco Warrants; and”

 

(c) Section 2 of the Agreement is hereby amended and restated in its entirety to read as follows:

 

“2. Company Earn-Out.

 

(a) For purposes of this Section 2:

 

(i) “Earn-Out Shares” means the First Level Earn-Out Shares and the Second Level Earn-Out Shares, as the case may be.

 

(ii) “Earn-Out Targets” means the First Earn-Out Target and the Second Earn-Out Target, as the case may be.

 

(iii) “First Earn-Out Target” means that the closing price per share of Holdco Common Shares on the Trading Market as reported by Bloomberg Financial L.P. using the AQR function equals or exceeds Twelve Dollars Fifty Cents ($12.50) for any twenty (20) trading days within any consecutive thirty (30)-trading-day period commencing after Closing.

 

 

(iv) “First Level Earn-Out Shares” means seven hundred twenty thousand (720,000) Holdco Common Shares.

 

(v) “First Target Expiration Date” means the second (2nd) anniversary of the Closing.

 

(vi) “Second Earn-Out Target” means that the closing price per share of Holdco Common Shares on the Trading Market as reported by Bloomberg Financial L.P. using the AQR function equals or exceeds Fifteen Dollars ($15.00) for any twenty (20) trading days within any consecutive thirty (30)-trading-day period commencing after Closing.

 

(vii) “Second Level Earn-Out Shares” means seven hundred twenty thousand (720,000) Holdco Common Shares.

 

(viii) “Second Target Expiration Date” means the fourth (4th) anniversary of the Closing.

 

(ix) “Trading Market” means the stock market on which the Holdco Common Shares shall be trading at the time of determination.

 

(b) The parties hereto hereby agree that, in connection with the Closing, Holdco shall adopt an equity incentive plan (the “Earnout Plan”) for the benefit of service providers of Holdco and its subsidiaries, the share reserve of which shall be composed only of the Earn-Out Shares. Under the Earnout Plan, the Holdco board of directors or any committee thereof may issue the Earn-Out Shares in the form of awards of stock options, restricted share units or restricted shares, subject to applicable vesting conditions determined by the Holdco board of directors or any committee thereof; provided, however, that no First Level Earn-Out Shares subject to such awards shall be issued unless and until the First Earn-Out Target shall have been achieved prior to or on the First Target Expiration Date and no Second Level Earn-Out Shares shall be issued with respect to such awards unless and until the Second Earn-Out Target shall have been achieved prior to or on the Second Target Expiration Date.

 

(c) The Earn-Out Shares and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock splits, reverse splits, stock dividends, reorganizations, reclassifications or any similar event with respect to Holdco Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Shares are issued to certain shareholders of the Company.

 

 

(d) The obligations specified in this Section 2 shall be applicable only in connection with the Transactions contemplated by the BCA, and this Section 2 shall be void and of no force and effect if the BCA shall be terminated or the Closing shall not occur for any reason.”

 

(d) The following Section 3 shall be inserted in its entirety immediately following Section 2 of the Agreement:

 

“3. Surrender of Sponsor Warrants.

 

(a) The Sponsor hereby agrees that, subject to, and conditioned upon, the occurrence of the Closing and effective as of immediately prior to the Merger Effective Time, the Sponsor shall automatically be deemed to irrevocably transfer, surrender and forfeit for no consideration all warrants then in its possession, other than the Sponsor Warrant Amount and the Working Capital Warrants (as defined in the SPAC Warrant Amendment), if any, issued to Sponsor in full satisfaction of the Sponsor Loans in accordance with Section 7.02(b)(vi) of the BCA (the “Sponsor Loans Working Capital Warrants” and together with the Sponsor Warrant Amount, the “Excluded Warrants”), and that from and after such time such warrants (other than the Excluded Warrants) shall be deemed to be cancelled and no longer outstanding. Each of the parties shall take all reasonably necessary actions required to reflect the surrender and forfeiture of such warrants (other than the Excluded Warrants) as of immediately prior to the Merger Effective Time in the books and records of the SPAC’s warrant agent. For the avoidance of doubt, neither the Sponsor Warrant Amount nor the Sponsor Loans Working Capital Warrants shall be surrendered, forfeited or cancelled pursuant to this Section 3.

 

(b) For purposes of this Section 3:

 

(i) “Available Cash Amount” means, after giving effect to the exercise of Redemption Rights and payments related thereto, the aggregate amount of cash held either in or outside the Trust Account, including the aggregate amount of the PIPEs, including, for the avoidance of doubt, the aggregate amount of the Agreed PIPE (as defined in the BCA) (excluding any PIK Amount) consummated prior to, or as of, the closing of the transactions contemplated by the BCA.

 

(ii) “PIK Amount” means the accrued payment-in-kind interest on the Secured Convertible Notes (as defined in the BCA), which shall be invested into the Agreed PIPE.

 

(iii) “Sponsor Warrant Amount” means a number of Holdco Warrants (rounded down to the nearest whole warrant) equal to (A) 1,245,000 plus (B) the quantity of (1) 2,905,000 multiplied by (2) the quotient obtained by dividing (I) the quantity of (x) the Available Cash Amount minus (y) $25,000,000 by (II) $20,000,000; provided that in no event shall the Sponsor Warrant Amount be less than 1,245,000 warrants or greater than 4,150,000 warrants. An illustrative calculation of the Sponsor Warrant Amount is set forth on Exhibit B hereto.

 

(e) Exhibit B attached to this Amendment shall be inserted in its entirety immediately following Exhibit A to the Agreement.

  

 

Section 2. Entire Agreement. This Amendment and the Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, among the parties hereto, or any of them, with respect to the subject matter hereof.

 

Section 3. Effect of Amendment No. 1.

 

(a) No Other Amendments. Except as expressly amended by this Amendment, the Agreement shall continue in full force and effect and is hereby ratified and confirmed and this Amendment will not constitute any other modification, amendment or waiver to the Agreement.

 

(b) References. On and after the date hereof, each reference in the Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring to the Agreement, and each reference in any other document relating to the “Transaction Support Agreement,” the “Agreement,” “thereunder,” “thereof,” or words of like import referring to the Agreement, means and references the Agreement as amended hereby.

 

Section 4. Authorization. Each party hereby represents to the other parties hereto that this Amendment has been duly authorized, executed and delivered by such party and constitutes a valid and binding obligation of such party enforceable against such party in accordance with its terms.

 

Section 5. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State.

 

Section 6. Counterparts. This Amendment may be executed and delivered (including by facsimile or portable document format (pdf) transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF the parties hereto have hereunto caused this Amendment to be duly executed as of the date first set forth above.

 

	SCHULTZE SPECIAL PURPOSE ACQUISITION SPONSOR, LLC
	By: Schultze Asset Management, LP
	By: Schultze Asset Management GP, LLC
	By	/s/  George J. Schultze
	Name:	George J. Schultze
	Title:	Managing Member
	SCHULTZE SPECIAL PURPOSE ACQUISITION CORP.
	By	/s/  George J. Schultze
	Name:	George J. Schultze
	Title:	Chief Executive Officer and President
	CLEVER LEAVES HOLDINGS INC.
	By	/s/  Kyle Detwiler
	Name:	Kyle Detwiler
	Title:	Director
	CLEVER LEAVES INTERNATIONAL INC.
	By	/s/  Kyle Detwiler
	Name:	Kyle Detwiler
	Title:	Chief Executive Officer

 

[Signature Page to Amendment No. 1 to the Transaction Support Agreement]

 

 

EXHIBIT A

 

ESCROW AGREEMENT AMENDMENT

 

Effective as of the Closing, Section 3.2 of the Escrow Agreement shall be deleted in its entirety and replaced with the following:

 

(a) Forfeiture of Sponsor Upfront Shares; Release of Sponsor Upfront Escrow Shares and SPAC Director Shares. Except as otherwise set forth herein, the Escrow Agent shall hold the shares remaining after any cancellation required pursuant to Section 3.1. Effective immediately prior to the consummation of the transactions contemplated by the BCA (as defined below), Sponsor shall forfeit and surrender the Shares Forfeiture Amount, the Escrow Agent shall release such forfeited shares of Common Stock to the Company for cancellation. Of such remaining shares, the Sponsor Upfront Escrow Shares including the SPAC Director Shares shall be held pursuant to this Section 3.2(a) and the Sponsor Earn-Out Shares shall be held pursuant to Section 3.2(b). The Sponsor Upfront Escrow Shares and the SPAC Director Shares shall be held for a period expiring on the earlier of (I) one (1) year following the date of the consummation of the transactions contemplated by the Business Combination Agreement, dated as of July 25, 2020, by and among the Company, Clever Leaves Holdings, Inc., Novel Merger Sub Inc. and Clever Leaves International Inc. (the “BCA”) and (II) the date on which the closing price of the shares of Common Stock on the Trading Market as reported by Bloomberg Financial L.P. using the AQR function equals or exceeds Twelve Dollars Fifty Cents ($12.50) per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for any twenty (20) trading days within any consecutive thirty (30)-trading-day period commencing after the 180^th day after the consummation of the transactions contemplated by the BCA (such period, the “Initial Stockholder Upfront Escrow Period”). Upon expiration of the Initial Stockholder Upfront Escrow Period, the Escrow Agent shall disburse and release to the Initial Stockholders all Sponsor Upfront Escrow Shares and SPAC Director Shares held with respect to such Initial Stockholders (and any applicable stock power), upon receipt of a written notice executed by Sponsor (with evidence a copy of such written notice shall have been delivered to Holdco), in form reasonably acceptable to the Escrow Agent, certifying the expiration of the Initial Stockholder Upfront Escrow Period and the number of Sponsor Upfront Escrow Shares and SPAC Director Shares to be disbursed and released to each Initial Stockholder. The Escrow Agent shall have no further duties under this Section 3.2(a) with respect to the Sponsor Upfront Escrow Shares and the SPAC Director Shares after the disbursement of the Sponsor Upfront Escrow Shares to the Initial Stockholders.

 

(b) Release of Sponsor Earn-Out Shares. The Escrow Agent shall hold, disburse and release the Sponsor Earn-Out Shares as follows:

 

(i) The Escrow Agent shall hold the First Level Earn-Out Shares until the closing price per share of the shares of Common Stock equals or exceeds the First Earn-Out Target at any time prior to or on the First Target Expiration Date. The Escrow Agent shall disburse and release to Sponsor all First Level Earn-Out Shares (and any applicable stock power), upon receipt of a written notice executed by Sponsor (with evidence a copy of such written notice shall have been delivered to Holdco), in form reasonably acceptable to the Escrow Agent, certifying the achievement of the First Earn-Out Target (the “First Earn-Out Target Release Notice”). In the event that the First Earn-Out Target Release Notice is not delivered on or prior to the First Target Expiration Date, then the Escrow Agent shall automatically disburse and release the First Level Earn-Out Shares (and any applicable stock power) to Holdco for cancellation. The Escrow Agent shall have no further duties under this Section 3.2(b)(i) with respect to the First Level Earn-Out Shares after the disbursement of the First Level Earn-Out Shares to Sponsor or Holdco, as the case may be.

 

 

(ii) Additionally, the Escrow Agent shall hold the Second Level Earn-Out Shares until the closing price per share of the shares of Common Stock equals or exceeds the Second Earn-Out Target at any time prior to or on the Second Target Expiration Date. The Escrow Agent shall disburse and release to Sponsor all Second Level Earn-Out Shares (and any applicable stock power), upon receipt of written notice executed by Sponsor (with evidence a copy of such written notice shall have been delivered to Holdco), in form reasonably acceptable to the Escrow Agent, certifying the achievement of the Second Earn-Out Target (the “Second Earn-Out Target Release Notice”). In the event that the Second Earn-Out Target Release Notice is not delivered on or prior to the Second Target Expiration Date, then the Escrow Agent shall automatically disburse and release the Second Level Earn-Out Shares (and any applicable stock power) to Holdco for cancellation. The Escrow Agent shall have no further duties under this Section 3.2(b)(ii) with respect to the Second Level Earn-Out Shares after the disbursement of the Second Level Earn-Out Shares to Sponsor or Holdco, as the case may be.

 

(iii) The Earn-Out Shares and the Earn-Out Targets shall be adjusted to reflect appropriately the effect of any stock splits, reverse splits, stock dividends, reorganizations, reclassifications and other similar events with respect to the Holdco Common Shares, occurring on or after the date hereof and prior to the time any such Earn-Out Shares are released to Sponsor or returned to Holdco, as the case may be.

 

(iv) For purposes of this Section 3.2:

 

(1) “Available Cash Amount” means, after giving effect to the exercise of Redemption Rights and payments related thereto, the aggregate amount of cash held either in or outside the Trust Account, including the aggregate amount of the PIPEs, including, for the avoidance of doubt, the aggregate amount of the Agreed PIPE (as defined in the BCA) (excluding any PIK Amount) consummated prior to, or as of, the closing of the transactions contemplated by the BCA.

 

(2) “Closing” shall have the meaning set forth in the BCA.

 

(3) “Earn-Out Shares” means the First Level Earn-Out Shares and the Second Level Earn-Out Shares, as the case may be.

 

(4) “Earn-Out Targets” means the First Earn-Out Target and the Second Earn-Out Target, as the case may be.

 

(5) “First Earn-Out Target” means that the closing price per share of Common Stock on the Trading Market as reported by Bloomberg Financial L.P. using the AQR function equals or exceeds Twelve Dollars Fifty Cents ($12.50) for any twenty (20) trading days within any consecutive thirty (30)-trading-day period commencing after Closing

 

 

(6) “First Level Earn-Out Shares” means the number of Holdco Common Shares equal to Fifty Percent (50%) of the Sponsor Earn-Out Shares.

 

(7) “First Target Expiration Date” means the second (2nd) anniversary of the Closing.

 

(8) “Maximum Upfront Shares Amount” means 1,168,421 Holdco Common Shares. For the avoidance of doubt, the Company may issue up to the aggregate amount of 2,631,579 shares of Common Stock at $9.50 (or higher) per share for a PIPE in the amount of twenty-five million dollars ($25,000,000) and such issuance pursuant to such PIPE shall in no event reduce the Maximum Upfront Shares Amount.

 

(9) “Minimum Upfront Shares Amount” means 460,000 Holdco Common Shares.

 

(10) “Net Capital” means an aggregate amount equal to (A) the Available Cash Amount, minus (B) SPAC’s good faith estimate of the SPAC Transaction Expenses (as defined in the BCA) delivered to the Company pursuant to Section 3.01(b) of the BCA.

 

(11) “PIK Amount” means the accrued payment-in-kind interest on the Secured Convertible Notes (as defined in the BCA), which shall be invested into the Agreed PIPE.

 

(12) “Second Earn-Out Target” means that the closing price per share of Common Stock on the Trading Market as reported by Bloomberg Financial L.P. using the AQR function equals or exceeds Fifteen Dollars ($15.00) for any twenty (20) trading days within any consecutive thirty (30)-trading-day period commencing after Closing.

 

(13) “Second Level Earn-Out Shares” means the number of Holdco Common Shares equal to Fifty Percent (50%) of the Sponsor Earn-Out Shares.

 

(14) “Second Target Expiration Date” means the fourth (4th) anniversary of the Closing.

 

(15) “Shares Forfeiture Amount” means a number of shares of Common Stock equal to (A) 3,250,000 minus (B) the Sponsor Upfront Escrow Shares minus (C) the Sponsor Earn-Out Shares, if any.

 

(16) “SPAC Director Shares” means 60,000 Sponsor Upfront Escrow Shares held by members of the Board of Directors of SPAC.

 

(17) “Sponsor Earn-Out Shares” means a number of shares of Common Stock (rounded down to the nearest whole share) equal to (A) the Sponsor Earn-Out Value, divided by (C) $5.00; provided that the number of Sponsor Earn-Out Shares shall not be less than zero or greater than 1,300,000.

 

 

(18) “Sponsor Earn-Out Value” means an amount equal to (A) the Sponsor Value, minus (B) the Sponsor Upfront Shares Value.

 

(19) “Sponsor Upfront Escrow Shares” means a number of shares of Common Stock (rounded down to the nearest whole share) equal to (A) the Sponsor Value, divided by (B) $10.00; provided that the number of Sponsor Upfront Escrow Shares shall not be less than the Minimum Upfront Shares Amount or greater than the Maximum Upfront Shares Amount.

 

(20) “Sponsor Upfront Shares Value” means an amount equal to (A) the Sponsor Upfront Escrow Shares, multiplied by (B) $10.00.

 

(21) “Sponsor Value” means an amount equal to (A) the Net Capital, multiplied by (B) twenty percent (20%).

 

(22) “Trading Market” means the stock market on which the shares of Common Stock shall be trading at the time of determination.

 

Effective as of the closing of the transactions contemplated by the BCA, a new Exhibit B shall be inserted in its entirety after Exhibit A to the Escrow Agreement, as amended, which is an illustrative calculation of (a) Net Capital, (b) Shares Forfeiture Amount, (c) Sponsor Earn-Out Shares, (d) Sponsor Earn-Out Value, (e) Sponsor Upfront Escrow Shares, (f) Sponsor Upfront Shares Value and (g) Sponsor Value.

 

Effective as of the Closing, the following Section 3.3 shall be inserted in its entirety immediately following Section 3.2 of the Escrow Agreement, as amended.

 

3.3 Effective as of the closing of the transactions contemplated by the BCA, the shares of Common Stock held in escrow pursuant to the terms of this Agreement shall become common shares of Holdco (“Holdco Common Shares”) in accordance with the terms and conditions of the BCA. Effective as of the Closing of the transactions contemplated by the BCA and for purposes of this Agreement, references to shares of “Common Stock” in this Agreement are hereby deemed to refer to Holdco Common Shares. Effective as of the closing of the transactions contemplated by the BCA, Holdco shall be deemed to be “the Company” for all purposes of this Agreement.

 

 

EXHIBIT B

 

ILLUSTRATIVE CALCULATION OF (A) NET CAPITAL, (B) SHARES FORFEITURE AMOUNT, (C) SPONSOR EARN-OUT SHARES, (D) SPONSOR EARN-OUT VALUE, (E) SPONSOR UPFRONT ESCROW SHARES, (F) SPONSOR UPFRONT SHARES VALUE, (G) SPONSOR VALUE AND (H) SPONSOR WARRANT AMOUNT.

 

See attached.

 

 

10

 

Exhibit 10.3

  

SUBSCRIPTION AGREEMENT

 

Schultze Special Purpose Acquisition Corp.

800 Westchester Avenue, Suite 632

Rye Brook, NY 10573

 

Ladies and Gentlemen:

 

In connection with the proposed business combination (the “Transaction”) between Schultze Special Purpose Acquisition Corp., a Delaware corporation (the “Company”), and Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada (“Clever Leaves”), pursuant to that certain Amended and Restated Business Combination Agreement, dated as of November 9, 2020 (the “Business Combination Agreement”), by and among the Company, Clever Leaves, Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada (“Holdco”), and Novel Merger Sub Inc. a Delaware corporation, (a) the undersigned desires to subscribe for and purchase from the Company, and the Company desires to sell to the undersigned, that number of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), set forth on the signature page hereof for a purchase price of $9.50 per share (the “Per Share Price”), for the aggregate subscription amount set forth on the signature page hereto (the “Purchase Price”), on the terms and subject to the conditions contained herein; and (b) certain other investors have entered into subscription agreements with the Company and Holdco substantially similar to this Subscription Agreement, pursuant to which such other investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to such other investors, on the Transaction Closing Date (as defined below), shares of Common Stock at the Per Share Price (the “Other Subscription Agreements”). Capitalized terms used but not defined herein shall have the respective meanings set forth in the Business Combination Agreement. In connection therewith, the undersigned, the Company and Holdco agree as follows:

 

1. Subscription. The undersigned hereby subscribes for and agrees to purchase from the Company such number of shares of Common Stock as is set forth on the signature page of this Subscription Agreement (collectively, the “SPAC Shares”) on the terms and subject to the conditions provided for herein, and the undersigned, the Company and Holdco acknowledge and agree that, substantially concurrent with the consummation of the Transaction, each SPAC Share will automatically be exchanged for one share of Holdco’s common stock pursuant to the terms of the Business Combination Agreement (collectively, the “Holdco Shares”, and together with the SPAC Shares, the “Shares”). The undersigned understands and agrees that the Company reserves the right to accept or reject the undersigned’s subscription for the SPAC Shares for any reason or for no reason, in whole or in part, at any time prior to its acceptance by the Company, and the same shall be deemed to be accepted by the Company only when this Subscription Agreement is signed by a duly authorized person by or on behalf of the Company; the Company may do so in counterpart form.

 

 

2. Closing. The closing of the sale of the SPAC Shares contemplated hereby (the “Closing”) is contingent upon the substantially concurrent consummation of the Transaction and the satisfaction or waiver of the conditions precedent set forth in Section 3. The Closing shall occur on the date of, and immediately prior to, the consummation of the Transaction (the “Transaction Closing Date”). Not less than five (5) business days prior to the scheduled Transaction Closing Date, the Company shall provide written notice to the undersigned (the “Closing Notice”) specifying: (a) the scheduled Transaction Closing Date, (b) that the Company reasonably expects all conditions to the closing of the Transaction to be satisfied or waived by such date, and (c) instructions for wiring the Purchase Price to the Escrow Account (as defined below). The undersigned shall deliver to Continental Stock Transfer & Trust Company, as escrow agent (the “Escrow Agent”), at least two (2) business days prior to the scheduled Transaction Closing Date specified in the Closing Notice, the Purchase Price, which shall be held in a segregated escrow account for the benefit of the undersigned (the “Escrow Account”) until the Closing pursuant to the terms of a customary escrow agreement, which shall be on terms and conditions reasonably satisfactory to the undersigned and the Company (the “Escrow Agreement”), to be entered into by the Company and the Escrow Agent, by wire transfer of United States dollars in immediately available funds to the Escrow Account in accordance with the wire instructions specified in the Closing Notice. On the Transaction Closing Date, Holdco shall deliver (or cause the delivery of) the Holdco Shares in book-entry form to the undersigned or to a custodian designated by undersigned, as applicable, as indicated below. Upon consummation of the Transaction, the Company’s receipt of written confirmation from the undersigned that the conditions set forth in Section 3 have been satisfied (or waived by the undersigned), and delivery of the Holdco Shares to the undersigned (or its nominee or custodian, if applicable), the Company shall provide notice to the Escrow Agent and the Purchase Price shall be released from the Escrow Account automatically and without further action by the Company or the undersigned. This Subscription Agreement shall terminate and be of no further force or effect, without any liability to either party hereto, if the Company notifies the undersigned in writing that it has abandoned its plans to move forward with the Transaction. If (i) this Subscription Agreement terminates following the delivery by the undersigned of the Purchase Price, (ii) the Closing has not occurred within ten (10) calendar days of the scheduled Transaction Closing Date specified in the Closing Notice, or (iii) the Transaction is not consummated within one (1) business day of the Closing, the Company shall cause the Escrow Agent to promptly (but in no event more than two (2) business days after the date of such termination, the end of such ten (10)-calendar day period, or the end of such one (1)-business day period, as applicable) return the Purchase Price to the undersigned (in accordance with wire instructions to be provided by the undersigned to the Company) (and, in the case of clause (iii), any book entries for the Holdco Shares shall be deemed cancelled).

 

3. Closing Conditions. The Closing shall be subject to the satisfaction on the Transaction Closing Date, or the waiver by each of the parties hereto, of each of the following conditions:

 

a. all representations and warranties of the Company, Holdco and the undersigned contained in this Subscription Agreement shall be true and correct in all material respects (other than representations and warranties that are qualified as to materiality or Company Material Adverse Effect or Holdco Material Adverse Effect (each as defined herein), which representations and warranties shall be true in all respects) at and as of the Transaction Closing Date (or, with respect to any representations and warranties made as of a specific date, as of such specific date), and consummation of the Closing shall constitute a reaffirmation by each of the Company, Holdco and the undersigned of each of the representations, warranties and agreements of such party contained in this Subscription Agreement as of the Transaction Closing Date, but in each case without giving effect to consummation of the Transaction;

 

 

b. no applicable governmental authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any judgment, order, law, rule or regulation (whether temporary, preliminary or permanent) which is then in effect and has the effect of making consummation of the transactions contemplated hereby illegal or otherwise restraining or prohibiting consummation of the transactions contemplated hereby, and no governmental authority shall have instituted or threatened in writing a proceeding seeking to impose any such restraint or prohibition;

 

c. no suspension of the qualification of the Shares for offering or sale or trading in any jurisdiction of competent jurisdiction in which such Shares are being offered and sold, or initiation or threatening of any proceedings for any of such purposes, shall have occurred;

 

d. each of the Company and the undersigned shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Subscription Agreement to be performed, satisfied or complied with by it at or prior to the Closing, except where the failure of such performance or compliance would not or would not reasonably be expected to prevent, materially delay, or materially impair the ability of the parties to consummate the Closing;

 

e. all conditions precedent to the closing of the Transaction set forth in the Business Combination Agreement, including the approval of the Company’s stockholders, shall have been satisfied or, to the extent permitted by applicable law (and except as provided in Section 3(f)), waived (other than those conditions which, by their nature, can only be satisfied at the closing of the Transaction, but subject to satisfaction of such conditions as of the closing of the Transaction); and

 

f. with respect to the undersigned’s obligation to consummate the Closing, no amendment, modification or waiver of (i) any provision of the Business Combination Agreement shall have occurred that would reasonably be expected to materially and adversely affect the rights, obligations and/or economic benefits that the undersigned would reasonably expect to receive under this Subscription Agreement (including, without limitation, the economic benefits to the undersigned of being an equity holder of Holdco), (ii) Section 9.03(f) of the Business Combination Agreement, or (iii) Section 3.1(e) of the Plan of Arrangement, in the form attached hereto as Exhibit A, or Article 28 of the articles of Holdco, in the form attached hereto as Exhibit B, in each case, without having received the undersigned’s prior written consent (not to be unreasonably withheld, conditioned or delayed).

 

4. Further Assurances. The Company and Holdco shall give the undersigned prompt written notice of any amendment, modification or waiver of any provision of the Business Combination Agreement, the Plan of Arrangement, the Holdco Articles or the Calculation Methodology. At the Closing, the parties hereto shall execute and deliver such additional documents and take such additional actions as the parties reasonably may deem to be practical and necessary in order to consummate the subscription as contemplated by this Subscription Agreement.

 

 

5. Company Representations and Warranties. The Company represents and warrants to the undersigned, as of the date hereof and as of the Closing, that:

 

a. The Company has been duly incorporated, is validly existing and is in good standing under the laws of the State of Delaware, with corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted.

 

b. The SPAC Shares have been duly authorized and, when issued and delivered to the undersigned against full payment therefor in accordance with the terms of this Subscription Agreement, the SPAC Shares will be validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under the Company’s Amended and Restated Certificate of Incorporation or bylaws, under any agreement or instrument to which the Company is a party or by which the Company is bound, or under the laws of the State of Delaware.

 

c. This Subscription Agreement, the Other Subscription Agreements and the Business Combination Agreement (collectively, the “Transaction Documents”) have been duly authorized, executed and delivered by the Company and are the valid and binding obligation of the Company and are enforceable against the Company in accordance with their terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.

 

d. The issuance and sale of the SPAC Shares, the execution and delivery by the Company of the Transaction Documents, and the compliance by the Company with all of the provisions of the Transaction Documents, and the consummation of the transactions contemplated herein and therein, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, which would have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of the Company (a “Company Material Adverse Effect”) or materially affect the validity of the SPAC Shares or the legal authority of the Company to comply in all material respects with the terms of this Subscription Agreement and the other Transaction Documents; (ii) result in any violation of the provisions of the organizational documents of the Company; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its properties that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or materially affect the validity of the SPAC Shares or the legal authority of the Company to comply with the terms of this Subscription Agreement and the other Transaction Documents.

 

 

e. The Company has delivered to the undersigned a true, correct and complete copy of each of the Transaction Documents, including any amendments or modifications thereto and any written waivers of any conditions thereunder.

 

f. Assuming the accuracy of the undersigned's representations and warranties set forth in Section 7, no registration under the Securities Act of 1933, as amended (the “Securities Act”) is required for the offer and sale of the SPAC Shares by the Company to the undersigned in the manner contemplated by this Subscription Agreement.

 

g. Neither the Company nor any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) in connection with any offer or sale of the SPAC Shares.

 

6. Holdco Representations and Warranties. Holdco represents and warrants to the undersigned, as of the date hereof and as of the Closing, that:

 

a. Holdco has been duly incorporated, is validly existing and is in good standing under the laws of British Columbia, Canada, with corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted.

 

b. When issued and delivered to the undersigned in exchange for the SPAC Shares, the Holdco Shares will be duly authorized, validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under Holdco’s organizational documents, under any agreement or instrument to which Holdco is a party or by which Holdco is bound, or under the laws of British Columbia, Canada.

 

c. The Transaction Documents have been duly authorized, executed and delivered by Holdco and are the valid and binding obligation of Holdco and are enforceable against Holdco in accordance with their terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.

 

d. The issuance of the Holdco Shares, the execution and delivery by Holdco of the Transaction Documents, and the compliance by Holdco with all of the provisions of the Transaction Documents, and the consummation of the transactions contemplated herein and therein, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Holdco or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which Holdco or any of its subsidiaries is a party or by which Holdco or any of its subsidiaries is bound or to which any of the property or assets of Holdco or any of its subsidiaries is subject, which would have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of Holdco (a “Holdco Material Adverse Effect”) or materially affect the validity of the Holdco Shares or the legal authority of Holdco to comply in all material respects with the terms of this Subscription Agreement and the other Transaction Documents; (ii) result in any violation of the provisions of the organizational documents of Holdco; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Holdco or any of its properties that would reasonably be expected to have, individually or in the aggregate, a Holdco Material Adverse Effect or materially affect the validity of the Holdco Shares or the legal authority of Holdco to comply with the terms of this Subscription Agreement and the other Transaction Documents.

 

 

e. Assuming the accuracy of the undersigned's representations and warranties set forth in Section 7, no registration under the Securities Act is required for the issuance of the Holdco Shares to the undersigned in exchange for the SPAC Shares in the manner contemplated by the Business Combination Agreement.

 

7. Subscriber Representations and Warranties. The undersigned represents and warrants to the Company, as of the date hereof and as of the Closing, that:

 

a. The undersigned is (i) a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) or (ii) an institutional “accredited investor” (within the meaning of Rule 501(a) under the Securities Act), in each case, satisfying the requirements set forth on Schedule A, and is acquiring the Shares only for his, her or its own account and not for the account of others, and not on behalf of any other account or person or with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act (and shall provide the requested information on Schedule A following the signature page hereto). The undersigned is not an entity formed for the specific purpose of acquiring the Shares.

 

b. The undersigned understands that the Shares are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Shares have not been registered under the Securities Act. The undersigned understands that the Shares may not be resold, transferred, pledged or otherwise disposed of by the undersigned absent an effective registration statement under the Securities Act except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities Act, and in each of cases (i) and (iii) in accordance with any applicable securities laws of the states and other jurisdictions of the United States, and that any certificates representing the Shares shall contain a legend to such effect. The undersigned acknowledges that the Shares will not be eligible for resale pursuant to Rule 144A promulgated under the Securities Act. The undersigned acknowledges the Shares will be “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act and the undersigned understands that any certificates representing the Shares will contain a legend in respect of such restrictions. The undersigned agrees that if any transfer of the Shares or any interest therein is proposed to be made (other than a transfer pursuant to the Registration Statement (as defined below) or Rule 144), as a condition precedent to any such transfer, the undersigned may be required to deliver to the Company an opinion of counsel satisfactory to the Company. The undersigned further acknowledges that because the Company is a shell company, Rule 144 may not be available to the undersigned for the resale of the Shares until one (1) year following consummation of the Transaction, despite technical compliance with the requirements of Rule 144 and the release or waiver of any contractual transfer restrictions. The undersigned understands and agrees that the Shares will be subject to transfer restrictions and, as a result of these transfer restrictions, the undersigned may not be able to readily resell the Shares and may be required to bear the financial risk of an investment in the Shares for an indefinite period of time. The undersigned understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Shares.

 

 

c. The undersigned understands and agrees that the undersigned is purchasing the SPAC Shares directly from the Company. The undersigned further acknowledges that there have been no representations, warranties, covenants and agreements made to the undersigned by the Company, or its officers or directors, expressly or by implication, other than those representations, warranties, covenants and agreements included in this Subscription Agreement.

 

d. The undersigned’s acquisition and holding of the Shares will not constitute or result in a non-exempt prohibited transaction under Section 406 of the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, as amended, or any applicable similar law.

 

e. The undersigned acknowledges and agrees that the undersigned has received such information as the undersigned deems necessary in order to make an investment decision with respect to the Shares. Without limiting the generality of the foregoing, the undersigned acknowledges that it has reviewed the Transaction Documents provided to the undersigned by the Company. The undersigned represents and agrees that the undersigned and the undersigned’s professional advisor(s), if any, have had the full opportunity to ask such questions, receive such answers and obtain such information as the undersigned and such undersigned’s professional advisor(s), if any, have deemed necessary to make an investment decision with respect to the Shares.

 

f. The undersigned became aware of this offering of the Shares solely by means of direct contact between the undersigned, the Company and Holdco and representatives of the Company and Holdco, and the Shares were offered to the undersigned solely by direct contact between the undersigned, the Company and Holdco and representatives of the Company and Holdco. The undersigned did not become aware of this offering of the Shares, nor were the Shares offered to the undersigned, by any other means. The undersigned acknowledges that each of the Company and Holdco represents and warrants that the Shares (i) were not offered by any form of general solicitation or general advertising and (ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or any state securities laws.

 

g. The undersigned acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Shares. The undersigned has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares, and the undersigned has sought such accounting, legal and tax advice as the undersigned has considered necessary to make an informed investment decision.

 

 

h. The undersigned has adequately analyzed and fully considered the risks of an investment in the Shares and determined that the Shares are a suitable investment for the undersigned and that the undersigned is able at this time and in the foreseeable future to bear the economic risk of a total loss of the undersigned’s investment in the Company and Holdco. The undersigned acknowledges specifically that a possibility of total loss exists.

 

i. In making its decision to purchase the Shares, the undersigned has relied solely upon independent investigation made by the undersigned. Without limiting the generality of the foregoing, the undersigned has not relied on any statements or other information provided by the Placement Agent (as defined below) concerning the Company, Holdco or the Shares or the offer and sale of the Shares.

 

j. The undersigned understands and agrees that no federal or state agency has passed upon or endorsed the merits of the offering of the Shares or made any findings or determination as to the fairness of this investment.

 

k. The undersigned has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation.

 

l. The execution, delivery and performance by the undersigned of this Subscription Agreement are within the powers of the undersigned, have been duly authorized and will not constitute or result in a breach or default under or conflict with any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking, to which the undersigned is a party or by which the undersigned is bound, and, if the undersigned is not an individual, will not violate any provisions of the undersigned’s charter documents, including, without limitation, its incorporation or formation papers, bylaws, indenture of trust or partnership or operating agreement, as may be applicable. The signature on this Subscription Agreement is genuine, and the signatory, if the undersigned is an individual, has legal competence and capacity to execute the same or, if the undersigned is not an individual, the signatory has been duly authorized to execute the same, and this Subscription Agreement constitutes a legal, valid and binding obligation of the undersigned, enforceable against the undersigned in accordance with its terms.

 

m. Neither the due diligence investigation conducted by the undersigned in connection with making its decision to acquire the Shares nor any representations and warranties made by the undersigned herein shall modify, amend or affect the undersigned’s right to rely on the truth, accuracy and completeness of the Company’s and Holdco’s representations and warranties contained herein.

 

n. The undersigned is not (i) a person or entity named on the List of Specially Designated Nationals and Blocked Persons administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or in any Executive Order issued by the President of the United States and administered by OFAC (“OFAC List”), or a person or entity prohibited by any OFAC sanctions program, (ii) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank (collectively, a “Prohibited Investor”). The undersigned agrees to provide law enforcement agencies, if requested thereby, such records as required by applicable law, provided that the undersigned is permitted to do so under applicable law. If the undersigned is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) (the “BSA”), as amended by the USA PATRIOT Act of 2001 (the “PATRIOT Act”), and its implementing regulations (collectively, the “BSA/PATRIOT Act”), the undersigned maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act.  To the extent required, it maintains policies and procedures reasonably designed for the screening of its investors against the OFAC sanctions programs, including the OFAC List. To the extent required, it maintains policies and procedures reasonably designed to ensure that the funds held by the undersigned and used to purchase the Shares were legally derived.

 

 

o. No disclosure or offering document has been prepared by Canaccord Genuity Group Inc. (the “Placement Agent”) or any of its affiliates in connection with the offer and sale of the Shares.

 

p. The Placement Agent and its directors, officers, employees, representatives and controlling persons have made no independent investigation with respect to the Company, Holdco or the Shares or the accuracy, completeness or adequacy of any information supplied to the undersigned by the Company or Holdco.

 

q. In connection with the issue and purchase of the Shares, the Placement Agent has not acted as the undersigned’s financial advisor or fiduciary.

 

r. If the undersigned is a resident or subject to the laws of Canada, the undersigned hereby declares, represents, warrants and agrees as set forth in the attached Schedule B.

 

8. Registration Rights.

 

a. In the event that the Holdco Shares are not registered in connection with the consummation of the Transaction, Holdco agrees that, within thirty (30) calendar days after the consummation of the Transaction (the “Filing Date”), Holdco will file with the Securities and Exchange Commission (the “SEC”) (at Holdco’s sole cost and expense) a registration statement (the “Registration Statement”) registering such resale, and Holdco shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof and no later than ninety (90) days (or forty-five (45) days if the SEC notifies the Company that it will not “review” the Registration Statement) after the Transaction Closing Date (as applicable, the “Effectiveness Date”); provided, however, that if the SEC is closed for operations due to a government shutdown, the Effectiveness Date shall be extended by the same number of days that the SEC remains closed for operations, provided, further, that Holdco’s obligations to include the Holdco Shares in the Registration Statement are contingent upon the undersigned furnishing in writing to Holdco such information regarding the undersigned, the securities of Holdco held by the undersigned and the intended method of disposition of the Holdco Shares as shall be reasonably requested by Holdco to effect the registration of the Holdco Shares, and shall execute such documents in connection with such registration as Holdco may reasonably request that are customary of a selling stockholder in similar situations. For purposes of clarification, any failure by Holdco to file the Registration Statement by the Filing Date or to effect such Registration Statement by the Effectiveness Date shall not otherwise relieve Holdco of its obligations to file or effect the Registration Statement as set forth above in this Section 8.

 

 

b. In the case of the registration, qualification, exemption or compliance effected by Holdco pursuant to this Subscription Agreement, Holdco shall, upon reasonable request, inform the undersigned as to the status of such registration, qualification, exemption and compliance. At its expense Holdco shall:

 

(i) except for such times as Holdco is permitted hereunder to suspend the use of the prospectus forming part of a Registration Statement, use its commercially reasonable efforts to keep such registration, and any qualification, exemption or compliance under state securities laws which Holdco determines to obtain, continuously effective with respect to the undersigned, and to keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions, until the earliest of (A) the date on which all of the Holdco Shares held by the undersigned may be sold without restriction under Rule 144 promulgated under the Securities Act, including, without limitation, any volume and manner of sale restrictions which may be applicable to Affiliates (as defined in Rule 144) under Rule 144, and without the requirement for Holdco to be in compliance with the current public information required under Rule 144(c)(1) or Rule 144(i)(2), as applicable, (B) the date on which the undersigned ceases to hold any Holdco Shares acquired pursuant to this Subscription Agreement, and (C) the second anniversary of the Transaction Closing Date; provided that the period under this clause (C) shall be extended by the same number of days that the Registration Statement is suspended in accordance with Section 8(c).

 

(ii) advise the undersigned within five (5) business days:

 

(1)

when a Registration Statement or any amendment thereto has been filed with the SEC and when such Registration Statement or any post-effective amendment thereto has become effective;

 

(2)

of any request by the SEC for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information;

 

(3)

of the issuance by the SEC of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose;

 

(4)

of the receipt by Holdco of any notification with respect to the suspension of the qualification of the Holdco Shares included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

(5)

subject to the provisions in this Subscription Agreement, of the occurrence of any event that requires the making of any changes in any Registration Statement or prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading.

 

 

Notwithstanding anything to the contrary set forth in the foregoing clause (ii), Holdco shall not, when so advising the undersigned of the events listed in (1) through (5) above, provide the undersigned with any material, nonpublic information regarding Holdco (other than to the extent that providing notice to the undersigned of the occurrence of the events listed in (1) through (5) above constitutes material, nonpublic information regarding Holdco);

 

(iii) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;

 

(iv) upon the occurrence of any event contemplated in Sections 8(b)(ii)(2)-(5) above, except for such times as Holdco is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, Holdco shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Holdco Shares included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(v) use its commercially reasonable efforts to cause all Holdco Shares to be listed on each securities exchange or market, if any, on which Holdco’s common stock is listed; and

 

(vi) use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Holdco Shares contemplated hereby and to enable the undersigned to sell the Holdco Shares under Rule 144.

 

c. Notwithstanding anything to the contrary in this Subscription Agreement, Holdco shall be entitled to delay or postpone the effectiveness of the Registration Statement, and from time to time to require the undersigned not to sell under the Registration Statement or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by Holdco or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event Holdco's board of directors reasonably believes would require additional disclosure by Holdco in the Registration Statement of material information that Holdco has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of Holdco's board of directors to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided, however, that Holdco may not delay or suspend the Registration Statement on more than two occasions in any twelve (12) month period or for more than sixty (60) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve (12) month period. Upon receipt of any written notice from Holdco of the happening of any Suspension Event during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, the undersigned agrees that it will (i) immediately discontinue offers and sales of the Holdco Shares under the Registration Statement until the undersigned receives copies of a supplemental or amended prospectus (which Holdco agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by Holdco that it may resume such offers and sales, and (ii) maintain the confidentiality of any information included in such written notice delivered by Holdco unless otherwise required by applicable law or subpoena.

 

 

d. The undersigned may deliver written notice (an “Opt-Out Notice”) to Holdco requesting that the undersigned not receive notices from Holdco otherwise required by this Section 8; provided, however, that the undersigned may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from the undersigned (unless subsequently revoked), (i) Holdco shall not deliver any such notices to the undersigned and the undersigned shall no longer be entitled to the rights associated with any such notice and (ii) each time prior to the undersigned's intended use of an effective Registration Statement, the undersigned will notify Holdco in writing at least two (2) business days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 8(d)) and the related suspension period remains in effect, Holdco will so notify the undersigned, within one (1) business day of the undersigned's notification to Holdco, by delivering to the undersigned a copy of such previous notice of Suspension Event, and thereafter will provide the undersigned with the related notice of the conclusion of such Suspension Event immediately upon its availability

 

e. Holdco shall indemnify, defend and hold harmless the undersigned (to the extent a seller under the Registration Statement), the officers, directors, partners, members, managers, stockholders and agents of the undersigned, and each person who controls the undersigned (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including reasonable costs of preparation and investigation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included in the Registration Statement 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 to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation by Holdco of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Section 8, except to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding the undersigned furnished in writing to Holdco by the undersigned expressly for use therein or the undersigned has omitted a material fact from such information or otherwise violated the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder; provided, however, that the indemnification contained in this Section 8 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of Holdco (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall Holdco be liable for any Losses to the extent they arise out of or are based upon a violation which occurs solely as a result of (A) if Holdco has made available to the undersigned a prospectus in accordance with this Section 8, the failure of the undersigned to deliver or cause to be delivered such prospectus to a purchaser of Holdco Shares from the undersigned pursuant to the Registration Statement in a timely manner, (B) an offer or sale of Holdco Shares effected by the undersigned by means of a freewriting prospectus (as defined in Rule 405) that was not authorized in writing by Holdco, or (C) an offer or sale of Holdco Shares effected by the undersigned pursuant to the Registration Statement in violation of Section 8(c). Holdco shall notify the undersigned promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 8 of which Holdco is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Holdco Shares by the undersigned.

 

 

f. The undersigned shall indemnify and hold harmless Holdco, its directors, officers, partners, members, managers, stockholders and agents and each person who controls Holdco (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), to the fullest extent permitted by applicable law, from and against all Losses, as incurred, that arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in the Registration Statement, 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 any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding the undersigned furnished in writing to Holdco by the undersigned expressly for use therein; provided, however, that the indemnification contained in this Section 8 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the undersigned (which consent shall not be unreasonably withheld, conditioned or delayed). In no event shall the liability of the undersigned be greater in amount than the dollar amount of the net proceeds received by the undersigned upon the sale of the Holdco Shares giving rise to such indemnification obligation. The undersigned shall notify Holdco promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 8 of which the undersigned is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Holdco Shares by the undersigned.

 

9. Lock-Up. The undersigned acknowledges and agrees that, without the prior written consent of the Company, during the period commencing on the Transaction Closing Date and continuing until the forty-fifth (45th) day following the Transaction Closing Date, the undersigned shall not (a) sell, assign, transfer (including by operation of law), incur any liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever, dispose of or otherwise encumber (each, a “Transfer”), (b) make any short sale of, grant any option for the purchase of, or (c) enter into any hedging or similar transaction with the same economic effect as a Transfer of, any of the Holdco Shares. The Company may impose stop-transfer instructions and may stamp each certificate representing the Holdco Shares with an appropriate legend to enforce the provisions of the foregoing sentence. Any purported Transfer or other transaction in violation of this Section 9 shall be null and void.

 

 

10. Termination. This Subscription Agreement shall terminate and be void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earlier to occur of (a) such date and time as the Business Combination Agreement is terminated in accordance with its terms without the Transaction being consummated, (b) upon the mutual written agreement of each of the parties hereto to terminate this Subscription Agreement, (c) if any of the conditions to Closing set forth in Section 3 of this Subscription Agreement are not satisfied or waived by each of the parties hereto on or prior to the Transaction Closing Date and, as a result thereof, the transactions contemplated by this Subscription Agreement are not consummated on such date, or (d) December 31, 2020; provided that nothing herein will relieve any party from liability for any willful breach hereof prior to the time of termination, and each party will be entitled to any remedies at law or in equity to recover losses, liabilities or damages arising from such breach. If the transactions contemplated by the Business Combination Agreement are not consummated, then rights and obligations of Holdco shall terminate without any further liability on the part of Holdco. The Company shall promptly notify the undersigned of the termination of the Business Combination Agreement after the termination of such agreement.

 

11. Trust Account Waiver. The undersigned acknowledges that the Company is a blank check company with the powers and privileges to effect a merger, asset acquisition, reorganization or similar business combination involving the Company and one or more businesses or assets. The undersigned further acknowledges that, as described in the Company’s prospectus relating to its initial public offering dated December 10, 2018 (the “Prospectus”) available at www.sec.gov, substantially all of the Company’s assets consist of the cash proceeds of the Company’s initial public offering and private placement of its securities, and substantially all of those proceeds have been deposited in a trust account (the “Trust Account”) for the benefit of the Company and its public stockholders. For and in consideration of the Company entering into this Subscription Agreement, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby irrevocably waives any and all right, title and interest, or any claim of any kind it has or may have in the future, in or to any monies held in the Trust Account, and agrees not to seek recourse against the Trust Account as a result of, or arising out of, this Subscription Agreement.

 

12. Notices. Any notice or communication to a party hereto required or permitted hereunder shall be in writing and either delivered personally, emailed, sent by overnight mail via a reputable overnight carrier, or sent by certified or registered mail, postage prepaid, and shall be deemed to be given and received (a) when so delivered personally, (b) when sent, with no mail undeliverable or other rejection notice, if sent by email, or (c) five (5) business days after the date of mailing to the address or email address of such party set forth beneath such party’s signature hereto (or to such other address or email address as a party may hereafter designate by notice given to the other parties in accordance with this Section 12).

 

13. Miscellaneous.

 

a. Neither this Subscription Agreement nor any rights that may accrue to the undersigned hereunder (other than the Shares acquired hereunder, if any) may be transferred or assigned.

 

 

b. The Company may request from the undersigned such additional information as the Company may deem necessary to evaluate the eligibility of the undersigned to acquire the Shares, and the undersigned shall provide such information as may reasonably be requested, to the extent readily available and to the extent consistent with its internal policies and procedures.

 

c. The undersigned acknowledges that the Company, Holdco, the Placement Agent and others will rely on the acknowledgments, understandings, agreements, representations and warranties contained in this Subscription Agreement. Prior to the Closing, the undersigned agrees to promptly notify the Company if any of the acknowledgments, understandings, agreements, representations and warranties set forth herein are no longer accurate. The undersigned agrees that each purchase by the undersigned of Shares from the Company will constitute a reaffirmation of the acknowledgments, understandings, agreements, representations and warranties herein (as modified by any such notice) by the undersigned as of the time of such purchase. The undersigned further acknowledges and agrees that the Placement Agent is a third-party beneficiary of the representations and warranties of the undersigned contained in Section 7 of this Subscription Agreement. Holdco acknowledges and agrees that the undersigned’s officers, directors, partners, members, managers, stockholders and agents, and each person who controls the undersigned (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), are third-party beneficiaries of Holdco’s indemnification obligations set forth in Section 8(e).

 

d. Each of the Company and the undersigned is entitled to rely upon this Subscription Agreement and is irrevocably authorized to produce this Subscription Agreement or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

 

e. All the agreements, representations and warranties made by each party hereto in this Subscription Agreement shall survive the Closing.

 

f. This Subscription Agreement may not be modified, waived or terminated except by an instrument in writing, signed by the party against whom enforcement of such modification, waiver, or termination is sought.

 

g. This Subscription Agreement constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof. Except as otherwise expressly set forth in subsection (c) of this Section 13, this Subscription Agreement shall not confer any rights or remedies upon any person other than the parties hereto, and their respective successor and assigns.

 

h. Except as otherwise provided herein, this Subscription Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors, administrators, successors, legal representatives and permitted assigns.

  

  

i. If any provision of this Subscription Agreement shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Subscription Agreement shall not in any way be affected or impaired thereby and shall continue in full force and effect.

 

j. This Subscription Agreement may be executed in one or more counterparts (including by facsimile or electronic mail or in .pdf) and by different parties in separate counterparts, with the same effect as if all parties hereto had signed the same document. All counterparts so executed and delivered shall be construed together and shall constitute one and the same agreement.

 

k. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Subscription Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Subscription Agreement and to enforce specifically the terms and provisions of this Subscription Agreement, this being in addition to any other remedy to which such party is entitled at law, in equity, in contract, in tort or otherwise.

 

l. THIS SUBSCRIPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER STATE. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS SUBSCRIPTION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

m. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, THE SUPREME COURT OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF NEW YORK SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS SUBSCRIPTION AGREEMENT AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY AGREE NOT TO ASSERT AS A DEFENSE IN ANY SUCH ACTION, SUIT OR PROCEEDING THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS SUBSCRIPTION AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED BY SUCH A NEW YORK STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 12 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.

 

[SIGNATURE PAGES FOLLOW]

 

 

IN WITNESS WHEREOF, the undersigned has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.

 

Name of Investor:			State/Country of Formation or Domicile:
By:
Name:
Title:
Name in which shares are to be registered (if different):			Date: __________________, 2020
Investor’s EIN:
Business Address-Street:			Mailing Address (for notices)-Street (if different):
City, State, Zip:			City, State, Zip:
Attn: ___________________________			Attn: ___________________________
Telephone No.:			Telephone No.:
Email:			Email:
Number of SPAC Shares subscribed for:
Aggregate Subscription Amount: $			Price Per Share: $9.50

 

You must pay the Subscription Amount by wire transfer of United States dollars in immediately available funds to the account specified by the Company in the Closing Notice. To the extent the offering is oversubscribed, the number of SPAC Shares received may be less than the number of SPAC Shares subscribed for.

 

[Signature Page to Subscription Agreement]

 

 

IN WITNESS WHEREOF, Schultze Special Purpose Acquisition Corp. has accepted this Subscription Agreement as of the date set forth below.

 

	SCHULTZE SPECIAL PURPOSE ACQUISITION CORP.
	By:
	Name:
	Title:

 

	Address for Notices:
	Schultze Special Purpose Acquisition Corp.
	800 Westchester Avenue, Suite S-632
	Rye Brook, New York 10573
	Attention: George Schultze; Gary Julien
	Email: [email protected]; [email protected]
	with a copy to:
	Greenberg Traurig, P.A.
	333 SE 2nd Avenue, Suite 4400
	Miami, Florida 33131
	Attention: Alan I. Annex, Esq.
	Email: [email protected]

 

Date: November ___, 2020

 

[Signature Page to Subscription Agreement]

 

 

IN WITNESS WHEREOF, Holdco has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.

 

	CLEVER LEAVES HOLDINGS INC.
	By:
	Name:
	Title:

 

	Address for Notices:
	Clever Leaves Holdings Inc.
	c/o Clever Leaves International Inc.
	489 Fifth Avenue, 27th Floor
	New York NY 10017
	Attention: Kyle Detwiler, David Kastin
	Email: [email protected]
	[email protected]
	with a copy to:
	Freshfields Bruckhaus Deringer US LLP
	601 Lexington Avenue, 31st Floor
	New York, NY 10022
	Attention: Sebastian L. Fain, Esq.
	Email: [email protected]

 

Date: November ___, 2020

 

[Signature Page to Subscription Agreement]

  

 

SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF THE INVESTOR

 

A.

QUALIFIED INSTITUTIONAL BUYER STATUS

 

(Please check the applicable subparagraphs):

 

1.

¨

We are a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act).

 

B.

INSTITUTIONAL ACCREDITED INVESTOR STATUS

 

(Please check the applicable subparagraphs):

 

1.

¨

We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act. for one or more of the following reasons (Please check the applicable subparagraphs):

 

	¨	We are a bank, as defined in Section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or a fiduciary capacity.
	¨	We are a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, as amended.
	¨	We are an insurance company, as defined in Section 2(13) of the Securities Act.
	¨	We are an investment company registered under the Investment Company Act of 1940 or a business development company, as defined in Section 2(a)(48) of that act.
	¨	We are a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
	¨	We are a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if the plan has total assets in excess of $5 million.
	¨	We are an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is being made by a plan fiduciary, as defined in Section 3(21) of such act, and the plan fiduciary is either a bank, an insurance company, or a registered investment adviser, or if the employee benefit plan has total assets in excess of $5 million.
	¨	We are a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.
	¨	We are a corporation, Massachusetts or similar business trust, or partnership, or an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, that was not formed for the specific purpose of acquiring the Securities, and that has total assets in excess of $5 million.

 

 

	¨	We are a trust with total assets in excess of $5 million not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act.
	¨	We are an entity in which all of the equity owners are accredited investors.

 

C.

AFFILIATE STATUS

 

(Please check the applicable box)

 

THE INVESTOR:

 

¨

is:

 

¨

is not:

 

an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company or acting on behalf of an affiliate of the Company.

 

This page should be completed by the Investor and constitutes a part of the Subscription Agreement

  

  

SCHEDULE B

ELIGIBILITY REPRESENTATIONS OF THE INVESTOR (Canadian Investors Only)

 

1.

We hereby declare, represent and warrant that:

 

(a)

we are purchasing the Shares as principal for our own account, or are deemed to be purchasing the Shares as principal for our own account in accordance with applicable Canadian securities laws, and not as agent for the benefit of another investor;

 

(b)

we are residents in or subject to the laws of one of the provinces or territories of Canada;

 

(c)

we are entitled under applicable securities laws to purchase the Shares without the benefit of a prospectus qualified under such securities laws and, without limiting the generality of the foregoing, are both:

 

a.

an “accredited investor” as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions (“NI 45-106”) or section 73.3(2) of the Securities Act (Ontario) by virtue of satisfying the indicated criterion in Section 11 below, and we are not a person created or used solely to purchase or hold securities as an “accredited investor” as described in paragraph (m) of the definition of "accredited investor" in section 1.1 of NI 45-106; and

 

b.

a “permitted client” as defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”) by virtue of satisfying the indicated criterion in Section 12 below

 

(d)

we have received, reviewed and understood, this Subscription Agreement and certain disclosure materials relating to the placing of Shares in Canada and, are basing our investment decision solely on this Subscription and the materials provided by the Company and not on any other information concerning the Company or the offering of the Shares;

 

(e)

the acquisition of Shares does not and will not contravene any applicable Canadian securities laws, rules or policies of the jurisdiction in which we are resident and does not trigger (i) any obligation to prepare and file a prospectus or similar document or (ii) any registration or other similar obligation on the part of any person;

 

(f)

we will execute and deliver within the applicable time periods all documentation as may be required by applicable Canadian securities laws to permit the purchase of the Shares on the terms set forth herein and, if required by applicable Canadian securities laws, will execute, deliver and file or assist the Company in obtaining and filing such reports, undertakings and other documents relating to the purchase of the Shares as may be required by any applicable Canadian securities laws, securities regulator, stock exchange or other regulatory authority; and

 

(g)

neither we nor any party on whose behalf we are acting has been established, formed or incorporated solely to acquire or permit the purchase of Shares without a prospectus in reliance on an exemption from the prospectus requirements of applicable Canadian securities laws.

 

 

2.

We are aware of the characteristics of the Shares, the risks relating to an investment therein and agree that we must bear the economic risk of its investment in the Shares. We understand that we will not be able to resell the Shares under applicable Canadian securities laws except in accordance with limited exemptions and compliance with other requirements of applicable law, and we (and not the Company) are responsible for compliance with applicable resale restrictions or hold periods and will comply with all relevant Canadian securities laws in connection with any resale of the Shares.

 

3.

We hereby undertake to notify the Company immediately of any change to any declaration, representation, warranty or other information relating to us set forth herein which takes place prior to the closing of the purchase of the Shares applied for hereby.

 

4.

We understand and acknowledge that (i) the Company is not a reporting issuer in any province or territory in Canada and its securities are not listed on any stock exchange in Canada and there is currently no public market for the Shares in Canada; and (ii) the Company currently has no intention of becoming a reporting issuer in Canada and the Company is not obligated to file and has no present intention of filing a prospectus with any securities regulatory authority in Canada to qualify the resale of the Shares to the public, or listing the Company’s securities on any stock exchange in Canada and thus the applicable restricted period or hold period may not commence and the Shares may be subject to an unlimited hold period or restricted period in Canada and in that case may only be sold pursuant to limited exemptions under applicable securities legislation.

 

5.

We confirm we have reviewed applicable resale restrictions under relevant Canadian legislation and regulations.

 

6.

It is acknowledged that we should consult our own legal and tax advisors with respect to the tax consequences of an investment in the Shares in our particular circumstances and with respect to the eligibility of the Shares for investment by us and resale restrictions under relevant Canadian legislation and regulations, and that we have not relied on the Company or on the contents of the disclosure materials provided by the Company, for any legal, tax or financial advice.

 

7.

If we are a resident of Quebec, we acknowledge that it is our express wish that all documents evidencing or relating in any way to the sale of the Shares be drawn in the English language only. Si nous sommes résidents de la province de Québec, nous reconnaissons par les présentes que c’est notre volonté expresse que tous les documents faisant foi ou se rapportant de quelque manière à la vente des engagements soient rédigés en anglais seulement.

 

8.

We understand and acknowledge that we are making the representations, warranties and agreements contained herein with the intent that they may be relied upon by the Company and the agents in determining our eligibility to purchase the Shares, including the availability of exemptions from the prospectus requirements of applicable Canadian securities laws in connection with the issuance of the Shares.

 

9.

We consent to the collection, use and disclosure of certain personal information for the purposes of meeting legal, regulatory, self-regulatory, security and audit requirements (including any applicable tax, securities, money laundering or anti-terrorism legislation, rules or regulations) and as otherwise permitted or required by law, which disclosures may include disclosures to tax, securities or other regulatory or self-regulatory authorities in Canada and/or in foreign jurisdictions, if applicable, in connection with the regulatory oversight mandate of such authorities.

 

 

10.

If we are an individual resident in Canada, we acknowledge that: (A) the Company or the agents may be required to provide personal information pertaining to us as required to be disclosed in Schedule I of Form 45-106F1 Report of Exempt Distribution (“Form 45-106F1”) under NI 45-106 (including its name, email address, address, telephone number and the aggregate purchase price paid by the purchaser) (“personal information”) to the securities regulatory authority or regulator in the local jurisdiction (the “Regulator”); (B) the personal information is being collected indirectly by the Regulator under the authority granted to it in securities legislation; and (C) the personal information is being collected for the purposes of the administration and enforcement of the securities legislation; and by purchasing the securities, we shall be deemed to have authorized such indirect collection of personal information by the Regulator. Questions about the indirect collection of information should be directed to the Regulator in the local jurisdiction, using the contact information set out below:

 

(a)

in Alberta, the Alberta Securities Commission, Suite 600, 250 - 5th Street SW, Calgary, Alberta T2P 0R4, Telephone: (403) 297-6454, toll free in Canada: 1-877-355-0585;

 

(b)

in British Columbia, the British Columbia Securities Commission, P.O. Box 10142, Pacific Centre, 701 West Georgia Street, Vancouver, British Columbia V7Y 1L2, Inquiries: (604) 899-6581, toll free in Canada: 1-800-373-6393, Email: [email protected];

 

(c)

in Manitoba, The Manitoba Securities Commission, 500 - 400 St. Mary Avenue, Winnipeg, Manitoba R3C 4K5, Telephone: (204) 945-2548, toll free in Manitoba 1-800-655-5244;

 

(d)

in New Brunswick, Financial and Consumer Services Commission (New Brunswick), 85 Charlotte Street, Suite 300, Saint John, New Brunswick E2L 2J2, Telephone: (506) 658-3060, toll free in Canada: 1-866-933-2222, Email: [email protected];

 

(e)

in Newfoundland and Labrador, Government of Newfoundland and Labrador, Financial Services Regulation Division, P.O. Box 8700, Confederation Building, 2nd Floor, West Block, Prince Philip Drive, St. John’s, Newfoundland and Labrador, A1B 4J6, Attention: Director of Securities, Telephone: (709) 729-4189,

 

(f)

in the Northwest Territories, the Government of the Northwest Territories, Office of the Superintendent of Securities, P.O. Box 1320, Yellowknife, Northwest Territories X1A 2L9, Attention: Deputy Superintendent, Legal & Enforcement, Telephone: (867) 920-8984;

 

(g)

in Nova Scotia, the Nova Scotia Securities Commission, Suite 400, 5251 Duke Street, Duke Tower, P.O. Box 458, Halifax, Nova Scotia B3J 2P8, Telephone: (902) 424-7768;

 

(h)

in Nunavut, Government of Nunavut, Department of Justice, Legal Registries Division, P.O. Box 1000, Station 570, 1st Floor, Brown Building, Iqaluit, Nunavut X0A 0H0, Telephone: (867) 975-6590;

 

(i)

in Ontario, the Inquiries Officer at the 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, Email: [email protected];

 

(j)

in Prince Edward Island, the Prince Edward Island Securities Office, 95 Rochford Street, 4th Floor Shaw Building, P.O. Box 2000, Charlottetown, Prince Edward Island C1A 7N8, Telephone: (902) 368-4569;

 

(k)

in Québec, the Autorité des marchés financiers, 800, Square Victoria, 22e étage, C.P. 246, Tour de la Bourse, Montréal, Québec H4Z 1G3, Telephone: (514) 395-0337 or 1-877-525-0337, Email: [email protected] (For corporate finance issuers), [email protected] (For investment fund issuers);

 

 

(l)

in Saskatchewan, the Financial and Consumer Affairs Authority of Saskatchewan, Suite 601 - 1919 Saskatchewan Drive, Regina, Saskatchewan S4P 4H2, Telephone: (306) 787-5879; and

 

(m)

in Yukon, Government of Yukon, Department of Community Services, Law Centre, 3rd Floor, 2130 Second Avenue, Whitehorse, Yukon Y1A 5H6, Telephone: (867) 667-5314.

 

11.

We hereby represent, warrant, covenant and certify that we are, or any party on whose behalf we are acting is, an “accredited investor” as defined in NI 45-106 or section 73.3(1) of the Securities Act (Ontario) by virtue of satisfying the indicated criterion below:

 

Please check the category that applies:

 

☐		a Canadian financial institution or a Schedule III bank of the Bank Act (Canada),
☐		the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada),
☐		a subsidiary of any person or company referred to in paragraphs (a) or (b) if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary,
☐		a person or company registered under the securities legislation of a province or territory of Canada as an adviser or dealer, except as otherwise prescribed by the regulations,
		[omitted]
	(e.1)	[omitted]
☐		the Government of Canada, the government of a province or territory of Canada, or any Crown corporation, agency or wholly owned entity of the Government of Canada or of the government of a province or territory of Canada,
☐		a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec,
☐		any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government,
☐	(i)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a province or territory of Canada,
		[omitted]
☐	(j.1)	an individual who beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds CAD$5,000,000,
		[omitted]
		[omitted]
☐		a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements,
☐		an investment fund that distributes or has distributed its securities only to
		a person that is or was an accredited investor at the time of the distribution,
		a person that acquires or acquired securities in the circumstances referred to in sections 2.10 of NI 45-106 [Minimum amount investment], or 2.19 of NI 45-106 [Additional investment in investment funds], or
		a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 of NI 45-106 [Investment fund reinvestment],

 

 

☐		an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,
☐		a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be,
☐		a person acting on behalf of a fully managed account1 managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,
☐		a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,
☐		an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (d) or paragraph (i) in form and function,
☐		a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,
☐		an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser,
☐		a person that is recognized or designated by the Commission as an accredited investor,
☐		a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.

 

12.

We hereby represent, warrant, covenant and certify that we are, or any party on whose behalf we are acting is, a “permitted client” by virtue of the criterion indicated below,

 

Please check the category that applies:

 

☐	(a)	a Canadian financial institution or a Schedule III bank;
☐	(b)	the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
☐	(c)	a subsidiary of any person or company referred to in paragraph (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of the subsidiary;

 

1

A “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction.

 

 

☐	(d)	a person or company registered under the securities legislation of a jurisdiction of Canada as an adviser, investment dealer, mutual fund dealer or exempt market dealer;
☐	(e)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions or a pension commission or similar regulatory authority of a jurisdiction of Canada or a wholly-owned subsidiary of such a pension fund;
☐	(f)	an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (e);
☐	(g)	the Government of Canada or a jurisdiction of Canada, or any Crown corporation, agency or wholly-owned entity of the Government of Canada or a jurisdiction of Canada;
☐	(h)	any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
☐	(i)	a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Quebec;
☐	(j)	a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a managed account managed by the trust company or trust corporation, as the case may be;
☐	(k)	a person or company acting on behalf of a managed account managed by person or company, if the person or company is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;
☐	(l)	an investment fund if one or both of the following apply: (i) the fund is managed by a person or company registered as an investment fund manager under the securities legislation of a jurisdiction of Canada; (ii) the fund is advised by a person or company authorized to act as an adviser under the securities legislation of a jurisdiction of Canada;
☐	(m)	in respect of a dealer, a registered charity under the Income Tax Act (Canada) that obtains advice on the securities to be traded from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity;
☐	(n)	in respect of an adviser, a registered charity under the Income Tax Act (Canada) that is advised by an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity;
☐	(o)	a registered charity under the Income Tax Act (Canada) that obtains advice on the securities to be traded from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity;
☐	(p)	an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5 million;
☐	(q)	a person or company that is entirely owned by an individual or individuals referred to in paragraph (o), who holds the beneficial ownership interest in the person or company directly or through a trust, the trustee of which is a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction;
☐	(r)	a person or company, other than an individual or an investment fund, that has net assets of at least C$25,000,000 as shown on its most recently prepared financial statements; or
☐	(s)	a person or company that distributes securities of its own issue in Canada only to persons or companies referred to in paragraphs (a) through (r).

 

 

Schedule B - 6

Exhibit 10.4

 

SUBSCRIPTION AGREEMENT

 

Schultze Special Purpose Acquisition Corp.

800 Westchester Avenue, Suite 632

Rye Brook, NY 10573

 

Ladies and Gentlemen:

 

In connection with the proposed business combination (the “Transaction”) between Schultze Special Purpose Acquisition Corp., a Delaware corporation (the “Company”), and Clever Leaves International Inc., a corporation organized under the laws of British Columbia, Canada (“Clever Leaves”), pursuant to that certain Amended and Restated Business Combination Agreement, dated as of November 9, 2020 (the “Business Combination Agreement”), by and among the Company, Clever Leaves, Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada (“Holdco”), and Novel Merger Sub Inc. a Delaware corporation, (a) the undersigned desires to subscribe for and purchase from the Company, and the Company desires to sell to the undersigned, that number of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), set forth on the signature page hereof for a purchase price of $9.50 per share (the “Per Share Price”), for the aggregate subscription amount set forth on the signature page hereto (the “Purchase Price”), on the terms and subject to the conditions contained herein; and (b) certain other investors have entered into subscription agreements with the Company and Holdco substantially similar to this Subscription Agreement, pursuant to which such other investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to such other investors, on the Transaction Closing Date (as defined below), shares of Common Stock at the Per Share Price (the “Other Subscription Agreements”). Capitalized terms used but not defined herein shall have the respective meanings set forth in the Business Combination Agreement. In connection therewith, the undersigned, the Company and Holdco agree as follows:

 

1. Subscription. The undersigned hereby subscribes for and agrees to purchase from the Company such number of shares of Common Stock as is set forth on the signature page of this Subscription Agreement (collectively, the “SPAC Shares”) on the terms and subject to the conditions provided for herein, and the undersigned, the Company and Holdco acknowledge and agree that, substantially concurrent with the consummation of the Transaction, each SPAC Share will automatically be exchanged for one share of Holdco’s common stock pursuant to the terms of the Business Combination Agreement (collectively, the “Holdco Shares”, and together with the SPAC Shares, the “Shares”). The undersigned understands and agrees that the Company reserves the right to accept or reject the undersigned’s subscription for the SPAC Shares for any reason or for no reason, in whole or in part, at any time prior to its acceptance by the Company, and the same shall be deemed to be accepted by the Company only when this Subscription Agreement is signed by a duly authorized person by or on behalf of the Company; the Company may do so in counterpart form.

 

 

2. Closing. The closing of the sale of the SPAC Shares contemplated hereby (the “Closing”) is contingent upon the substantially concurrent consummation of the Transaction and the satisfaction or waiver of the conditions precedent set forth in Section 3. The Closing shall occur on the date of, and immediately prior to, the consummation of the Transaction (the “Transaction Closing Date”). Not less than five (5) business days prior to the scheduled Transaction Closing Date, the Company shall provide written notice to the undersigned (the “Closing Notice”) specifying: (a) the scheduled Transaction Closing Date and (b) that the Company reasonably expects all conditions to the closing of the Transaction to be satisfied or waived by such date. Upon the Closing, (i) all interest accrued and outstanding to December 31, 2020 to the benefit of the undersigned pursuant to that certain secured convertible note issued to the undersigned by Clever Leaves (formerly Northern Swan Holdings, Inc.) on March 30, 2019, with a maturity date of March 30, 2022, as amended to the date hereof (the “Note”) including pursuant to Amendment, Consent and Waiver Agreement No. 3 dated as of the date hereof (“Amendment #3”), such interest amount set forth on the signature page hereof and equal to the Purchase Price, shall automatically be exchanged for shares of Common Stock at the Per Share Price and, concurrent with completion of the Transaction, be deemed to be cancelled (the “Debt Cancellation”) and (ii) Holdco shall deliver (or cause the delivery of) the Holdco Shares in book-entry form to the undersigned or to a custodian designated by undersigned, as applicable, as indicated below. The undersigned agrees that it shall take all further action, reasonably requested by Clever Leaves upon completion of the Transaction, including the execution of any additional documentation, as requested, to evidence such Debt Cancellation, provided that the costs of such documentation shall be for the sole account of Clever Leaves. Notwithstanding the foregoing or anything contained herein to the contrary, the undersigned and Clever Leaves hereby acknowledge and confirm that, other than the Debt Cancellation, nothing contained in this Subscription Agreement shall be deemed or construed to amend, supplement or modify the Note or otherwise affect the rights and obligations of the undersigned or Clever Leaves thereunder, all of which remain in full force and effect, and that the Note and all other amounts and obligations owing by Clever Leaves to the undersigned shall continue in full force and effect. This Subscription Agreement shall terminate and be of no further force or effect, without any liability to either party hereto, if the Company notifies the undersigned in writing that it has abandoned its plans to move forward with the Transaction.

 

3. Closing Conditions. The Closing shall be subject to the satisfaction on the Transaction Closing Date, or the waiver by each of the parties hereto, of each of the following conditions:

 

a. all representations and warranties of the Company, Holdco and the undersigned contained in this Subscription Agreement shall be true and correct in all material respects (other than representations and warranties that are qualified as to materiality or Company Material Adverse Effect or Holdco Material Adverse Effect (each as defined herein), which representations and warranties shall be true in all respects) at and as of the Transaction Closing Date (or, with respect to any representations and warranties made as of a specific date, as of such specific date), and consummation of the Closing shall constitute a reaffirmation by each of the Company, Holdco and the undersigned of each of the representations, warranties and agreements of such party contained in this Subscription Agreement as of the Transaction Closing Date, but in each case without giving effect to consummation of the Transaction;

 

b. no applicable governmental authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any judgment, order, law, rule or regulation (whether temporary, preliminary or permanent) which is then in effect and has the effect of making consummation of the transactions contemplated hereby illegal or otherwise restraining or prohibiting consummation of the transactions contemplated hereby, and no governmental authority shall have instituted or threatened in writing a proceeding seeking to impose any such restraint or prohibition;

 

 

c. no suspension of the qualification of the Shares for offering or sale or trading in any jurisdiction of competent jurisdiction in which such Shares are being offered and sold, or initiation or threatening of any proceedings for any of such purposes, shall have occurred;

 

d. each of the Company and the undersigned shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Subscription Agreement to be performed, satisfied or complied with by it at or prior to the Closing, except where the failure of such performance or compliance would not or would not reasonably be expected to prevent, materially delay, or materially impair the ability of the parties to consummate the Closing;

 

e. all conditions precedent to the closing of the Transaction set forth in the Business Combination Agreement, including the approval of the Company’s stockholders, shall have been satisfied or, to the extent permitted by applicable law (and except as provided in Section 3(f)), waived (other than those conditions which, by their nature, can only be satisfied at the closing of the Transaction, but subject to satisfaction of such conditions as of the closing of the Transaction);

 

f. with respect to the undersigned’s obligation to consummate the Closing, no amendment, modification or waiver of (i) any provision of the Business Combination Agreement shall have occurred that would reasonably be expected to materially and adversely affect the rights, obligations and/or economic benefits that the undersigned would reasonably expect to receive under this Subscription Agreement (including, without limitation, the economic benefits to the undersigned of being an equity holder of Holdco), or (ii) Section 9.03(f) of the Business Combination Agreement, in each case, without having received the undersigned’s prior written consent (not to be unreasonably withheld, conditioned or delayed);

 

g. each of the conditions precedent set out in Section 3.1 of Amendment #3 shall have been satisfied; and

 

h. all conditions for the Debt Cancellation shall be ready to implement immediately prior to the consummation of the Transaction.

 

4. Further Assurances. The Company and Holdco shall give the undersigned prompt written notice of any amendment, modification or waiver of any provision of the Business Combination Agreement, the Plan of Arrangement, the Holdco Articles or the Calculation Methodology. At the Closing, the parties hereto shall execute and deliver such additional documents and take such additional actions as the parties reasonably may deem to be practical and necessary in order to consummate the subscription as contemplated by this Subscription Agreement.

 

 

5. Company Representations and Warranties. The Company represents and warrants to the undersigned, as of the date hereof and as of the Closing, that:

 

a. The Company has been duly incorporated, is validly existing and is in good standing under the laws of the State of Delaware, with corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted.

 

b. The SPAC Shares have been duly authorized and, when issued and delivered to the undersigned against full payment therefor in accordance with the terms of this Subscription Agreement, the SPAC Shares will be validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under the Company’s Amended and Restated Certificate of Incorporation or bylaws, under any agreement or instrument to which the Company is a party or by which the Company is bound, or under the laws of the State of Delaware.

 

c. This Subscription Agreement, the Other Subscription Agreements and the Business Combination Agreement (collectively, the “Transaction Documents”) have been duly authorized, executed and delivered by the Company and are the valid and binding obligation of the Company and are enforceable against the Company in accordance with their terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.

 

d. The issuance and sale of the SPAC Shares, the execution and delivery by the Company of the Transaction Documents, and the compliance by the Company with all of the provisions of the Transaction Documents, and the consummation of the transactions contemplated herein and therein, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, which would have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of the Company (a “Company Material Adverse Effect”) or materially affect the validity of the SPAC Shares or the legal authority of the Company to comply in all material respects with the terms of this Subscription Agreement and the other Transaction Documents; (ii) result in any violation of the provisions of the organizational documents of the Company; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its properties that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or materially affect the validity of the SPAC Shares or the legal authority of the Company to comply with the terms of this Subscription Agreement and the other Transaction Documents.

 

e. The Company has delivered to the undersigned a true, correct and complete copy of each of the Transaction Documents, including any amendments or modifications thereto and any written waivers of any conditions thereunder.

 

  

f. Assuming the accuracy of the undersigned's representations and warranties set forth in Section 7, no registration under the Securities Act of 1933, as amended (the “Securities Act”) is required for the offer and sale of the SPAC Shares by the Company to the undersigned in the manner contemplated by this Subscription Agreement.

 

g. Neither the Company nor any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) in connection with any offer or sale of the SPAC Shares.

 

6. Holdco Representations and Warranties. Holdco represents and warrants to the undersigned, as of the date hereof and as of the Closing, that:

 

a. Holdco has been duly incorporated, is validly existing and is in good standing under the laws of British Columbia, Canada, with corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted.

 

b. When issued and delivered to the undersigned in exchange for the SPAC Shares, the Holdco Shares will be duly authorized, validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under Holdco’s organizational documents, under any agreement or instrument to which Holdco is a party or by which Holdco is bound, or under the laws of British Columbia, Canada.

 

c. The Transaction Documents have been duly authorized, executed and delivered by Holdco and are the valid and binding obligation of Holdco and are enforceable against Holdco in accordance with their terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.

 

d. The issuance of the Holdco Shares, the execution and delivery by Holdco of the Transaction Documents, and the compliance by Holdco with all of the provisions of the Transaction Documents, and the consummation of the transactions contemplated herein and therein, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Holdco or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which Holdco or any of its subsidiaries is a party or by which Holdco or any of its subsidiaries is bound or to which any of the property or assets of Holdco or any of its subsidiaries is subject, which would have a material adverse effect on the business, properties, financial condition, stockholders’ equity or results of operations of Holdco (a “Holdco Material Adverse Effect”) or materially affect the validity of the Holdco Shares or the legal authority of Holdco to comply in all material respects with the terms of this Subscription Agreement and the other Transaction Documents; (ii) result in any violation of the provisions of the organizational documents of Holdco; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Holdco or any of its properties that would reasonably be expected to have, individually or in the aggregate, a Holdco Material Adverse Effect or materially affect the validity of the Holdco Shares or the legal authority of Holdco to comply with the terms of this Subscription Agreement and the other Transaction Documents.

 

  

e. Assuming the accuracy of the undersigned's representations and warranties set forth in Section 7, no registration under the Securities Act is required for the issuance of the Holdco Shares to the undersigned in exchange for the SPAC Shares in the manner contemplated by the Business Combination Agreement.

 

7. Subscriber Representations and Warranties. The undersigned represents and warrants to the Company, as of the date hereof and as of the Closing, that:

 

a. The undersigned is (i) a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) or (ii) an institutional “accredited investor” (within the meaning of Rule 501(a) under the Securities Act), in each case, satisfying the requirements set forth on Schedule A, and is acquiring the Shares only for his, her or its own account and not for the account of others, and not on behalf of any other account or person or with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act (and shall provide the requested information on Schedule A following the signature page hereto). The undersigned is not an entity formed for the specific purpose of acquiring the Shares.

 

b. The undersigned understands that the Shares are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Shares have not been registered under the Securities Act. The undersigned understands that the Shares may not be resold, transferred, pledged or otherwise disposed of by the undersigned absent an effective registration statement under the Securities Act except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities Act, and in each of cases (i) and (iii) in accordance with any applicable securities laws of the states and other jurisdictions of the United States, and that any certificates representing the Shares shall contain a legend to such effect. The undersigned acknowledges that the Shares will not be eligible for resale pursuant to Rule 144A promulgated under the Securities Act. The undersigned acknowledges the Shares will be “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act and the undersigned understands that any certificates representing the Shares will contain a legend in respect of such restrictions. The undersigned agrees that if any transfer of the Shares or any interest therein is proposed to be made (other than a transfer pursuant to the Registration Statement (as defined below) or Rule 144), as a condition precedent to any such transfer, the undersigned may be required to deliver to the Company an opinion of counsel satisfactory to the Company. The undersigned further acknowledges that because the Company is a shell company, Rule 144 may not be available to the undersigned for the resale of the Shares until one (1) year following consummation of the Transaction, despite technical compliance with the requirements of Rule 144 and the release or waiver of any contractual transfer restrictions. The undersigned understands and agrees that the Shares will be subject to transfer restrictions and, as a result of these transfer restrictions, the undersigned may not be able to readily resell the Shares and may be required to bear the financial risk of an investment in the Shares for an indefinite period of time. The undersigned understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Shares.

 

  

c. The undersigned understands and agrees that the undersigned is purchasing the SPAC Shares directly from the Company. The undersigned further acknowledges that there have been no representations, warranties, covenants and agreements made to the undersigned by the Company, or its officers or directors, expressly or by implication, other than those representations, warranties, covenants and agreements included in this Subscription Agreement.

 

d. The undersigned’s acquisition and holding of the Shares will not constitute or result in a non-exempt prohibited transaction under Section 406 of the Employee Retirement Income Security Act of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, as amended, or any applicable similar law.

 

e. The undersigned acknowledges and agrees that the undersigned has received such information as the undersigned deems necessary in order to make an investment decision with respect to the Shares. Without limiting the generality of the foregoing, the undersigned acknowledges that it has reviewed the Transaction Documents provided to the undersigned by the Company. The undersigned represents and agrees that the undersigned and the undersigned’s professional advisor(s), if any, have had the full opportunity to ask such questions, receive such answers and obtain such information as the undersigned and such undersigned’s professional advisor(s), if any, have deemed necessary to make an investment decision with respect to the Shares.

 

f. The undersigned became aware of this offering of the Shares solely by means of direct contact between the undersigned, the Company and Holdco and representatives of the Company and Holdco, and the Shares were offered to the undersigned solely by direct contact between the undersigned, the Company and Holdco and representatives of the Company and Holdco. The undersigned did not become aware of this offering of the Shares, nor were the Shares offered to the undersigned, by any other means. The undersigned acknowledges that each of the Company and Holdco represents and warrants that the Shares (i) were not offered by any form of general solicitation or general advertising and (ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or any state securities laws.

 

g. The undersigned acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Shares. The undersigned has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares, and the undersigned has sought such accounting, legal and tax advice as the undersigned has considered necessary to make an informed investment decision.

 

h. The undersigned has adequately analyzed and fully considered the risks of an investment in the Shares and determined that the Shares are a suitable investment for the undersigned and that the undersigned is able at this time and in the foreseeable future to bear the economic risk of a total loss of the undersigned’s investment in the Company and Holdco. The undersigned acknowledges specifically that a possibility of total loss exists.

 

i. In making its decision to purchase the Shares, the undersigned has relied solely upon independent investigation made by the undersigned. Without limiting the generality of the foregoing, the undersigned has not relied on any statements or other information provided by the Placement Agent (as defined below) concerning the Company, Holdco or the Shares or the offer and sale of the Shares.

 

 

j. The undersigned understands and agrees that no federal or state agency has passed upon or endorsed the merits of the offering of the Shares or made any findings or determination as to the fairness of this investment.

 

k. The undersigned has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation.

 

l. The execution, delivery and performance by the undersigned of this Subscription Agreement are within the powers of the undersigned, have been duly authorized and will not constitute or result in a breach or default under or conflict with any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking, to which the undersigned is a party or by which the undersigned is bound, and, if the undersigned is not an individual, will not violate any provisions of the undersigned’s charter documents, including, without limitation, its incorporation or formation papers, bylaws, indenture of trust or partnership or operating agreement, as may be applicable. The signature on this Subscription Agreement is genuine, and the signatory, if the undersigned is an individual, has legal competence and capacity to execute the same or, if the undersigned is not an individual, the signatory has been duly authorized to execute the same, and this Subscription Agreement constitutes a legal, valid and binding obligation of the undersigned, enforceable against the undersigned in accordance with its terms.

 

m. Neither the due diligence investigation conducted by the undersigned in connection with making its decision to acquire the Shares nor any representations and warranties made by the undersigned herein shall modify, amend or affect the undersigned’s right to rely on the truth, accuracy and completeness of the Company’s and Holdco’s representations and warranties contained herein.

 

n. The undersigned is not (i) a person or entity named on the List of Specially Designated Nationals and Blocked Persons administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or in any Executive Order issued by the President of the United States and administered by OFAC (“OFAC List”), or a person or entity prohibited by any OFAC sanctions program, (ii) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank (collectively, a “Prohibited Investor”). The undersigned agrees to provide law enforcement agencies, if requested thereby, such records as required by applicable law, provided that the undersigned is permitted to do so under applicable law. If the undersigned is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) (the “BSA”), as amended by the USA PATRIOT Act of 2001 (the “PATRIOT Act”), and its implementing regulations (collectively, the “BSA/PATRIOT Act”), the undersigned maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act.  To the extent required, it maintains policies and procedures reasonably designed for the screening of its investors against the OFAC sanctions programs, including the OFAC List. To the extent required, it maintains policies and procedures reasonably designed to ensure that the funds held by the undersigned and used to purchase the Shares were legally derived.

 

  

o. No disclosure or offering document has been prepared by Canaccord Genuity Group Inc. (the “Placement Agent”) or any of its affiliates in connection with the offer and sale of the Shares.

 

p. The Placement Agent and its directors, officers, employees, representatives and controlling persons have made no independent investigation with respect to the Company, Holdco or the Shares or the accuracy, completeness or adequacy of any information supplied to the undersigned by the Company or Holdco.

 

q. In connection with the issue and purchase of the Shares, the Placement Agent has not acted as the undersigned’s financial advisor or fiduciary.

 

r. If the undersigned is a resident or subject to the laws of Canada, the undersigned hereby declares, represents, warrants and agrees as set forth in the attached Schedule B.

 

8. Registration Rights.

 

a. In the event that the Holdco Shares are not registered in connection with the consummation of the Transaction, Holdco agrees that, within thirty (30) calendar days after the consummation of the Transaction (the “Filing Date”), Holdco will file with the Securities and Exchange Commission (the “SEC”) (at Holdco’s sole cost and expense) a registration statement (the “Registration Statement”) registering such resale, and Holdco shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof and no later than ninety (90) days (or forty-five (45) days if the SEC notifies the Company that it will not “review” the Registration Statement) after the Transaction Closing Date (as applicable, the “Effectiveness Date”); provided, however, that if the SEC is closed for operations due to a government shutdown, the Effectiveness Date shall be extended by the same number of days that the SEC remains closed for operations, provided, further, that Holdco’s obligations to include the Holdco Shares in the Registration Statement are contingent upon the undersigned furnishing in writing to Holdco such information regarding the undersigned, the securities of Holdco held by the undersigned and the intended method of disposition of the Holdco Shares as shall be reasonably requested by Holdco to effect the registration of the Holdco Shares, and shall execute such documents in connection with such registration as Holdco may reasonably request that are customary of a selling stockholder in similar situations. For purposes of clarification, any failure by Holdco to file the Registration Statement by the Filing Date or to effect such Registration Statement by the Effectiveness Date shall not otherwise relieve Holdco of its obligations to file or effect the Registration Statement as set forth above in this Section 8.

 

 

b. In the case of the registration, qualification, exemption or compliance effected by Holdco pursuant to this Subscription Agreement, Holdco shall, upon reasonable request, inform the undersigned as to the status of such registration, qualification, exemption and compliance. At its expense Holdco shall:

 

(i) except for such times as Holdco is permitted hereunder to suspend the use of the prospectus forming part of a Registration Statement, use its commercially reasonable efforts to keep such registration, and any qualification, exemption or compliance under state securities laws which Holdco determines to obtain, continuously effective with respect to the undersigned, and to keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions, until the earliest of (A) the date on which all of the Holdco Shares held by the undersigned may be sold without restriction under Rule 144 promulgated under the Securities Act, including, without limitation, any volume and manner of sale restrictions which may be applicable to Affiliates (as defined in Rule 144) under Rule 144, and without the requirement for Holdco to be in compliance with the current public information required under Rule 144(c)(1) or Rule 144(i)(2), as applicable, (B) the date on which the undersigned ceases to hold any Holdco Shares acquired pursuant to this Subscription Agreement, and (C) the second anniversary of the Transaction Closing Date; provided that the period under this clause (C) shall be extended by the same number of days that the Registration Statement is suspended in accordance with Section 8(c).

 

(ii) advise the undersigned within five (5) business days:

 

(1)

when a Registration Statement or any amendment thereto has been filed with the SEC and when such Registration Statement or any post-effective amendment thereto has become effective;

 

(2)

of any request by the SEC for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information;

 

(3)

of the issuance by the SEC of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose;

 

(4)

of the receipt by Holdco of any notification with respect to the suspension of the qualification of the Holdco Shares included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

(5)

subject to the provisions in this Subscription Agreement, of the occurrence of any event that requires the making of any changes in any Registration Statement or prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading.

 

Notwithstanding anything to the contrary set forth in the foregoing clause (ii), Holdco shall not, when so advising the undersigned of the events listed in (1) through (5) above, provide the undersigned with any material, nonpublic information regarding Holdco (other than to the extent that providing notice to the undersigned of the occurrence of the events listed in (1) through (5) above constitutes material, nonpublic information regarding Holdco);

 

(iii) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;

 

 

(iv) upon the occurrence of any event contemplated in Sections 8(b)(ii)(2)-(5) above, except for such times as Holdco is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, Holdco shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Holdco Shares included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(v) use its commercially reasonable efforts to cause all Holdco Shares to be listed on each securities exchange or market, if any, on which Holdco’s common stock is listed; and

 

(vi) use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Holdco Shares contemplated hereby and to enable the undersigned to sell the Holdco Shares under Rule 144.

 

c. Notwithstanding anything to the contrary in this Subscription Agreement, Holdco shall be entitled to delay or postpone the effectiveness of the Registration Statement, and from time to time to require the undersigned not to sell under the Registration Statement or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by Holdco or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event Holdco's board of directors reasonably believes would require additional disclosure by Holdco in the Registration Statement of material information that Holdco has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of Holdco's board of directors to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided, however, that Holdco may not delay or suspend the Registration Statement on more than two occasions in any twelve (12) month period or for more than sixty (60) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve (12) month period. Upon receipt of any written notice from Holdco of the happening of any Suspension Event during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, the undersigned agrees that it will (i) immediately discontinue offers and sales of the Holdco Shares under the Registration Statement until the undersigned receives copies of a supplemental or amended prospectus (which Holdco agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by Holdco that it may resume such offers and sales, and (ii) maintain the confidentiality of any information included in such written notice delivered by Holdco unless otherwise required by applicable law or subpoena.

 

 

d. The undersigned may deliver written notice (an “Opt-Out Notice”) to Holdco requesting that the undersigned not receive notices from Holdco otherwise required by this Section 8; provided, however, that the undersigned may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from the undersigned (unless subsequently revoked), (i) Holdco shall not deliver any such notices to the undersigned and the undersigned shall no longer be entitled to the rights associated with any such notice and (ii) each time prior to the undersigned's intended use of an effective Registration Statement, the undersigned will notify Holdco in writing at least two (2) business days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 8(d)) and the related suspension period remains in effect, Holdco will so notify the undersigned, within one (1) business day of the undersigned's notification to Holdco, by delivering to the undersigned a copy of such previous notice of Suspension Event, and thereafter will provide the undersigned with the related notice of the conclusion of such Suspension Event immediately upon its availability

 

e. Holdco shall indemnify, defend and hold harmless the undersigned (to the extent a seller under the Registration Statement), the officers, directors, partners, members, managers, stockholders and agents of the undersigned, and each person who controls the undersigned (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including reasonable costs of preparation and investigation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included in the Registration Statement 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 to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation by Holdco of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Section 8, except to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding the undersigned furnished in writing to Holdco by the undersigned expressly for use therein or the undersigned has omitted a material fact from such information or otherwise violated the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder; provided, however, that the indemnification contained in this Section 8 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of Holdco (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall Holdco be liable for any Losses to the extent they arise out of or are based upon a violation which occurs solely as a result of (A) if Holdco has made available to the undersigned a prospectus in accordance with this Section 8, the failure of the undersigned to deliver or cause to be delivered such prospectus to a purchaser of Holdco Shares from the undersigned pursuant to the Registration Statement in a timely manner, (B) an offer or sale of Holdco Shares effected by the undersigned by means of a freewriting prospectus (as defined in Rule 405) that was not authorized in writing by Holdco, or (C) an offer or sale of Holdco Shares effected by the undersigned pursuant to the Registration Statement in violation of Section 8(c). Holdco shall notify the undersigned promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 8 of which Holdco is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Holdco Shares by the undersigned.

 

 

f. The undersigned shall indemnify and hold harmless Holdco, its directors, officers, partners, members, managers, stockholders and agents and each person who controls Holdco (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), to the fullest extent permitted by applicable law, from and against all Losses, as incurred, that arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in the Registration Statement, 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 any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding the undersigned furnished in writing to Holdco by the undersigned expressly for use therein; provided, however, that the indemnification contained in this Section 8 shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the undersigned (which consent shall not be unreasonably withheld, conditioned or delayed). In no event shall the liability of the undersigned be greater in amount than the dollar amount of the net proceeds received by the undersigned upon the sale of the Holdco Shares giving rise to such indemnification obligation. The undersigned shall notify Holdco promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section 8 of which the undersigned is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Holdco Shares by the undersigned.

 

9. Lock-Up. The undersigned acknowledges and agrees that, without the prior written consent of the Company, during the period commencing on the Transaction Closing Date and continuing until the forty-fifth (45th) day following the Transaction Closing Date, the undersigned shall not (a) sell, assign, transfer (including by operation of law), incur any liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever, dispose of or otherwise encumber (each, a “Transfer”), (b) make any short sale of, grant any option for the purchase of, or (c) enter into any hedging or similar transaction with the same economic effect as a Transfer of, any of the Holdco Shares. The Company may impose stop-transfer instructions and may stamp each certificate representing the Holdco Shares with an appropriate legend to enforce the provisions of the foregoing sentence. Any purported Transfer or other transaction in violation of this Section 9 shall be null and void.

 

10. Termination. This Subscription Agreement shall terminate and be void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earlier to occur of (a) such date and time as the Business Combination Agreement is terminated in accordance with its terms without the Transaction being consummated, (b) upon the mutual written agreement of each of the parties hereto to terminate this Subscription Agreement, (c) if any of the conditions to Closing set forth in Section 3 of this Subscription Agreement are not satisfied or waived by each of the parties hereto on or prior to the Transaction Closing Date and, as a result thereof, the transactions contemplated by this Subscription Agreement are not consummated on such date, or (d) December 31, 2020; provided that nothing herein will relieve any party from liability for any willful breach hereof prior to the time of termination, and each party will be entitled to any remedies at law or in equity to recover losses, liabilities or damages arising from such breach. If the transactions contemplated by the Business Combination Agreement are not consummated, then rights and obligations of Holdco shall terminate without any further liability on the part of Holdco. The Company shall promptly notify the undersigned of the termination of the Business Combination Agreement after the termination of such agreement.

 

 

11. Trust Account Waiver. The undersigned acknowledges that the Company is a blank check company with the powers and privileges to effect a merger, asset acquisition, reorganization or similar business combination involving the Company and one or more businesses or assets. The undersigned further acknowledges that, as described in the Company’s prospectus relating to its initial public offering dated December 10, 2018 (the “Prospectus”) available at www.sec.gov, substantially all of the Company’s assets consist of the cash proceeds of the Company’s initial public offering and private placement of its securities, and substantially all of those proceeds have been deposited in a trust account (the “Trust Account”) for the benefit of the Company and its public stockholders. For and in consideration of the Company entering into this Subscription Agreement, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby irrevocably waives any and all right, title and interest, or any claim of any kind it has or may have in the future, in or to any monies held in the Trust Account, and agrees not to seek recourse against the Trust Account as a result of, or arising out of, this Subscription Agreement.

 

12. Notices. Any notice or communication to a party hereto required or permitted hereunder shall be in writing and either delivered personally, emailed, sent by overnight mail via a reputable overnight carrier, or sent by certified or registered mail, postage prepaid, and shall be deemed to be given and received (a) when so delivered personally, (b) when sent, with no mail undeliverable or other rejection notice, if sent by email, or (c) five (5) business days after the date of mailing to the address or email address of such party set forth beneath such party’s signature hereto (or to such other address or email address as a party may hereafter designate by notice given to the other parties in accordance with this Section 12).

 

13. Miscellaneous.

 

a. Neither this Subscription Agreement nor any rights that may accrue to the undersigned hereunder (other than the Shares acquired hereunder, if any) may be transferred or assigned.

 

b. The Company may request from the undersigned such additional information as the Company may deem necessary to evaluate the eligibility of the undersigned to acquire the Shares, and the undersigned shall provide such information as may reasonably be requested, to the extent readily available and to the extent consistent with its internal policies and procedures.

 

 

c. The undersigned acknowledges that the Company, Holdco, the Placement Agent and others will rely on the acknowledgments, understandings, agreements, representations and warranties contained in this Subscription Agreement. Prior to the Closing, the undersigned agrees to promptly notify the Company if any of the acknowledgments, understandings, agreements, representations and warranties set forth herein are no longer accurate. The undersigned agrees that each purchase by the undersigned of Shares from the Company will constitute a reaffirmation of the acknowledgments, understandings, agreements, representations and warranties herein (as modified by any such notice) by the undersigned as of the time of such purchase. The undersigned further acknowledges and agrees that the Placement Agent is a third-party beneficiary of the representations and warranties of the undersigned contained in Section 7 of this Subscription Agreement. Holdco acknowledges and agrees that the undersigned’s officers, directors, partners, members, managers, stockholders and agents, and each person who controls the undersigned (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), are third-party beneficiaries of Holdco’s indemnification obligations set forth in Section 8(e).

 

d. Each of the Company and the undersigned is entitled to rely upon this Subscription Agreement and is irrevocably authorized to produce this Subscription Agreement or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

 

e. All the agreements, representations and warranties made by each party hereto in this Subscription Agreement shall survive the Closing.

 

f. This Subscription Agreement may not be modified, waived or terminated except by an instrument in writing, signed by the party against whom enforcement of such modification, waiver, or termination is sought.

 

g. This Subscription Agreement constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof. Except as otherwise expressly set forth in subsection (c) of this Section 13, this Subscription Agreement shall not confer any rights or remedies upon any person other than the parties hereto, and their respective successor and assigns.

 

h. Except as otherwise provided herein, this Subscription Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

i. If any provision of this Subscription Agreement shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Subscription Agreement shall not in any way be affected or impaired thereby and shall continue in full force and effect.

 

j. This Subscription Agreement may be executed in one or more counterparts (including by facsimile or electronic mail or in .pdf) and by different parties in separate counterparts, with the same effect as if all parties hereto had signed the same document. All counterparts so executed and delivered shall be construed together and shall constitute one and the same agreement.

 

  

k. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Subscription Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Subscription Agreement and to enforce specifically the terms and provisions of this Subscription Agreement, this being in addition to any other remedy to which such party is entitled at law, in equity, in contract, in tort or otherwise.

 

l. THIS SUBSCRIPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER STATE. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS SUBSCRIPTION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

m. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, THE SUPREME COURT OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF NEW YORK SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS SUBSCRIPTION AGREEMENT AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY AGREE NOT TO ASSERT AS A DEFENSE IN ANY SUCH ACTION, SUIT OR PROCEEDING THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS SUBSCRIPTION AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED BY SUCH A NEW YORK STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 12 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.

 

[SIGNATURE PAGES FOLLOW]

 

 

IN WITNESS WHEREOF, the undersigned has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.

 

Name of Investor:				State/Country of Formation or Domicile:
By:
Name:
Title:
Name in which shares are to be registered (if different):				Date: __________________, 2020
Investor’s EIN:
Business Address-Street:				Mailing Address (for notices)-Street (if different):
City, State, Zip:				City, State, Zip:
Attn:				Attn:
Telephone No.:				Telephone No.:
Email:				Email:
Number of SPAC Shares subscribed for:
Aggregate Subscription Amount: $				Price Per Share: $9.50

 

 

  

IN WITNESS WHEREOF, Schultze Special Purpose Acquisition Corp. has accepted this Subscription Agreement as of the date set forth below.

 

	SCHULTZE SPECIAL PURPOSE ACQUISITION CORP.
	By:
	Name:
	Title:
	Address for Notices:
	Schultze Special Purpose Acquisition Corp.
	800 Westchester Avenue, Suite S-632
	Rye Brook, New York 10573
	Attention: George Schultze; Gary Julien
	Email: [email protected]; [email protected]
	with a copy to:
	Greenberg Traurig, P.A.
	333 SE 2nd Avenue, Suite 4400
	Miami, Florida 33131
	Attention: Alan I. Annex, Esq.
	Email: [email protected]

 

Date: _____________, 2020

 

[Signature Page to Subscription Agreement]

 

 

IN WITNESS WHEREOF, Holdco has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.

 

	CLEVER LEAVES HOLDINGS INC.
	By:
	Name:
	Title:
	Address for Notices:
	Clever Leaves Holdings Inc.
	c/o Clever Leaves International Inc.
	489 Fifth Avenue, 27th Floor
	New York NY 10017
	Attention: Kyle Detwiler, David Kastin
	Email: [email protected]
	[email protected]
	with a copy to:
	Freshfields Bruckhaus Deringer US LLP
	601 Lexington Avenue, 31st Floor
	New York, NY 10022
	Attention: Sebastian L. Fain, Esq.
	Email: [email protected]

 

Date: _____________, 2020

 

[Signature Page to Subscription Agreement] 

 

 

SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF THE INVESTOR

 

A.

QUALIFIED INSTITUTIONAL BUYER STATUS

 

(Please check the applicable subparagraphs):

 

1.

☐

We are a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act).

 

B.  INSTITUTIONAL ACCREDITED INVESTOR STATUS

 

(Please check the applicable subparagraphs):

 

1.

☐

We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act. for one or more of the following reasons (Please check the applicable subparagraphs):

  

☐

We are a bank, as defined in Section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or a fiduciary capacity.

 

☐

We are a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, as amended.

 

☐

We are an insurance company, as defined in Section 2(13) of the Securities Act.

 

☐

We are an investment company registered under the Investment Company Act of 1940 or a business development company, as defined in Section 2(a)(48) of that act.

 

☐

We are a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.

 

☐

We are a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if the plan has total assets in excess of $5 million.

 

☐

We are an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is being made by a plan fiduciary, as defined in Section 3(21) of such act, and the plan fiduciary is either a bank, an insurance company, or a registered investment adviser, or if the employee benefit plan has total assets in excess of $5 million.

 

☐

We are a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

 

☐

We are a corporation, Massachusetts or similar business trust, or partnership, or an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, that was not formed for the specific purpose of acquiring the Securities, and that has total assets in excess of $5 million.

 

 

☐

We are a trust with total assets in excess of $5 million not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act.

 

☐

We are an entity in which all of the equity owners are accredited investors.

 

C.

AFFILIATE STATUS

 

(Please check the applicable box)

 

THE INVESTOR:

 

☐

is:

 

☐

is not:

 

an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company or acting on behalf of an affiliate of the Company.

 

This page should be completed by the Investor and constitutes a part of the Subscription Agreement

 

  

SCHEDULE B

ELIGIBILITY REPRESENTATIONS OF THE INVESTOR (Canadian Investors Only)

 

1.

We hereby declare, represent and warrant that:

 

(a)

we are purchasing the Shares as principal for our own account, or are deemed to be purchasing the Shares as principal for our own account in accordance with applicable Canadian securities laws, and not as agent for the benefit of another investor;

 

(b)

we are residents in or subject to the laws of one of the provinces or territories of Canada;

 

(c)

we are entitled under applicable securities laws to purchase the Shares without the benefit of a prospectus qualified under such securities laws and, without limiting the generality of the foregoing, are both:

 

a.

an “accredited investor” as defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions (“NI 45-106”) or section 73.3(2) of the Securities Act (Ontario) by virtue of satisfying the indicated criterion in Section 11 below, and we are not a person created or used solely to purchase or hold securities as an “accredited investor” as described in paragraph (m) of the definition of "accredited investor" in section 1.1 of NI 45-106; and

 

b.

a “permitted client” as defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”) by virtue of satisfying the indicated criterion in Section 12 below

 

(d)

we have received, reviewed and understood, this Subscription Agreement and certain disclosure materials relating to the placing of Shares in Canada and, are basing our investment decision solely on this Subscription and the materials provided by the Company and not on any other information concerning the Company or the offering of the Shares;

 

(e)

the acquisition of Shares does not and will not contravene any applicable Canadian securities laws, rules or policies of the jurisdiction in which we are resident and does not trigger (i) any obligation to prepare and file a prospectus or similar document or (ii) any registration or other similar obligation on the part of any person;

 

(f)

we will execute and deliver within the applicable time periods all documentation as may be required by applicable Canadian securities laws to permit the purchase of the Shares on the terms set forth herein and, if required by applicable Canadian securities laws, will execute, deliver and file or assist the Company in obtaining and filing such reports, undertakings and other documents relating to the purchase of the Shares as may be required by any applicable Canadian securities laws, securities regulator, stock exchange or other regulatory authority; and

 

(g)

neither we nor any party on whose behalf we are acting has been established, formed or incorporated solely to acquire or permit the purchase of Shares without a prospectus in reliance on an exemption from the prospectus requirements of applicable Canadian securities laws.

 

  

2.

We are aware of the characteristics of the Shares, the risks relating to an investment therein and agree that we must bear the economic risk of its investment in the Shares. We understand that we will not be able to resell the Shares under applicable Canadian securities laws except in accordance with limited exemptions and compliance with other requirements of applicable law, and we (and not the Company) are responsible for compliance with applicable resale restrictions or hold periods and will comply with all relevant Canadian securities laws in connection with any resale of the Shares.

 

3.

We hereby undertake to notify the Company immediately of any change to any declaration, representation, warranty or other information relating to us set forth herein which takes place prior to the closing of the purchase of the Shares applied for hereby.

 

4.

We understand and acknowledge that (i) the Company is not a reporting issuer in any province or territory in Canada and its securities are not listed on any stock exchange in Canada and there is currently no public market for the Shares in Canada; and (ii) the Company currently has no intention of becoming a reporting issuer in Canada and the Company is not obligated to file and has no present intention of filing a prospectus with any securities regulatory authority in Canada to qualify the resale of the Shares to the public, or listing the Company’s securities on any stock exchange in Canada and thus the applicable restricted period or hold period may not commence and the Shares may be subject to an unlimited hold period or restricted period in Canada and in that case may only be sold pursuant to limited exemptions under applicable securities legislation.

 

5.

We confirm we have reviewed applicable resale restrictions under relevant Canadian legislation and regulations.

 

6.

It is acknowledged that we should consult our own legal and tax advisors with respect to the tax consequences of an investment in the Shares in our particular circumstances and with respect to the eligibility of the Shares for investment by us and resale restrictions under relevant Canadian legislation and regulations, and that we have not relied on the Company or on the contents of the disclosure materials provided by the Company, for any legal, tax or financial advice.

 

7.

If we are a resident of Quebec, we acknowledge that it is our express wish that all documents evidencing or relating in any way to the sale of the Shares be drawn in the English language only. Si nous sommes résidents de la province de Québec, nous reconnaissons par les présentes que c’est notre volonté expresse que tous les documents faisant foi ou se rapportant de quelque manière à la vente des engagements soient rédigés en anglais seulement.

 

8.

We understand and acknowledge that we are making the representations, warranties and agreements contained herein with the intent that they may be relied upon by the Company and the agents in determining our eligibility to purchase the Shares, including the availability of exemptions from the prospectus requirements of applicable Canadian securities laws in connection with the issuance of the Shares.

 

9.

We consent to the collection, use and disclosure of certain personal information for the purposes of meeting legal, regulatory, self-regulatory, security and audit requirements (including any applicable tax, securities, money laundering or anti-terrorism legislation, rules or regulations) and as otherwise permitted or required by law, which disclosures may include disclosures to tax, securities or other regulatory or self-regulatory authorities in Canada and/or in foreign jurisdictions, if applicable, in connection with the regulatory oversight mandate of such authorities.

 

  

10.

If we are an individual resident in Canada, we acknowledge that: (A) the Company or the agents may be required to provide personal information pertaining to us as required to be disclosed in Schedule I of Form 45-106F1 Report of Exempt Distribution (“Form 45-106F1”) under NI 45-106 (including its name, email address, address, telephone number and the aggregate purchase price paid by the purchaser) (“personal information”) to the securities regulatory authority or regulator in the local jurisdiction (the “Regulator”); (B) the personal information is being collected indirectly by the Regulator under the authority granted to it in securities legislation; and (C) the personal information is being collected for the purposes of the administration and enforcement of the securities legislation; and by purchasing the securities, we shall be deemed to have authorized such indirect collection of personal information by the Regulator. Questions about the indirect collection of information should be directed to the Regulator in the local jurisdiction, using the contact information set out below:

 

(a)

in Alberta, the Alberta Securities Commission, Suite 600, 250 - 5th Street SW, Calgary, Alberta T2P 0R4, Telephone: (403) 297-6454, toll free in Canada: 1-877-355-0585;

 

(b)

in British Columbia, the British Columbia Securities Commission, P.O. Box 10142, Pacific Centre, 701 West Georgia Street, Vancouver, British Columbia V7Y 1L2, Inquiries: (604) 899-6581, toll free in Canada: 1-800-373-6393, Email: [email protected];

 

(c)

in Manitoba, The Manitoba Securities Commission, 500 - 400 St. Mary Avenue, Winnipeg, Manitoba R3C 4K5, Telephone: (204) 945-2548, toll free in Manitoba 1-800-655-5244;

 

(d)

in New Brunswick, Financial and Consumer Services Commission (New Brunswick), 85 Charlotte Street, Suite 300, Saint John, New Brunswick E2L 2J2, Telephone: (506) 658-3060, toll free in Canada: 1-866-933-2222, Email: [email protected];

 

(e)

in Newfoundland and Labrador, Government of Newfoundland and Labrador, Financial Services Regulation Division, P.O. Box 8700, Confederation Building, 2nd Floor, West Block, Prince Philip Drive, St. John’s, Newfoundland and Labrador, A1B 4J6, Attention: Director of Securities, Telephone: (709) 729-4189,

 

(f)

in the Northwest Territories, the Government of the Northwest Territories, Office of the Superintendent of Securities, P.O. Box 1320, Yellowknife, Northwest Territories X1A 2L9, Attention: Deputy Superintendent, Legal & Enforcement, Telephone: (867) 920-8984;

 

(g)

in Nova Scotia, the Nova Scotia Securities Commission, Suite 400, 5251 Duke Street, Duke Tower, P.O. Box 458, Halifax, Nova Scotia B3J 2P8, Telephone: (902) 424-7768;

 

(h)

in Nunavut, Government of Nunavut, Department of Justice, Legal Registries Division, P.O. Box 1000, Station 570, 1st Floor, Brown Building, Iqaluit, Nunavut X0A 0H0, Telephone: (867) 975-6590;

 

(i)

in Ontario, the Inquiries Officer at the 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, Email: [email protected];

 

(j)

in Prince Edward Island, the Prince Edward Island Securities Office, 95 Rochford Street, 4th Floor Shaw Building, P.O. Box 2000, Charlottetown, Prince Edward Island C1A 7N8, Telephone: (902) 368-4569;

 

(k)

in Québec, the Autorité des marchés financiers, 800, Square Victoria, 22e étage, C.P. 246, Tour de la Bourse, Montréal, Québec H4Z 1G3, Telephone: (514) 395-0337 or 1-877-525-0337, Email: [email protected] (For corporate finance issuers), [email protected] (For investment fund issuers);

 

 

(l)

in Saskatchewan, the Financial and Consumer Affairs Authority of Saskatchewan, Suite 601 - 1919 Saskatchewan Drive, Regina, Saskatchewan S4P 4H2, Telephone: (306) 787-5879; and

 

(m)

in Yukon, Government of Yukon, Department of Community Services, Law Centre, 3rd Floor, 2130 Second Avenue, Whitehorse, Yukon Y1A 5H6, Telephone: (867) 667-5314.

 

11.

We hereby represent, warrant, covenant and certify that we are, or any party on whose behalf we are acting is, an “accredited investor” as defined in NI 45-106 or section 73.3(1) of the Securities Act (Ontario) by virtue of satisfying the indicated criterion below:

 

Please check the category that applies:

 

	☐		a Canadian financial institution or a Schedule III bank of the Bank Act (Canada),
	☐		the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada),
	☐		a subsidiary of any person or company referred to in paragraphs (a) or (b) if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary,
	☐		a person or company registered under the securities legislation of a province or territory of Canada as an adviser or dealer, except as otherwise prescribed by the regulations,
			[omitted]
		(e.1)	[omitted]
	☐		the Government of Canada, the government of a province or territory of Canada, or any Crown corporation, agency or wholly owned entity of the Government of Canada or of the government of a province or territory of Canada,
	☐		a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec,
	☐		any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government,
	☐	(i)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a province or territory of Canada,
			[omitted]
	☐	(j.1)	an individual who beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds CAD$5,000,000,
			[omitted]
			[omitted]
	☐		a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements,
	☐		an investment fund that distributes or has distributed its securities only to a person that is or was an accredited investor at the time of the distribution,

 

 

			a person that acquires or acquired securities in the circumstances referred to in sections 2.10 of NI 45-106 [Minimum amount investment], or 2.19 of NI 45-106 [Additional investment in investment funds], or
			a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 of NI 45-106 [Investment fund reinvestment],
	☐		an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,
	☐		a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be,
	☐		a person acting on behalf of a fully managed account1 managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,
	☐		a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,
	☐		an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (d) or paragraph (i) in form and function,
	☐		a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,
	☐		an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser,
	☐		a person that is recognized or designated by the Commission as an accredited investor,
	☐		a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.

 

1

A “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction.

 

 

12.

We hereby represent, warrant, covenant and certify that we are, or any party on whose behalf we are acting is, a “permitted client” by virtue of the criterion indicated below,

 

Please check the category that applies:

 

	☐	(a)	a Canadian financial institution or a Schedule III bank;
	☐	(b)	the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
	☐	(c)	a subsidiary of any person or company referred to in paragraph (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of the subsidiary;
	☐	(d)	a person or company registered under the securities legislation of a jurisdiction of Canada as an adviser, investment dealer, mutual fund dealer or exempt market dealer;
	☐	(e)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions or a pension commission or similar regulatory authority of a jurisdiction of Canada or a wholly-owned subsidiary of such a pension fund;
	☐	(f)	an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (e);
	☐	(g)	the Government of Canada or a jurisdiction of Canada, or any Crown corporation, agency or wholly-owned entity of the Government of Canada or a jurisdiction of Canada;
	☐	(h)	any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
	☐	(i)	a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Quebec;
	☐	(j)	a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a managed account managed by the trust company or trust corporation, as the case may be;
	☐	(k)	a person or company acting on behalf of a managed account managed by person or company, if the person or company is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;
	☐	(l)	an investment fund if one or both of the following apply:
			(i) the fund is managed by a person or company registered as an investment fund manager under the securities legislation of a jurisdiction of Canada;
			(ii) the fund is advised by a person or company authorized to act as an adviser under the securities legislation of a jurisdiction of Canada;
	☐	(m)	in respect of a dealer, a registered charity under the Income Tax Act (Canada) that obtains advice on the securities to be traded from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity;
	☐	(n)	in respect of an adviser, a registered charity under the Income Tax Act (Canada) that is advised by an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity;
	☐	(o)	a registered charity under the Income Tax Act (Canada) that obtains advice on the securities to be traded from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity;
	☐	(p)	an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5 million;

 

 

	☐	(q)	a person or company that is entirely owned by an individual or individuals referred to in paragraph (o), who holds the beneficial ownership interest in the person or company directly or through a trust, the trustee of which is a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction;
	☐	(r)	a person or company, other than an individual or an investment fund, that has net assets of at least C$25,000,000 as shown on its most recently prepared financial statements; or
	☐	(s)	a person or company that distributes securities of its own issue in Canada only to persons or companies referred to in paragraphs (a) through (r).

 

 

Schedule B - 7

 

Exhibit 99.1

 

Schultze Special Purpose Acquisition Corp. and Clever Leaves, a Large-Scale
Pharmaceutical-Grade Multi-National Cannabis Operator, Announce Revised Transaction Terms

 

Companies to Host Joint Investor Webinar and Q&A Session Today at 11:00 AM ET

 

●

Enterprise Value Reduction of 20% Provides Greater Value to Shareholders

 

●

Peer Comp EBITDA Multiples Have Increased 20% Since Initial Transaction Announcement

 

●

Significant Reduction in the Minimum Cash Condition to $26.0 Million

 

●

Investor Sponsorship through Private Placement and Non-Redemption Commitment

 

●

Committed Capital Pool in Excess of the Minimum Cash Condition

 

●

Transaction Remains on Track to Close in the Fourth Quarter 2020

 

Rye Brook, NY – November 9, 2020 - Schultze Special Purpose Acquisition Corp. (NASDAQ: SAMA, SAMAW, and SAMAU) (“SAMA”) and Clever Leaves International Inc. (“Clever Leaves”) jointly announced today that they have amended their definitive agreement (the “Business Combination Agreement”), which was entered into on July 25, 2020, pursuant to which a newly formed holding company, Clever Leaves Holdings Inc. (“Holdco”), will acquire SAMA and Clever Leaves (the “Business Combination”) and is anticipated to become a NASDAQ-listed public company trading under the ticker symbol “CLVR”.

 

Under the amended terms, the initial expected enterprise value has been reduced to $206 million from $255 million and the minimum cash condition for SAMA has been reduced to $26 million from $60 million. Additionally, the cash consideration payable to certain Clever Leaves’ shareholders at closing has been amended, thereby increasing the equity rollover consideration of the transaction to approximately 97% while Schultze Special Purpose Acquisition Sponsor, LLC agreed to restructure its’ equity ownership to better align with the capital retained at closing. In connection with these revised terms, institutional investors have committed over $10 million through a private placement to be funded at closing of the Business Combination. Additionally, select SAMA stockholders have agreed not to redeem their shares held thereby providing a path to over $16 million of additional committed capital¹ and thus having adequate capital to consummate the transaction. When including SAMA’s cash in trust, the parties expect to have over $80 million of cash on its balance sheet following closing.

 

George J. Schultze, Chairman and CEO of SAMA, said, “The revised terms of the business combination agreement coupled with a significant increase in the trading multiples of Clever Leaves’ peers provide enhanced value to our shareholders, increase transaction certainty, and add further momentum to this transaction. We remain incredibly excited to partner with Clever Leaves and look forward to consummating this transaction under these more favorable terms, which we anticipate will result in Holdco being among the best-capitalized companies in the cannabis industry upon closing.”

 

Kyle Detwiler, CEO of Clever Leaves, said, “Our business combination with SAMA will significantly strengthen our balance sheet while enabling us to accelerate the commercialization of our high-quality products, expand our operations and distribution in attractive markets around the world, and have a valuable currency to use for targeted M&A. We are eager to close this transaction and begin our collaborative work with SAMA on achieving accelerated growth and profitability.”

 

1

Requires SAMA common stock to trade at greater than $10.30 based on the volume weighted average stock price for the five trading days immediately prior to the redemption date in connection with the closing of the business combination.

 

 

The amendments to the Business Combination Agreement have been unanimously approved by the Boards of Directors of both SAMA and Clever Leaves and the transaction remains on track to close in the fourth quarter of 2020, subject to the Registration Statement being declared effective by the SEC, in addition to other regulatory and shareholder approvals, as well as customary closing conditions.

 

Canaccord Genuity and EarlyBirdCapital are serving as financial advisors to SAMA, with Greenberg Traurig, LLP, Stikeman Elliott and Posse Herrera Ruiz serving as legal advisors. Cowen is serving as financial advisor to Clever Leaves, with Freshfields Bruckhaus Deringer US LLP, Dentons Canada LLP, and Brigard & Urrutia Abogados SAS serving as legal advisors.

 

Investor Webinar and Q&A Session Today at 11:00 AM ET

 

The companies will host a joint investor webinar and Q&A session today at 11:00 AM ET. To register, please click https://icrinc.zoom.us/webinar/register/WN_AEPA9RznTh2W5HqtRbo7PA

 

About Schultze Special Purpose Acquisition Corp.

 

Schultze Special Purpose Acquisition Corp. (NASDAQ: SAMA, SAMAW, and SAMAU) is a blank check company formed for the purpose of entering into a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. SAMA Sponsor is an affiliate of Schultze Asset Management, LP, an alternative investment management firm founded in 1998 that focuses on distressed, special situation and event-driven securities and has invested over $3.2 billion since inception with a notable track-record through its active investment strategy. SAMA itself is backed by an experienced team of operators and investors with a successful track-record of creating material value in public and private companies.

 

About Clever Leaves

 

Clever Leaves is a multi-national cannabis company with a mission to operate in compliance with federal and state laws and with an emphasis on ecologically sustainable, large-scale cultivation and pharmaceutical-grade processing as the cornerstones of its global cannabinoid business. With operations and investments in Canada, Colombia, Germany, Portugal, and the United States, Clever Leaves has created an effective distribution network and global footprint, with a foundation built upon capital efficiency and rapid growth. Clever Leaves aims to be one of the industry’s leading global cannabinoid companies recognized for its principles, people, and performance while fostering a healthier global community.

 

Additional Information and Where to Find It

 

SAMA, Clever Leaves and Holdco urge investors, stockholders and other interested persons to read the Registration Statement, including the proxy statement/prospectus, as well as other documents filed with the SEC, because these documents will contain important information about the Business Combination. Following the Registration Statement having been declared effective by the SEC, a definitive proxy statement/prospectus will be mailed to stockholders of SAMA as of a record date to be established for voting on the Business Combination. SAMA’s stockholders will also be able to obtain a copy of such documents, without charge, by directing a request to: Schultze Special Purpose Acquisition Corp, 800 Westchester Avenue, Suite 632, Rye Brook, New York 10573; e-mail: [email protected]. These documents, once available, can also be obtained, without charge, at the SEC’s web site (http://www.sec.gov).

 

Participants in Solicitation

 

SAMA, Clever Leaves, Holdco and their respective directors, executive officers and other members of their management and employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of SAMA stockholders in connection with the Business Combination. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies to SAMA’s stockholders in connection with the Business Combination is set forth in the preliminary proxy statement/prospectus contained in the Registration Statement, and will also be included in the definitive proxy statement/prospectus for the Business Combination when available. Information concerning the interests of SAMA’s and Clever Leaves’ participants in the solicitation, which may, in some cases, be different than those of SAMA’s and Clever Leaves’ equity holders generally, is also set forth in the proxy statement/prospectus contained in the Registration Statement, and will also be included in the definitive proxy statement/prospectus for the Business Combination when available.

 

 

Forward Looking Statements

 

This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts and may be identified by the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions). Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Factors that may cause such differences include, without limitation, SAMA’s and Clever Leaves’ inability to complete the transactions contemplated by the Business Combination; matters discovered by the parties as they complete their respective due diligence investigation of the other; the inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the amount of cash available following any redemptions by SAMA stockholders and the ability to close the private placement with certain institutional investors; the ability to meet NASDAQ’s listing standards following the consummation of the Business Combination; costs related to the Business Combination; expectations with respect to future operating and financial performance and growth, including when Clever Leaves or Holdco will become cash flow positive; the timing of the completion of the Business Combination; Clever Leaves’ ability to execute its business plans and strategy and to receive regulatory approvals; potential litigation involving the parties; global economic conditions; geopolitical events, natural disasters, acts of God and pandemics, including, but not limited to, the economic and operational disruptions and other effects of COVID-19; regulatory requirements and changes thereto; access to additional financing; and other risks and uncertainties indicated from time to time in filings with the SEC. Other factors include the possibility that the proposed transaction does not close, including due to the failure to receive required security holder approvals or the failure to satisfy other closing conditions. The foregoing list of factors is not exclusive. Additional information concerning certain of these and other risk factors is contained in SAMA’s most recent filings with the SEC and is contained in the Form S-4, including the proxy statement/prospectus. All subsequent written and oral forward-looking statements concerning SAMA, Clever Leaves or Holdco, the transactions described herein or other matters and attributable to SAMA, Clever Leaves, Holdco or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Each of SAMA, Clever Leaves and Holdco expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

 

Schultze Special Purpose Acquisition Corp.

George J. Schultze: [email protected]

Gary M. Julien: [email protected]

(914) 701-5260

 

Investor Relations

Raphael Gross

ICR

[email protected]

(203) 682-8253

 

Media Relations

KCSA Strategic Communications

McKenna Miller

[email protected]

(347) 487-6197