Loan # 002069

Loan Agreement - TerrAscend

Exhibit 10.10

 

 

 

 

 

LOAN AGREEMENT

 

 

 

BY AND BETWEEN

 

 

 

PELORUS FUND REIT, LLC,

 

AS LENDER,

 

TERRASCEND NJ LLC, HMS PROCESSING LLC, HMS HAGERSTOWN, LLC, AND HMS HEALTH, LLC,

 

COLLECTIVELY AS BORROWER,

 

TERRASCEND CORP. AND TERRASCEND USA, INC., WELL AND GOOD, INC. AND WDB HOLDING MD, INC.,

 

COLLECTIVELY AS GUARANTOR,

 

 

 

DATED AS OF OCTOBER 11, 2022

 

 

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TABLE OF CONTENTS

 

 

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ARTICLE I DEFINITIONS 2

1.1
Defined Terms 2
1.2
Exhibits and Schedules 34
1.3
Principles of Construction 34
1.4
Rates 34

ARTICLE II THE LOAN 35

2.1
Loan 35
2.2
Use of Funds 35
2.3
Loan Origination Fee; Exit Fee 35
2.4
Maturity Date 36
2.5
Intentionally Omitted 36
2.6
Effective Date; Closing Conditions 36
2.7
Interest on Loan 36
2.8
Loan Payments 37
2.9
Credit for Payments 37
2.10
Prepayment 38
2.11
Full Repayment and Release 39
2.12
Authorization 39
2.13
Recourse 40
2.14
Increased Costs Generally 40
2.15
Taxes 43
2.16
Appointment of Servicer and Delegation of Lender Rights 46
2.17
Original Issue Discount 46
2.18
Mitigation Obligations; Replacement of Lenders 46

ARTICLE III RESERVE ACCOUNTS GENERALLY 47

3.1
Reserve Accounts 47

ARTICLE IV REPRESENTATIONS AND WARRANTIES 48

4.1
Organization; Power; Special Purpose Entity 48
4.2
Authority; Enforceability 49
4.3
Ownership of Loan Parties 49
4.4
No Conflict 49
4.5
Consents and Authorizations 49
4.6
Financial Information 50
4.7
No Additional Liabilities of Borrower and/or Guarantors Not Previously Disclosed in Writing to Lender 50
4.8
Litigation; Adverse Effects; Condemnation 50
4.9
Payment of Taxes 51
4.10
Disclosure 51
4.11
Requirements of Law and Other Covenants 52
4.12
Property and Collateral Documents 52
4.13
Title to Assets; No Liens 53
4.14
Utilities 54
4.15
Leases 54
4.16
Affiliate Fees and Transactions 54
4.17
Defects 54

 

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4.18
Patriot Act and Related Matters 54
4.19
ERISA 55
4.20
Investment Company Act; Public Utility Holding Company Act 56
4.21
Contracts 56
4.22
Solvency 56
4.23
Compliance with Law; Government Approvals 57
4.24
Use of Property 57
4.25
Use of Funds 57
4.26
Insurance 57
4.27
Common Enterprise 57

ARTICLE V REPORTING COVENANTS 58

5.1
Financial Statements and Other Financial and Operating Information 58
5.2
Environmental Notices 60
5.3
Accuracy of Information 60

ARTICLE VI OTHER COVENANTS 60

6.1
Existence 60
6.2
Compliance 60
6.3
Payment of Property Taxes, Assessments and Charges 61
6.4
Books and Records 61
6.5
Entry and Inspection 61
6.6
Intentionally Omitted 61
6.7
Loan Party Indebtedness 61
6.8
Leases 62
6.9
Subdivision Maps; Zoning; Joint Assessment 62
6.10
ERISA Compliance 62
6.11
Transfers 62
6.12
Liens 63
6.13
Patriot Act and Related Matters 63
6.14
Fundamental Changes 63
6.15
Special Purpose Entity 63
6.16
Maintenance; Waste; Alterations 64
6.17
Material Contracts 64
6.18
Cannabis Related Provisions 64
6.19
Additional Collateral; Further Assurances 65
6.20
Accounts 65
6.21
DSCR Period 65
6.22
Holding Company Covenant 66
6.23
Affiliate Fees 66
6.24
Post-Closing 66

ARTICLE VII CONSTRUCTION 66

7.1
Construction Work 66
7.2
Establishment of Construction Reserve Account 67

ARTICLE VIII INSURANCE; CASUALTY, CONDEMNATION AND

RESTORATION 67

8.1
Title Insurance 67
8.2
Property Insurance 68

 

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8.3
Builder’s Risk Insurance 68
8.4
Liability Insurance 68
8.5
General Insurance Requirements 68
8.6
Restoration Proceeds 69
8.7
Restoration 71
8.8
Disbursement 72
8.9
Change in Insurance Requirements 72
8.10
Notification of Loss 73

ARTICLE IX EVENTS OF DEFAULT AND REMEDIES 73

9.1
Events of Default 73
9.2
Remedies upon Default 75
9.3
Remedies Cumulative 76
9.4
Lender Appointed Attorney-In-Fact 77
9.5
Lender’s Right to Perform 77
9.6
Affiliate Agreements 77
9.7
Borrower Cooperation 77
9.8
Operating Lease 78

ARTICLE X LOAN GUARANTY 78

10.1
Full Guaranty 78
10.2
Guaranty of Payment 78
10.3
No Discharge or Diminishment of Loan Guaranty 78
10.4
Defenses Waived 79
10.5
Rights of Subrogation 79
10.6
Subordination. 80
10.7
Reinstatement; Stay of Acceleration 80
10.8
Information 81
10.9
Maximum Liability 81
10.10
Contribution 81
10.11
Liability Cumulative 82

ARTICLE XI SECONDARY MARKET TRANSACTIONS 82

11.1
General 82
11.2
Register 83
11.3
Participations 83
11.4
Borrower Cooperation 83
11.5
Dissemination of Information 84
11.6
Change of Payment Date 84

ARTICLE XII MISCELLANEOUS 84

12.1
Performance by Lender 84
12.2
Actions 85
12.3
Nonliability of Lender 85
12.4
No Third Parties Benefited 86
12.5
Indemnity 86
12.6
Binding Effect; Assignment 87
12.7
Joint and Several Obligations 87
12.8
Counterparts; Electronic Signatures 87
12.9
Amendments; Waiver in Writing 88

 

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12.10
Costs and Expenses 88
12.11
Intentionally Omitted 89
12.12
Survival 89
12.13
Notices 89
12.14
Further Assurances 90
12.15
Governing Law 90
12.16
Severability of Provisions 90
12.17
Headings 90
12.18
Time of the Essence; Delay Not a Waiver 90
12.19
Construction of Agreement 91
12.20
Brokers 91
12.21
Lender’s Discretion 91
12.22
Preferences 91
12.23
Waiver of Notice 91
12.24
Offsets, Counterclaims and Defenses 91
12.25
Waiver of Marshalling of Assets Defense 92
12.26
Arbitration; Submission to Jurisdiction; Waiver of Right to Trial by Jury 92
12.27
Additional Cannabis Terms 94
12.28
California Provisions 95

 

 

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EXHIBITS AND SCHEDULES:

 

Exhibits:

EXHIBIT A-1 - Form of U.S. Tax Compliance Certificate EXHIBIT A-2 - Form of U.S. Tax Compliance Certificate EXHIBIT A-3 - Form of U.S. Tax Compliance Certificate EXHIBIT A-4 - Form of U.S. Tax Compliance Certificate

EXHIBIT B - Definition of “Special Purpose Entity” and Related Defined Terms Schedules:

Schedule 1 - List of Loan Documents Schedule 2.6 Conditions to Closing

Schedule 4.1 - Loan Parties Organizational Numbers Schedule 4.3 - Borrower Organizational Chart Schedule 4.16 - Affiliate Fees

Schedule 4.21 - Material Contracts Schedule 4.23 - Regulatory Licenses Schedule 6.20 - Certain Accounts

Schedule 6.7 - Existing Parent Indebtedness Schedule 6.24 - Post-Closing Obligations Schedule 7.1 - Construction Work

Schedule 7.2 - Approved Construction Budget Schedule 11.1 - List of Disqualified Lenders

 

 

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THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO STRICT REQUIREMENTS FOR ONGOING REGULATORY COMPLIANCE BY THE PARTIES HERETO, INCLUDING, WITHOUT LIMITATION, REQUIREMENTS THAT THE PARTIES TAKE NO ACTION IN VIOLATION OF EITHER ANY STATE CANNABIS LAWS OR THE GUIDANCE OR INSTRUCTION OF THE REGULATOR. SECTION 12.27(b) CONTAINS SPECIFIC REQUIREMENTS AND COMMITMENTS BY THE PARTIES TO MAINTAIN FULLY THEIR RESPECTIVE COMPLIANCE WITH STATE CANNABIS LAWS AND THE REGULATOR. THE PARTIES UNDERSTAND THE REQUIREMENTS OF SECTION 12.27(b).

 

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT is made and entered into as of October 11, 2022, by and between TERRASCEND NJ LLC, a New Jersey limited liability company (“TerrAscend NJ”), HMS HAGERSTOWN, LLC a Delaware limited liability company (“MD Propco”), HMS PROCESSING, LLC, a Maryland limited liability company (“MD Opco 1”), HMS HEALTH, LLC, a Maryland limited liability company (“MD Opco 2” and, together with MD Opco 1, individually and collectively, as the context may require, “MD Opco”; each of TerrAscend NJ, MD Propco and MD Opco are referred to herein individually and collectively, as the context may require, as “Borrower”), TERRASCEND CORP., an Ontario corporation (“Canadian Parent”), TERRASCEND USA, INC., a Delaware corporation (“American Parent” and, together with Canadian Parent, individually and collectively, as the context may require, “Parent”), WELL AND GOOD, INC., a Delaware corporation, and WDB HOLDING MD, INC., a Maryland corporation (Well and Good, Inc., Parent and WDB Holding MD, Inc. are referred to herein individually and collectively, as the context may require, as “Guarantor”), and PELORUS FUND REIT, LLC, a Delaware limited liability company (together with its successors and/or assigns, “Lender”).

 

WITNESSETH:

 

WHEREAS, Borrower has requested that Lender provide Borrower with real estate secured financing (the “Loan”) in the amount of Forty Five Million Four Hundred Seventy Eight Thousand and 00/100 Dollars ($45,478,000.00) (the “Loan Amount”).

 

WHEREAS, Guarantor owns, directly or indirectly, beneficial ownership interests in Borrower and will derive substantial benefit from Lender making the Loan to Borrower;

 

WHEREAS, MD Propco has leased the MD Real Property to MD Opco, and MD Opco operates the Cannabis Business (as defined below) and holds the Regulatory Licenses with respect thereto;

 

WHEREAS, prior to the consummation of the Permitted Reorganization, TerrAscend NJ owns the NJ Real Property and operates the Cannabis Business (as defined below) and holds the Regulatory Licenses with respect thereto;

 

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WHEREAS, Lender is willing to provide the Loan to Borrower, on the terms and conditions contained in this Agreement and the other Loan Documents.

 

NOW, THEREFORE, in consideration of the making of the Loan by Lender, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE I DEFINITIONS

1.1
Defined Terms. As used in this Agreement, the following terms shall have the

meanings set forth respectively after each:

 

Accounting Standard” means GAAP or any other accounting method approved

by Lender.

 

ADA” means the Americans with Disabilities Act, 42 U.S.C. §§ 12101, et seq., as

the same may be hereafter amended or modified.

 

Adjusted EBITDA” means for any period, Net Income of Borrower for such period, plus, without duplication and to the extent deducted in determining Net Income for such period, the sum of (a) interest expense (including, without limitation, any interest component in respect of lease obligations, right of use assets and any revaluation thereof), (b) provision for taxes based on income, (c) depreciation expense, (d) amortization expense, (e) unusual or nonrecurring charges, expenses or losses (excluding losses from discontinued operations), (f) other non-cash charges, expenses or losses (excluding any such non-cash charge to the extent it represents an accrual or reserve for potential cash charge in any future period or amortization of a prepaid cash charge that was paid in a prior period, but including purchase accounting adjustments under ASC 805 under GAAP), minus, without duplication and to the extent included in determining Net Income for such period, the sum of (g) unusual or non-recurring gains and non-cash income,

(h) any other noncash income or gains increasing Net Income for such period (excluding any such non-cash gain to the extent it represents the reversal of an accrual or reserve for potential cash charge in any prior period), and (i) any gains realized from the disposition of property outside of the ordinary course of business, all as determined on a consolidated basis; provided, however that the adjustments pursuant to clause (e) may not exceed 30% of consolidated Adjusted EBITDA (without giving effect to any adjustments pursuant to clause (e)) for any given period.

 

Adjusted Term SOFR” means Term SOFR plus 9.5%.

 

Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

 

 

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Affiliate Fees” is defined in Section 4.16.

 

 

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Agreement” means this Loan Agreement, as the same may be amended, restated, modified or supplemented from time to time.

 

Applicable Interest Rate” has the meaning set forth in Section 2.7(d), as adjusted pursuant to this Agreement.

 

Appraisal” means a written appraisal prepared by an MAI appraiser acceptable to Lender in its sole discretion and prepared in compliance with applicable regulatory requirements, including, without limitation, the Financial Institutions Recovery, Reform and Enforcement Act of 1989, as amended from time to time, and subject to Lender’s customary independent appraisal requirements.

 

American Parent” is defined in the opening paragraph of this Agreement.

 

Annual Budget” means the operating budget for the Loan Parties (including with respect to the Property), as amended from time to time in accordance with this Agreement.

 

Anti-Money Laundering Laws” means those laws, regulations and sanctions, state and United States and/or Canadian, as applicable, federal, criminal and civil, that (a) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (b) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States or Canada, as applicable; (c) require identification and documentation of the parties with whom a financial institution conducts business; or (d) are designed to disrupt the flow of funds to terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the Money Laundering Control Act of 1986, as amended, the Patriot Act, the Bank Secrecy Act, the Trading with the Enemy Act, 50 U.S.C. App. Section 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957.

 

Approved Construction Budget” means the construction budget attached hereto as Schedule 7.2, as the same may be amended from time to time with the approval of Lender (and the Approved Construction Budget and Schedule 7.2 shall be deemed to be updated to the extent such approval is obtained).

 

Bankruptcy Action” means with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (c) such Person filing an answer consenting to or otherwise colluding or acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; or soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (d) the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of the Property; (e) such Person making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due; or (f) such Person commencing (or have commenced against it) a

 

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proceeding for the dissolution or liquidation of it.

 

Bankruptcy Proceeding” is defined in Section 10.6(a).

 

Bankruptcy Code” means the Bankruptcy Reform Act of 1978, 11 U.S.C. §101- 1330, as the same may be hereafter amended or modified.

 

Base Rate” means, on any day, the greatest of (a) the Floor, (b) the Federal Funds Rate in effect on such day plus ½%, (c) Term SOFR for a one-month tenor in effect on such day; provided that this clause (c) shall not be applicable during any period in which Term SOFR is unavailable or unascertainable, and (d) the U.S. prime rate as published in The Wall Street Journal’s “Money Rates” table for such day or such other rate of interest publicly announced by Lender from time to time as its prime rate in effect (which is not necessarily the best or lowest rate of interest charged as a prime rate). If multiple prime rates are quoted in such table, then the highest U.S. prime rate quoted therein shall be the prime rate. In the event that a U.S. prime rate is not published in The Wall Street Journal’s “Money Rates” table for any reason or The Wall Street Journal is not published that day in the United States of America for general distribution, Lender will choose a substitute U.S. prime rate, for purposes of calculating the interest rate applicable hereunder, which is based on comparable information, until such time as a prime rate is published in The Wall Street Journal’s “Money Rates” table. Each change in the Base Rate shall become effective without notice to Borrower on the effective date of each such change.

 

Base Rate Loan” means each portion of the Loan to the extent that it that bears interest at a rate determined by reference to the Base Rate.

 

Base Rate Term SOFR Determination Day” has the meaning specified therefor in the definition of “Term SOFR”.

 

Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.14(a)(iii)(A).

 

Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of (a) the alternate benchmark rate that has been selected by Lender and Borrower giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for Dollar-denominated syndicated credit facilities and (b) the related Benchmark Replacement Adjustment; provided that if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement shall be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

 

Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread

 

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adjustment, or method for calculating or determining such spread adjustment (which may be a

 

 

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positive or negative value or zero) that has been selected by Lender and Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body, or

(b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities.

 

Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

 

(a)
in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and

(ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide such Benchmark (or such component thereof); or

 

(b)
in the case of clause (c) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by or on behalf of the administrator of such Benchmark (or such component thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative or non-compliant with or non-aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks; provided, that such non-representativeness, non-compliance, or non-alignment will be determined by reference to the most recent statement or publication referenced in such clause (c);

 

(c)
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to such Benchmark (or the published component used in the calculation thereof).

 

Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

 

(a)
a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof);

 

(b)
a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors, the Federal Reserve Bank of New York, an insolvency official with

 

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jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof); or

 

(c)
a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that such Benchmark (or such component thereof) is not, or as of a specified future date will not be, representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks.

 

Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).

 

Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14(a)(iii) and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14(a)(iii).

 

Blocked Account” means the commercial deposit account to be established by MD Propco at Blocked Account Bank over which Lender will have exclusive control for withdrawal purposes pursuant to a Control Agreement.

 

Blocked Account Bank” means ParkeBank, or such other bank as shall be approved by Lender.

 

Board of Governors” means the Board of Governors of the Federal Reserve System of the United States (or any successor).

 

Borrower” is defined in the opening paragraph of this Agreement.

 

Business Day” means any day, other than a Saturday, Sunday or any other day on which the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business or which is a day on which banking institutions located in the State or the Province of Ontario are required or authorized by law or other governmental action to close.

 

 

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Canadian Parent” is defined in the opening paragraph of this Agreement.

 

 

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Cannabis Business” shall mean the business of acquiring, cultivating, manufacturing, extracting, testing, producing, processing, possessing, selling (at retail or wholesale), dispensing, distributing, transporting, packaging, labeling, marketing or disposing of cannabis, marijuana or related substances or products containing or relating to the same, and all ancillary activities related to the foregoing, including leasing any real property on which any such activity is conducted.

 

Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof, (c) commercial paper, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances, (e) Deposit Accounts, (f) repurchase obligations of any commercial bank or recognized securities dealer, (g) debt securities with maturities of six (6) months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank, and (h) investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (g) above.

 

Casualty” is defined in Section 8.1.

 

Casualty Retainage” is defined in Section 8.8(b).

 

Cell Tower Lease” means that certain land lease agreement dated as of February 23, 2017 among Deckenbach Family Limited Partnership, as lessor (the “Original Lessor”), and New York SMSA Limited Partnership d/b/a Verizon Wireless assigned by the Original Lessor to TerrAscend NJ pursuant to that certain assignment and assumption of lease agreement dated as of February 12, 2019 among Original Lessor and TerrAsc.

 

Change in Cannabis Law” means any adverse change after the Effective Date in Federal Cannabis Laws or State Cannabis Laws, or the application or interpretation thereof by any Governmental Authority, (a) that would make it unlawful for Lender to (i) continue to be a party to any Loan Document, (ii) perform any of its obligations under any Loan Document, or (iii) to fund or maintain the Loan, (b) pursuant to which any Governmental Authority has enjoined any Lender from (i) continuing to be a party to any Loan Document, (ii) performing any of its obligations under any Loan Document, or (iii) funding or maintaining the Loans, (c) pursuant to which any Governmental Authority requires (i) confidential information from or disclosure of confidential information about Lender or its Affiliate or any investor therein, or (ii) Lender to obtain any license, permit, or other authorization to, in each case, (A) continue to be a party to any Loan Document, (B) perform any of its obligations under any Loan Document, or (C) to fund or maintain the Loans, or (d) that would impair Lender’s ability to foreclose upon or otherwise deal with the Collateral.

 

Change in Control” means (a) with respect to Canadian Parent, (i) any person or group of persons acting jointly or in concert (as such expression is defined in National Instrument 62-104 Take-Over Bids and Issuer Bids adopted by the Canadian Securities Regulatory Authorities (as such Instrument may be amended from time to time)) beneficially owns, directly or indirectly,

 

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more than 50% or more of the Equity Interests of the Canadian Parent entitled to vote for members

 

 

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of the board of directors or equivalent governing body of the Canadian Parent on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right), (ii) any person or group of persons, acting jointly or in concert (as such expression is defined in National Instrument 62-104 Take-Over Bids and Issuer Bids adopted by the Canadian Securities Regulatory Authorities (as such Instrument may be amended from time to time)) acquires the power to direct, or cause the direction of, management, business or policies of the Canadian Parent, whether through the ability to exercise voting power, by contract or otherwise, or (iii) any person or group of persons acting jointly or in concert (as such expression is defined in National Instrument 62-104 – Take-Over Bids and Issuer Bids adopted by the Canadian Securities Regulatory Authorities (as such Instrument may be amended from time to time)) succeed in having a sufficient number of nominees elected to the board of directors of the Canadian Parent that such nominees, when added to any existing director remaining on the board of directors of the Canadian Parent, will constitute a majority of the board of directors of the Canadian Parent; (b) with respect to any Loan Party other than Canadian Parent or TerrAscend NJ, Canadian Parent shall cease to own, directly or indirectly, free and clear of all Liens or other encumbrances, 100% of the outstanding voting Equity Interests of such Loan Party on a fully diluted basis; and (c) with respect to TerrAscend NJ, Canadian Parent shall cease to indirectly own, free and clear of all Liens or other encumbrances, at least 87.5% of the outstanding voting Equity Interests of TerrAscend NJ on a fully diluted basis.

 

Change in Law” means the occurrence after the date of this Agreement of: (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation, judicial ruling, judgment or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation, guideline or treaty, (c) any new, or adjustment to, requirements prescribed by the Board of Governors for “Eurocurrency Liabilities” (as defined in Regulation D of the Board of Governors), requirements imposed by the Federal Deposit Insurance Corporation, or similar requirements imposed by any domestic or foreign governmental authority or resulting from compliance Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority and related in any manner to SOFR, the Term SOFR Reference Rate, or Term SOFR, or (d) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

 

Code” means the Internal Revenue Code of 1986, as the same may be hereafter amended or modified.

 

Collateral” means all of Borrower’s now owned or hereafter acquired right, title and interest in and to all property, including, without limitation, each of the following:

 

 

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(a)
all of its Accounts;

 

 

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(b)
all of its Books and Records;

 

(c)
all of its Chattel Paper;

 

(d)
all of its Deposit Accounts;

 

(e)
all of its Equipment and Fixtures;

 

(f)
all of its General Intangibles;

 

(g)
all of its Inventory;

 

(h)
all of its Investment Property;

 

(i)
all of its Negotiable Instruments;

 

(j)
all of its Supporting Obligations;

 

(k)
all of its Commercial Tort Claims;

 

(l)
all of its money, Cash Equivalents, or other assets that now or hereafter come into the possession, custody, or control of Lender;

 

(m)
all Property; and

 

(n)
all of the proceeds (as such term is defined in the Code) and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books and Records, Chattel Paper, Deposit Accounts, Equipment, Fixtures, General Intangibles, Inventory, Investment Property, Negotiable Instruments, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (the “Proceeds”). Without limiting the generality of the foregoing, the term “Proceeds” includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to Borrower or Lender from time to time with respect to any of the Investment Related Property; provided, however, the Collateral shall not include any Excluded Asset.

 

Complete” or “Completion” means the Construction Work and the Property shall satisfy the following conditions: (a) a permanent certificate (or certificates) of occupancy for the

 

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Construction Work has been issued and delivered to Lender; (b) Borrower has furnished Lender with final lien waivers with respect to the Construction Work and work related thereto; and

 

 

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(c) Borrower shall have delivered to Lender: (i) the final as built plans and specifications for the Construction Work; (ii) the licenses and permits that are required for the operation or occupancy of the Property shall have been unconditionally issued to Borrower; (iii) a certificate from Borrower stating that: (A) the Construction Work has been completed in a good and workmanlike manner, (B) the Property as so completed complies with all applicable Legal Requirements; (C) no written notices from any Governmental Authority of any claimed violations of applicable Legal Requirements arising from the development or operation of the Property which have not been cured were served upon Borrower or (to Borrower’s knowledge) any contractor or subcontractor, and (D) no circumstances exist which are reasonably likely to give rise to the issuance of any such notice of claimed violation; and (iv) a certificate (in form and substance reasonably acceptable to Lender) from Borrower stating that each such Person has been paid in full, for all Construction Work performed and/or materials furnished by such party, such Officer’s Certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender, (v) Lender shall have received a title search indicating that the Property is free from all liens, claims and other encumbrances not previously approved by Lender, (v) Lender shall have received such other evidence as Lender shall reasonably request that the Construction Work shall have been completed and (vi) Lender shall have received evidence reasonably satisfactory to Lender that Borrower is current in payment and otherwise in compliance with the terms of any insurance financing arrangements. Wherever the word “completion” (or any derivations thereof) is used herein but not capitalized, it shall have the ordinary meaning given such term in light of the context in which it appears.

 

Compliance Certificate” means a certificate in form and substance reasonably acceptable to Lender and signed by the chief financial officer of Canadian Parent (a) evidencing Debt Service Coverage Ratio for the immediately prior Fiscal Quarter, (b) listing all Permitted Indebtedness or Permitted Parent Indebtedness consisting of intercompany loans to any Loan Parties and certifying that the same constitute Permitted Indebtedness or Permitted Parent Indebtedness, as applicable and (c) including an acknowledgment and agreement signed by the holder(s) of all such Indebtedness that (i) such Indebtedness shall be subordinate to the Loan, and that no payments of same shall be accepted so long as any portion of the Obligations remain outstanding, (ii) such Indebtedness shall be subject to the provisions of Section 9.6 of this Agreement and (iii) such acknowledgment and agreement may be enforced by Lender against such holder.

 

Compliance Notice” is defined in Section 12.27(b)(ii). “Condemnation Proceeds” is defined in Section 8.6(a)

Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption, or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period,” or any similar or analogous definition (or the addition of a concept of “interest period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment notices, the applicability and length of lookback periods, and other technical, administrative or operational matters) that Lender decides may be appropriate to reflect the adoption and implementation of such Benchmark

 

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Replacement and to permit the use and administration thereof by Lender in a manner substantially consistent with market practice (or, if Lender decides that adoption of any portion of such market practice is not administratively feasible or if Lender determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as Lender decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).

 

Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

Construction Costs” means the costs incurred by Borrower in connection with the construction of the Construction Work.

 

Construction Reserve Account” is defined in Section 7.2. “Construction Reserve Funds” is defined in Section 2.1. “Construction Work” is defined in Section 7.1.

Control” means the possession, directly or indirectly, of the power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, family relationship or otherwise; and the terms “controls”, “controlling” and “controlled” have the meanings correlative to the foregoing.

 

Control Agreement” means a control agreement, restricted account agreement or similar agreement or document, in each case in form and substance reasonably satisfactory to Lender and entered into for the purpose of perfecting a security interest in the Blocked Account.

 

Cookies License” means (a) that certain Retail License Agreement dated as of August 18, 2021 among Cookies Creative Consulting & Promotions, Inc. and TerrAscend NJ, as amended from time to time, and (b) that certain Amended and Restated License and Packaging Agreement dated as of February 23, 2022 among Creative Consulting & Promotions, Inc., 1L Botanicals LLC and TerrAscend NJ, as amended from time to time (including, without limitation, pursuant to that First Amendment to Amended and Restated License and Packaging Agreement effective July 15, 2022 among Creative Consulting & Promotions, Inc., 1L Botanicals LLC and TerrAscend NJ).

 

Damages” means, with respect to any Person, any and all liabilities, obligations, losses, demands, damages, penalties, assessments, actions, causes of action, judgments, proceedings, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including reasonable attorneys’ fees and other costs of defense and/or enforcement whether or not suit is brought), fines, charges, fees, settlement costs and disbursements imposed on, incurred by or asserted against such party, whether based on any federal, state, local or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Hazardous Materials Laws), on common law or equitable cause or on contract or otherwise; provided, however, that “Damages” shall not include special, consequential or punitive damages,

 

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except to the extent imposed upon Lender by one or more third parties.

 

Debt” means the outstanding principal balance of the Loan, together with all interest accrued and unpaid thereon and all other sums due from any Loan Party under the Loan Documents.

 

Debt Service” as of any date, means the interest due on the outstanding principal balance of the Loan, as of such date, at the Applicable Interest Rate in effect as of such date, together with the principal reduction payment, if any, required on such date pursuant to this Agreement.

 

Debt Service Coverage Ratio” means for Borrower, determined on a consolidated basis for the relevant period, the ratio of Adjusted EBITDA to Debt Service for such period.

 

Default” means a condition or event which has occurred and which, after notice or lapse of time, or both, would constitute an Event of Default if that condition or event were not cured within any applicable cure period.

 

Default Interest Rate” means a rate per annum equal to the lesser of (i) Adjusted Term SOFR plus eight percent (8%), or (ii) if such increased rate of interest may not be collected under applicable law, then at the maximum rate of interest, if any, which may be collected from Borrower under applicable law.

 

DSCR Period” means any period during which the Debt Service Coverage Ratio has declined below 1.75:1.00 as demonstrated by the Compliance Certificate delivered together with financial statements pursuant to Section 5.1(e), subject to review and approval by Lender. A DSCR Period shall end (i) upon the Debt Service Coverage Ratio being greater than or equal to

1.75:1.00 for each of two (2) consecutive Fiscal Quarters as demonstrated by the Compliance Certificate delivered together with the financial statements pursuant to Section 5.1(e), subject to review and approval by Lender, or (ii) upon the prepayment of principal to Lender by Borrower causing the Debt Service Coverage Ratio as of the last day of each of two (2) consecutive Fiscal Quarters, calculated on a pro forma basis for each such Fiscal Quarter after giving effect to such prepayment, to be greater than or equal to 1.75:1.00.

 

DSCR Required Payment Amount” means the difference between (a) the Adjusted EBITDA of Borrower that would be required to cause the DSCR to equal 1.75:1.00 and

(b) the actual Adjusted EBITDA of Borrower, in each case as of the end of the Fiscal Quarter ending immediately prior to the commencement of the DSCR Period or the immediately preceding Fiscal Quarter during the DSCR Period, as applicable.

 

Effective Date” is defined in Section 2.5.

 

Embargoed Person” means any Person subject to trade restrictions under any Federal Trade Embargo.

 

Environmental Indemnity Agreement” means that certain Environmental

 

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Indemnity Agreement executed and delivered by the Loan Parties collectively and jointly and severally in favor of Lender pursuant to this Agreement, as the same may be amended, restated, modified or supplemented from time to time.

 

Equity Interests” means (a) partnership interests (general or limited) in a partnership; (b) membership interests in a limited liability company; (c) shares or stock interests in a corporation; and (d) the beneficial ownership interests in a trust.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended or re-codified from time to time, and the regulations promulgated thereunder.

 

ERISA Affiliate” is defined in Section 4.18.

Event of Default” means each of those events so designated in Section 9.1. “Excluded Assets” means (a) any asset or property in which Lender is prohibited

from taking, or any Local Loan Party is prohibited from granting, a security interest in or to pursuant to the express provisions of any State Cannabis Law or any other Legal Requirement; provided, however, “Excluded Assets” shall not include (i) such assets or property to the extent any such prohibition would be rendered ineffective under applicable law or principles of equity, and (ii) the proceeds of any such assets or property (including proceeds from the sale, license, lease or other disposition thereof), and provided further, upon such prohibition ceasing to exist, including pursuant to an approval or consent from the applicable Governmental Authority, such assets and property shall automatically no longer be considered “Excluded Assets” and shall become part of the Collateral, (b) rights held under a license that are not assignable by their terms without the consent of the licensor thereof (but only to the extent such restriction on assignment is effective under Section 9-406, 9-407, 9-408 or 9-409 of the Code (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); (c) any interest of a Borrower in respect of any equipment lease permitted hereunder if such Borrower is prohibited by the terms of such lease from granting a security interest in respect thereof or under which such an assignment or Lien would cause a default to occur under such lease; provided, however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by such Local Loan Party or Lender.

 

Excluded Taxes” means any of the following Taxes imposed on or with respect to a Lender or any other recipient of payments to be made by or on account of any obligation of any Loan Party hereunder or under any other Loan Document, or required to be withheld or deducted from a payment to the Lender or any other recipient of payments to be made by or on account of any obligation of any Loan Party hereunder or under any other Loan Document:

(a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Lender or other recipient being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in the Loan or Obligation pursuant to a law in effect on the date on which (i) such Lender acquires such interest

 

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in the Loan or Obligation or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.15, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Lender’s or other recipient’s failure to comply with Section 2.15(e), (d) Canadian federal withholding Taxes imposed on a payment made to a Lender or other recipient solely as a result of: (i) such Lender or other recipient not dealing at arm’s length (for the purposes of the Tax Act) with Canadian Parent at the time of such payment, (ii) such Lender or other recipient being a “specified non-resident shareholder” (as defined in subsection 18(5) of the Tax Act) of Canadian Parent or not dealing at arm’s length (for the purposes of the Tax Act) with a “specified shareholder” of Canadian Parent, or (iii) Canadian Parent being a “specified entity” (as defined in subsection 18.4(1) of the proposals to amend the Tax Act released by the Minister of Finance (Canada) on April 29, 2022) in respect of the Lender or other recipient, except where the non-arm’s length relationship arises, such Lender or other recipient is a “specified non-resident shareholder” of Canadian Parent or is not dealing at arm’s length with a “specified shareholder” of Canadian Parent, or Canadian Parent is a “specified entity” in respect of the Lender or other recipient, as applicable, in connection with or as a result of the Lender or other recipient having become a party to, received or perfected a security interest under or received or enforced any rights under, any Loan Document and (e) any withholding Taxes imposed under FATCA.

 

Existing Lease” is defined in Section 4.15.

 

Existing Parent Indebtedness” means the Indebtedness existing on the Effective Date and disclosed in Schedule 6.7.

 

Exit Fee” is defined in Section 2.3(b).

 

FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.

 

Federal Cannabis Law” shall mean any federal Legal Requirement as such relates, either directly or indirectly, to the cultivation, harvesting, production, distribution, sale and possession of cannabis, marijuana or related substances or products containing or relating to the same, including the prohibition on drug trafficking under 21 U.S.C. § 841(a), et seq., the conspiracy statute under 18 U.S.C. § 846, the bar against aiding and abetting the conduct of an offense under 18 U.S.C. § 2, the bar against misprision of a felony (concealing another’s felonious conduct) under 18 U.S.C. § 4, the bar against being an accessory after the fact to criminal conduct under 18 U.S.C. § 3, and federal money laundering statutes under 18 U.S.C. §§ 1956, 1957, and 1960 and the regulations and rules promulgated under any of the foregoing.

 

Federal Funds Rate” means, for any period, a fluctuating interest rate per annum

 

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equal to, for each day during such period, the weighted average of the rates on overnight Federal

 

 

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funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal funds brokers of recognized standing selected by it (and, if any such rate is below zero, then the rate determined pursuant to this definition shall be deemed to be zero).

 

Federal Trade Embargo” means any federal law imposing trade restrictions, or economic or financial sanctions, including (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), (ii) the International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq., as amended), (iii) Executive Order 13224, (iv) the PATRIOT Act, and

(v) any enabling legislation or executive order relating to the foregoing.

 

Financing Statements” means (i) any financing statement describing Collateral to perfect Lender’s Lien in any of the Collateral, including, without limitation those describing the Collateral as “all personal property” or “all assets” or words of similar effect, and (ii) any amendment or continuation of any filed financing statement, and listing the applicable Local Loan Party as debtor and Lender as secured party.

 

Fiscal Quarter” means each three (3)-month period ending on March 31, June 30, September 30 and December 31 of each year or such other fiscal quarter as the applicable Loan Party may select from time to time with the prior written consent of Lender, such consent not to be unreasonably withheld.

 

Fiscal Year” means the twelve (12)-month period ending on December 31 of each year or such other fiscal year as the applicable Loan Party may select from time to time with the prior written consent of Lender, such consent not to be unreasonably withheld.

Floor” means a rate of interest equal to two and one-half percent (2.5%). “Foreign Lender” means (a) if Borrower is a U.S. Person, a Lender that is not a

U.S. Person, and (b) if Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which Borrower is resident for tax purposes.

 

GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accounts and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination

 

Government Approval” means, with respect to any Person, any action, authorization, consent, approval, license, lease, ruling, permit, privilege, franchise, variance, concession, grant, certification, exemption, filing or registration by or from any Governmental Authority, and any other contractual obligation with, any Governmental Authority, including all licenses, permits, allocations, authorizations, approvals and certificates obtained by or in the name

 

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of, or assigned to, any Loan Party and used in connection with the ownership, construction, operation, use or occupancy of the Property or its operations, including building permits, zoning and planning approvals, business licenses, licenses to conduct business, certificates of occupancy and all such other permits, licenses and rights in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or operations or to which such Person or any of its property or operations is subject.

 

Governmental Authority” means any national, federal, state, regional or local government, or any other political subdivision of any of the foregoing, in each case with jurisdiction over the applicable Loan Party, the Property, or any Person with jurisdiction over the applicable Loan Party or the Property exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

Government Lists” means (a) the Specially Designated Nationals and Blocked Persons Lists maintained by Office of Foreign Assets Control (“OFAC”); (b) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Lender notified Borrower in writing is now included in Government Lists; or (c) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other government authority or pursuant to any Executive Order of the President of the United States of America that Lender notified Borrower in writing is now included in Government Lists.

 

Guaranteed Obligations” is defined in Section 10.1.

 

Guarantor” is defined in the opening paragraph of this Agreement, together with each other Person that may be joined hereto from time to time as a Guarantor.

 

Guarantor Payment” is defined in Section 10.10(a).

 

Harmony Assets” means the assets comprised of the proposed cultivation and processing site located at 166 Brainards Road, Phillipsburg, NJ 08865.

 

Hazardous Materials” means oil; flammable explosives; asbestos; urea formaldehyde insulation; radioactive materials; fungi or bacterial matter which reproduces through the release of spores or the splitting of cells, including, without limitation, mold, mildew, and viruses, whether or not living; any substance that is then defined or listed in, or otherwise classified or regulated pursuant to, any Hazardous Materials Laws as a “hazardous substance”, “hazardous material”, “hazardous waste,” “infectious waste,” “toxic substance,” “toxic pollutant,” “pollutant,” “contaminant” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or “EP toxicity”; gasoline and any other petroleum and drilling fluids, produced waters, and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources; and/or petroleum products, polychlorinated biphenyls, per- and polyflouroalkyl substances (PFAS), urea formaldehyde, radon gas, radioactive matter, lead and lead based paint, medical waste, fugitive dust emissions, and toxic mold and other harmful biological agents. “Hazardous Materials” shall not include commercially reasonable

 

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amounts of such materials used in the ordinary course of operation of the Property which are used

 

 

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and stored at all times in accordance with all then applicable Hazardous Materials Laws.

 

Hazardous Materials Laws” collectively means and includes all present and future federal, state and local laws and any amendments (whether common law, statute, rule, order, regulation or otherwise), permits, and other requirements or guidelines of governmental authorities applicable to the Property and relating to health and safety, the environment and environmental conditions or to any Hazardous Materials or any activity relating thereto (including, without limitation, CERCLA, the Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C.

§ 6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq., the Clean Air Act, 42 U.S.C. § 7401, et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 2692, the California Waste Quality Improvement Act and California Health and Safety Code §§ 25117 and 25316, the Carpenter- Presley-Turner Hazardous Substance Account Act, California Health and Safety Code § 25300 et seq., the Hazardous Waste Control Act, California Health and Safety Code § 25100, et seq., the Medical Waste Management Act, California Health and Safety Code § 25105, et seq., the Porter- Cologne Water Quality Control Act, California Water Code § 13000, et seq., the Safe Drinking Water and Toxic Enforcement Act of 1986, California Health and Safety Code § 25219.5- 25249.13, the Underground Storage of Hazardous Substances Act, California Health and Safety Code § 25280-25299.8, the Safe Drinking Water Act, 42 U.S.C. § 300f 300j, the Emergency Planning and Community Right To Know Act, 42 U.S.C. § 11001, et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, the Endangered Species Act, the National Environmental Policy Act, the River and Harbors Appropriation Act, and any so called “Super Fund” or “Super Lien” law, environmental laws administered by the United States Environmental Protection Agency, any similar state and local laws, regulations and guidelines, as well as the regulations and guidelines of the Department of Housing and Urban Development, the Occupational Safety and Health Administration, the California Department of Toxic Substances Control and any Regional Water Quality Control Board with jurisdiction and all amendments thereto and all regulations, orders, decisions, and decrees now or hereafter promulgated thereunder).

 

Hazardous Materials Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Loan Party directly or indirectly resulting from or based upon (a) any violation of any Hazardous Materials Laws, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any exposure to any Hazardous Materials,

(d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

Improvements” means all improvements or fixtures now or hereafter located on any Real Property.

 

Indebtedness” of a Person, at a particular date, shall mean the sum (without duplication) at such date of (a) all indebtedness or liability of such Person (including, without limitation, amounts for borrowed money and indebtedness in the form of mezzanine debt or preferred equity); (b) obligations evidenced by bonds, debentures, notes, or other similar

 

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instruments; (c) obligations for the deferred purchase price of property or services (including trade

 

 

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obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities;

(f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss;

(g) obligations under PACE Loans, and (h) obligations secured by any Liens, whether or not the obligations have been assumed (other than the Permitted Encumbrances).

 

Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

 

Information Certificate” means the information certificate dated on or about the date hereof delivered to Lender by each Loan Party.

 

Insurance Premiums” means all premiums payable in respect of the insurance policies required hereunder.

 

Insurance Proceeds” is defined in Section 8.6(a).

 

Interest Period” means (a) the period from the date of the initial advance under the Note through last day of the calendar month in which the initial advance occurs, and (b) each period thereafter from the first (1st) day of each calendar month through the last day of each calendar month; except that the Interest Period, if any, that would otherwise commence before and end after the Maturity Date shall end on the Maturity Date. Notwithstanding the foregoing, if Lender shall have elected to change the date on which scheduled payments under the Loan are due, as described in the definition of “Payment Date”, from and after the effective date of such election, each Interest Period shall commence on the day of each month in which occurs such changed Payment Date and end on the day immediately preceding the following Payment Date, as so changed.

 

Investor” and “Investors” have the meaning given to such term in Section 11.4. “IRS” means the United States Internal Revenue Service.

KingSett Loan” means that certain $7,250,000 1st mortgage term loan made pursuant to that certain commitment letter dated as of June 12, 2020 among TerrAscend Canada Inc. (a Subsidiary of the Canadian Parent), as borrower, Canadian Parent, as guarantor, and KingSett Mortgage Corporation, as lender in respect of an industrial facility located as 3610 Mavis Road, Mississauga, Ontario (the “Mississauga Property”) and secured by (a) a registered

$7,250,000 first priority mortgage/charge registered on title to the Mississauga Property, (b) a guarantee from the Canadian Parent in favor of KingSett Mortgage Corporation pursuant to that certain Guarantee dated June 19, 2020 (the “KingSett Guaranty”), and (c) a general security agreement by Canadian Parent in favor KingSett Mortgage Corporation (a copy of which cannot be located by Canadian Parent as at the Effective Date).

 

Late Payment Charge” is defined in Section 2.7(c).

 

 

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Lease” means any lease and other agreements or arrangements affecting the use or occupancy of all or any portion of the Property now in effect or hereafter entered into (including all lettings, subleases, licenses, concessions, tenancies and other occupancy agreements covering or encumbering all or any portion of the Property), together with any guarantee, supplement, amendment, modification, extension and/or renewal of the same.

 

Legal Requirements” means (a) all statutes, laws (including, without limitation, Hazardous Materials Laws and State Cannabis Laws), rules, rule of common law, orders, regulations, ordinances, judgments, orders, decrees and injunctions of Governmental Authorities, approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended (including any thereof pertaining to land use, zoning and building ordinances and codes applicable to the Property) affecting any Loan Party, the Loan Documents, the Property or any other Collateral, or any part thereof, and all permits and regulations relating thereto, (b) all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to any Loan Party, at any time in force affecting the Property, the other Collateral, or any part thereof, (c) terms of any insurance Policy maintained by or on behalf of any Loan Party, and (d) the organizational documents of each Loan Party, excluding (i) Federal Cannabis Law to the extent its then effective provisions forbid or restrict the conduct of Cannabis Activities and (ii) any other U.S. federal law which by extension would be violated solely because a Cannabis Activity violates the then effective provisions of any Federal Cannabis Law.

 

Lender” individually and collectively means Pelorus, and each of its successors

and/or assigns.

 

Liabilities and Costs” means any losses, actual damages, costs, fees, expenses,

claims, suits, judgments, awards, liabilities (including strict liabilities), obligations, debts, diminutions in value, fines, penalties, charges, costs of Remediation (whether or not performed voluntarily), amounts paid in settlement, foreseeable and unforeseeable consequential damages, litigation costs, reasonable attorneys’ fees, engineers’ fees, environmental consultants’ fees, and investigation costs (including costs for sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or awards.

 

Lien” means any mortgage, deed of trust, deed to secure debt, lien, pledge, encumbrance, easement, restrictive covenant, hypothecation, assignment, security interest, PACE Loan, conditional sale or other title retention agreement, financing lease having substantially the same economic effect as any of the foregoing, or financing statement or similar instrument.

 

Loan” is defined in the Recitals.

 

Loan Amount” is defined in the Recitals.

 

 

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Loan Documents” means, collectively, this Agreement and all other documents,

 

 

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agreements, instruments and certificates now or hereafter evidencing, securing or delivered to Lender in connection with the Loan and the Obligations, including without limitation the documents listed on Schedule 1.1 attached hereto, as each may be (and each of the defined terms shall refer to such documents as they may be) amended, restated, or otherwise modified from time to time.

 

Loan Origination Fee” is defined in Section 2.3(a). “Loan Guaranty” means Article X of this Agreement.

Local Loan Party” means each Loan Party other than Parent. “Loan Party” means each Borrower and Guarantor.

Lodi Assets” means the assets comprised of the alternative treatment center located at 200 NJ-17, Lodi, NJ 07644 which has been provided authority to operate under the authority of the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, P.L.2021, C.16 (C.24:6I-31 ET AL.), and provides medical and adult-use cannabis products, cannabis support and services, cannabis accessories, and the sale of other non- cannabis products to certain permitted individuals.

 

Maplewood Assets” means the assets comprised of the alternative treatment center located at 1865 Springfield Ave, Maplewood, NJ 07040 which has been provided authority to operate under the authority of the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, P.L.2021, C.16 (C.24:6I-31 ET AL.), and provides medical and adult-use cannabis products, cannabis support and services, cannabis accessories, and the sale of other non-cannabis products to certain permitted individuals, including, without limitation the Maplewood Lease.

 

Maplewood Lease” means that certain Lease Agreement dated as of July 31, 2020 by and between 5 Gould LLC, as landlord and TerrAscend NJ, as tenant in respect of premises located at 1865 Springfield Avenue, Maplewood Amendment to Maplewood Lease dated August 26, 2022.

 

Material Adverse Effect” means, as applicable, a material adverse effect upon

(a)
the business or financial position or results of operations of the Loan Parties (taken as a whole),
(b)
the ability of any Loan Party to perform, or of Lender to enforce, any of the Loan Documents, or (c) the value of the Property or other Collateral (taken as a whole) or (d) a material impairment of (i) the legality, validity or enforceability of any Loan Document, (ii) the rights, remedies of Lender under any Loan Document except as a result of the action or inaction of Lenders, or (iii) the validity, perfection or priority of any Lien in favor of Lender on any Collateral except as the result of the action of inaction of Lender.

 

Material Contract” means any license, agreement or document of any Loan Party the loss or termination (other than in accordance with the terms of such license or agreement) of which would reasonably be expected to have a Material Adverse Effect, provided that the documents and agreements evidencing or securing the Permitted Parent Indebtedness and the

 

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Permitted Indebtedness shall not be deemed to be Material Contracts. “Maturity Date” means October 11, 2027.

MD Opco” is defined in the opening paragraph of this Agreement “MD Opco 1” is defined in the opening paragraph of this Agreement “MD Opco 2” is defined in the opening paragraph of this Agreement

MD Operating Lease” means that certain lease dated as of September 27, 2022 between MD Propco, as lessor, and MD Opco 1 and MD Opco 2, as co-lessees.

 

MD Propco” is defined in the opening paragraph of this Agreement.

 

MD Real Property means that certain parcel of real property located at 273 East Memorial Boulevard, Hagerstown, Maryland 21740, as more particularly described in the Security Instrument, and all appurtenances thereto.

 

Members” means the direct or indirect holders of Equity Interests in Borrower. “Minimum Interest Payment” is defined in Section 2.10.

Net Income” means, for any period, the consolidated net income (or loss) of Borrower and its Subsidiaries on a consolidated basis; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of Borrower) in which Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or Legal Requirement applicable to such Subsidiary.

 

Net Restoration Proceeds” is defined in Section 8.6(a). “NJ Loan Parties” means TerrAscend NJ and NJ Propco.

NJ Propco” means an entity formed in New Jersey for the purpose of the NJ Real

Property.

 

NJ Operating Lease” means upon consummation of the Permitted

Reorganization, that certain Lease between NJ Propco, as lessor, and TerrAscend NJ, as lessee.

 

NJ Partners” means BWH NJ LLC, a New Jersey limited liability company and Blue Marble Ventures LLC, a New Jersey limited liability company.

 

 

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NJ Real Property” that (a) certain parcel of real property located at 122/130 Old Denville Road, Boonton, New Jersey 07005, and (b) that certain parcel of real property located at 55 South Main Street, Phillipsburg, New Jersey 08865, each as more particularly described in the Security Instrument, and all appurtenances thereto.

 

NJ Subordination Agreement” means that certain Subordination and Intercreditor Agreement among Lender, NJ Partners and TerrAscend NJ dated as of the Effective Date, as amended, restated, supplemented or modified from time.

 

Note” means each Secured Promissory Note by Borrower to Lender, as may be executed from time to time in connection herewith, together with all supplements, schedules, and exhibits thereto, as amended, restated, supplemented or modified from time to time.

 

Obligated Party” is defined in Section 10.2.

 

Obligations” means collectively, the obligations for the payment of the Debt and the performance of all obligations of the Loan Parties contained in the Loan Documents, including but not limited to all unpaid principal of and accrued and unpaid interest on the Loan, all accrued and unpaid fees (including, without limitation, any Exit Fee or Minimum Interest Payment) and all expenses, reimbursements, indemnities and other obligations and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any Loan Party to Lender or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or other instruments at any time evidencing any thereof.

 

OFAC” is defined in the definition of “Government Lists”. “Opco” is defined in the opening paragraph of this Agreement.

Operating Leases” means the MD Operating Leases and the NJ Operating

Leases.

 

Other Connection Taxes” means, with respect to any Lender or other recipient

of a payment under this Agreement or any other Loan Document, Taxes imposed as a result of a present or former connection between such Lender and the jurisdiction imposing such Tax (other than connections arising from such Lender or other recipient) having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security

 

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interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

 

PACE Loan” means any (a) ”Property-Assessed Clean Energy loan,” or (b) other indebtedness, without regard to the name given to such indebtedness, that is (i) incurred for improvements to the Property for the purpose of increasing energy efficiency, increasing use of renewable energy sources, resource conservation or a combination of the foregoing, and (ii) repaid through multi-year assessments against the Property.

 

Participant Register” is defined in Section 11.3.

 

Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended from time to time, and corresponding provisions of future Legal Requirements.

 

Patriot Act Offense” is defined in Section 4.18(b).

 

Payment Date” means the first (1st) Business Day of the first calendar month following the Effective Date, and the first (1st) Business Day of each calendar month thereafter until the Maturity Date, provided that, if the Loan is funded on a date that is not the first day of a calendar month, then Borrower’s first monthly interest payment shall be on the first (1st) day of the second (2nd) calendar month following the Effective Date and Borrower shall pay interest for the month in which the closing of the Loan occurs at the closing of the Loan on the Effective Date.

 

Pelorus” individually and collectively means Pelorus Fund REIT, LLC, a Delaware limited liability company, and its successors and/or assigns.

 

Permitted Contest” means legal proceedings to contest the validity or application of any Legal Requirements, or the amount of any Property Taxes or other Lien, provided that such proceedings (a) are permitted by law, (b) are conducted in good faith and with due diligence at the expense of the applicable Loan Party, (c) Lender is given prior written notice of any such proposed contest if such contest relates to an amount of $250,000 or more, (d) in the case of any Property Taxes or any other Lien, such proceedings shall suspend the collection thereof from the Collateral;

(e) neither the Collateral nor any part thereof or interest therein will be sold, forfeited or lost if the Loan Parties pay the amount or satisfy the condition being contested, and the Loan Parties do so if the Loan Parties fail to prevail in such contest; (f) Lender would not, by virtue of such permitted contest, reasonably be expected to be exposed to any risk of civil or criminal liability, and neither the Collateral nor any part thereof or any interest therein would be subject to the imposition of any Lien as a result of the failure to comply with any Legal Requirement of such proceeding; (g) the Loan Party has maintained adequate reserves with respect thereto; (h) such contest shall not affect the ownership, use or occupancy of the Property; and (i) such Loan Party shall, upon written request by Lender, give Lender prompt notice of the status of such proceedings and/or confirmation of the continuing satisfaction of the conditions set forth in the foregoing clauses (a) through (h).

 

 

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Permitted Disposal” means the series of transactions in which (i) TerrAscend NJ

 

 

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contributes its interest in the Lodi Assets to a wholly-owned subsidiary of the Canadian Parent, and (ii) TerrAscend NJ contributes its interest in the Maplewood Assets to a wholly-owned subsidiary of the Canadian Parent, provided that the Permitted Disposal Condition has been satisfied.

 

Permitted Disposal Condition” means, at the time of the Permitted Disposal, the revenue and Adjusted EBITDA of the NJ Loan Parties (excluding any income and expenses associated with the Lodi Assets and the Maplewood Assets) is greater than (a) the revenue and Adjusted EBITDA of the NJ Loan Parties (excluding any income and expenses associated with the Lodi Assets and the Maplewood Assets) as of the end of the month immediately preceding the month in which the proposed Permitted Disposal is to occur and (b) Two Million Eight Hundred Thousand and 00/100 Dollars ($2,800,000.00), as evidenced by a certificate executed by the applicable Loan Party, certifying the Permitted Disposal Condition has been satisfied.

 

Permitted Encumbrances” means, with respect to the Collateral, collectively,

(a) the Liens created by the Loan Documents, (b) all Liens and other matters disclosed in the Title Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet delinquent or which are contested pursuant to a Permitted Contest, (d) Liens which are carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, constructions or other like liens (or claims of such liens) or stop notices (or claims of stop notices) which are contested or discharged pursuant to a Permitted Contest, (e) Liens or claims of Lien (which are not mechanic’s liens or stop notices) which are contested or discharged pursuant to a Permitted Contest, (d) such governmental, public utility and private restrictions, covenants, reservations, easements, licenses or other agreements or similar encumbrances affecting real property that, in the aggregate, do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of business of the applicable Person, and any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of real property that does not materially interfere with the ordinary conduct of the business of Borrower and its Subsidiaries, (e) Liens securing the Existing Parent Indebtedness as described on Schedule 6.7 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased except as contemplated by clause (b) of the definition of Permitted Indebtedness, (iii) the direct or contingent obligor with respect thereto has not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by clause (b) of the definition of Permitted Indebtedness,

(f) intentionally omitted, (g) Liens securing judgments for the payment of money, or orders, attachments, decrees or awards, in each case not constituting an Event of Default, (h) Liens (i) of a collecting bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection and (ii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of setoff) that are customary in the banking industry, (i) any interest or title of a lessor, sublessor, licensor or sublicensor under leases or non-exclusive licenses permitted by this Agreement that are entered into in the ordinary course of business;

(j) intentionally omitted, (k) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business; (l) Liens incurred in the ordinary course of business in connection with the purchase or shipping of goods or assets (or the related assets and proceeds thereof), which Liens are in favor of the seller or shipper of such goods or assets and only attach to such goods or

 

 

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assets, (m) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Loan Party in the ordinary course of business in accordance with the past practices of such Loan Party, (n) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Loan Party, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts, sweep accounts and netting arrangements and similar arrangements of the Loan Parties consisting of the right to apply the funds held therein to satisfy overdraft or similar obligations incurred in the ordinary course of business of such person; provided that, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness, and Liens granted in the ordinary course of business by Borrower or any of its Subsidiaries to any bank with whom it maintains accounts to the extent required by the relevant bank’s (or custodian’s or trustee’s, as applicable) standard terms and conditions, in each case, which are within the general parameters customary in the banking industry, (o) Liens of a collecting bank arising in the ordinary course of business under Section 4- 208 of the UCC in effect in the relevant jurisdiction covering only the items being collected upon;

(n) (i) deposits of cash with the owner or lessor of premises leased or operated by Borrower or any of its Subsidiaries and (ii) cash collateral on deposit with banks or other financial institutions issuing letters of credit (or backstopping such letters of credit) or other equivalent bank guarantees issued naming as beneficiaries the owners or lessors of premises leased or operated by Borrower or any of its Subsidiaries, in each case, in the ordinary course of business of Borrower and such Subsidiaries to secure the performance of Borrower’s or such Subsidiary’s obligations under the terms of the lease for such premises, (o) statutory Liens incurred or pledges or deposits made in favor of a Governmental Authority to secure the performance of obligations of any Loan Party under Environmental Laws to which any assets of such Loan Party are subject, (p) Liens on the equipment that is the subject of Indebtedness permitted under clause (b) of the definition of Permitted Indebtedness to secure such Permitted Indebtedness and (q) the second priority mortgage Lien on the NJ Real Property in connection with the Permitted NJ Indebtedness.

 

Permitted Indebtedness” means, in respect of the Local Loan Parties, (a) the Debt, (b) Indebtedness consisting of capitalized equipment lease obligations and purchase money Indebtedness, in each case incurred by any Loan Party or any of Subsidiary of a Loan Party to finance the expansion and construction of the Harmony Assets, provided that such Indebtedness does not exceed Eight Million and 00/100 Dollars in the aggregate and does not include any Lien on any Collateral; (c) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations not in connection with money borrowed, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business,

(d) Indebtedness resulting from a bank or other financial institution honoring a check, draft or similar instrument in the ordinary course of business; (i) Indebtedness consisting of (i) the financing of insurance premiums not in excess of twelve (12) months in advance or (ii) take or pay obligations contained in supply arrangements, in each case, in the ordinary course of business,

(e) intercompany loans owed by a Local Loan Party to any member of the TerrAscend Group, provided that each such intercompany loan is (i) unsecured, (ii) fully subordinate to the Loan, with no payments there under permitted while any portion of the Loan remains outstanding, and with

 

 

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the holder of such loan acknowledging such subordination in writing for the benefit of Lender, and

(iii) is subject to the terms of Section 9.6, with the holder of such loan acknowledging the same in writing for the benefit of Lender, (g) Indebtedness arising as a direct result of judgments, orders, awards or decrees against any Local Loan Party, in each case not constituting an Event of Default,

(f) unsecured Indebtedness representing any Taxes to the extent such Taxes are being contested by any Loan Party pursuant to a Permitted Contest, (g) unsecured Indebtedness to trade creditors incurred in the ordinary course of business not to exceed 2% of the Loan Amount in the aggregate and which are paid within ninety (90) days after the date incurred, provided that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business and not in connection with the borrowing of money, (h) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness

(b) through (g) above, provided that (i) the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon the applicable Loan Party and (ii) such Indebtedness continues to satisfy the conditions to qualify as Permitted Indebtedness as described in clauses (b) through (g) above, (i) Indebtedness pursuant to the Success Fee Agreement, and (j) the Permitted NJ Subordinate Debt.

 

Permitted NJ Subordinate Indebtedness” means the Indebtedness of TerrAscend NJ of $25,000,000 pursuant to that certain promissory note dated as of the Effective Date among TerrAscend NJ, Canadian Parent and NJ Partners, which Indebtedness is subject to the NJ Subordination Agreement.

 

Permitted Parent Indebtedness” means, in respect of Canadian Parent and American Parent, (a) the Debt, (b) the Existing Parent Indebtedness, provided that (i) Canadian Parent’s or American Parent’s, as applicable, guaranteed obligations in respect of such Indebtedness is not increased except by an amount equal to any commitments existing as of the Effective Date and unutilized thereunder and (ii) to the extent such Indebtedness is secured, such Indebtedness shall not be secured by any assets other than those assets now securing such Indebtedness as described on Schedule 6.7, (c) guarantees in respect of any Indebtedness incurred by any Subsidiary of a Parent formed or acquired after the Effective Date provided that (i) the debt service coverage ratio of such Indebtedness, as determined with respect to the Adjusted EBITDA of the Subsidiaries that are the primary borrowers of such Indebtedness, is not less than 1.75:1.00, such guarantees are unsecured and the lender thereunder is given no greater priority in payment than Lender has with respect to the Loan, and (ii) Lender is given prior written notice of such Indebtedness, (d) guarantees of Indebtedness secured solely by the Maplewood Assets and/or the Lodi Assets following a Permitted Disposal, provided that (i) the amount of such Indebtedness that is guaranteed by Parent does not exceed the aggregate amount of any reduction of the principal amount of the Existing Parent Indebtedness after the Effective Date, (ii) such guarantees are unsecured and the lender thereunder is given no greater priority in payment than Lender has with respect to the Loan, and (iii) Lender is given prior written notice of such Indebtedness,

(e) obligations (contingent or otherwise) of Borrower or any Subsidiary existing or arising under any Swap Contract, provided that such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of mitigating risks associated with liabilities, commitments, investments, assets or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for speculative purposes,

(f) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and

 

 

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completion guarantees and similar obligations not in connection with money borrowed, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business, (g) Indebtedness resulting from a bank or other financial institution honoring a check, draft or similar instrument in the ordinary course of business; (h) Indebtedness consisting of the financing of insurance premiums not in excess of twelve (12) months in advance, (i) Indebtedness in the form of unsecured credit card facilities maintained in connection with the business of the TerrAscend Group not exceeding One Million Dollars ($1,000,000), (j) intercompany loans owed by Canadian Parent or American Parent to any of their respective Subsidiaries (other than any Local Loan Party), provided that each such intercompany loan is (i) unsecured, (ii) fully subordinate to the Loan, with no payments there under permitted while any portion of the Loan remains outstanding, and with the holder of such loan acknowledging such subordination in writing for the benefit of Lender, and (iii) subject to the terms of Section 9.6, with the holder of such loan acknowledging the same in writing for the benefit of Lender, (k) Indebtedness arising as a direct result of judgments, orders, awards or decrees against Canadian Parent or American Parent, as applicable, in each case not constituting an Event of Default, (l) unsecured Indebtedness representing any Taxes to the extent such Taxes are being contested by Canadian Parent or American Parent pursuant to a Permitted Contest,

(m) Indebtedness constituting reimbursement obligations in respect of letters of credit and similar instruments issued for the account of Canadian Parent, American Parent or any of their respective Subsidiary, in an aggregate amount for all such Indebtedness not to exceed One Million and 00/100 Dollars ($1,000,000.00) at any one time outstanding, and (n) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (b) through

(m) above, provided that (i) the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon the applicable Parent, (ii) such Indebtedness continues to satisfy the conditions to qualify as Permitted Indebtedness as described in clauses (b) through (l) above and (iii) Lender is given prior written notice of same.

 

Permitted Reorganization” means the series of transactions in which (i) Well and Good, Inc., or TerrAscend NJ, as applicable, forms NJ Propco, (ii) TerrAscend NJ contributes its interest in the NJ Real Property to NJ Propco and (iii) NJ Propco leases the NJ Real Property to TerrAscend NJ pursuant to a lease in form and substance reasonably acceptable to Lender, provided that no such transactions shall be permitted hereunder unless the Permitted Reorganization Conditions have been satisfied within the timeframes specified therein.

 

Permitted Reorganization Conditions” means that (a) immediately prior to the step contemplated by paragraph (ii) of the definition of “Permitted Reorganization”, NJ Propco joins this Agreement, the Note, the Security Instrument and such other Loan Documents as Lender deems necessary or appropriate as a Borrower pursuant to such joinders and/or modifications in form and substance acceptable to Lender, with Borrower paying all costs and expenses incurred by Lender in connection therewith and (b) simultaneously with the actions described in (a), at Borrower’s expense, the Title Policy is endorsed in such a manner as will ensure that the Title Policy will remain in full force and effect with respect to the Security Instrument as so amended, and subject to no additional Liens or encumbrances.

 

Person” means any individual, corporation, partnership, limited liability company, trust, unincorporated organization or other entity, and any Governmental Authority.

 

 

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Pledge Agreement” means that certain Pledge Agreement executed and delivered by Well and Good Inc. and WDB Holdings MD, Inc. in favor of Lender pursuant to this Agreement, together with all supplements, schedules and exhibits thereto, as amended, amended and restated or otherwise modified from time to time.

Policy” and “Policies” are defined in the introductory paragraph to Article V. “Post-Closing Obligations” means the obligations set forth on Schedule 6.24

hereto.

 

Prohibited Person” means:

 

(a)
any Person or country who or which is listed in the annex to, or who is

otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”);

 

(b)
any Person who is listed on any Government Lists;

 

(c)
any Person who has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under any laws relating to money laundering or terrorist financing, including, without limitation, (i) the criminal laws against terrorism; (ii) the criminal laws against money laundering, (iii) the Bank Secrecy Act, as amended, (iv) the Money Laundering Control Act of 1986, as amended, and (v) the Patriot Act;

 

(d)
any Person who is currently under investigation by any Governmental Authority for alleged criminal activity;

 

(e)
any Person that is an Embargoed Person;

 

(f)
any Person or country with whom another Person is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Executive Order;

 

(g)
any Person who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order;

 

(h)
any Person that is owned or Controlled by, or acting for or on behalf of, a Person that is described in the foregoing clauses (a) through (g) above or is otherwise subject to the provisions of the Executive Order; or

 

(i)
any Person who is an Affiliate of a Person listed in clauses (a) through (h)

above.

 

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Property” means, collectively, the Real Property and any Improvements in respect thereof.

 

Property Tax” means all real estate and personal property taxes, assessments, water rates or sewer rents or user fees, now or hereafter levied or assessed or imposed against the Property or part thereof.

 

Rating Agencies” means any nationally recognized statistical rating organization to the extent that have been or will be engaged by Lender or its designees in connection with or in anticipation of a Secondary Market Transaction (each, individually, a “Rating Agency”).

 

Real Property” means the NJ Real Property and MD Real Property. “Register” is defined in Section 11.2.

Regulator” is defined in Section 12.27(b)(ii).

 

Regulatory Change” means any change after the date of this Agreement in any Legal Requirements or the adoption or making after such date of any interpretations, directives or requests applying to lenders, including Lender, under any Legal Requirements relating to the conduct of lenders.

 

Regulatory License” means any permit, license, certificate, authorization, approval, consent, permission, accreditation, qualification, registration, filing, exemption, waiver, variance, clearance, franchise, concession or other right required, issued, granted, given or otherwise made available by or under the authority of any Governmental Authority required to be held by Borrower, or that Borrower must have rights to use, to conduct its Cannabis Business or Support Business, as applicable, in compliance with State Cannabis Laws. For purposes of this definition only, neither the U.S. Federal government nor any agency thereof shall constitute a Governmental Authority.

 

Relevant Governmental Body” means the Board of Governors or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors or the Federal Reserve Bank of New York, or any successor thereto.

 

Release” means with respect to Hazardous Materials, but is not limited to, any presence, release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

 

Remediation” means, but is not limited to, any activity to (a) clean up, detoxify, decontaminate, disinfect, contain, treat, remove, respond to, correct, dispose of, transport, or otherwise remediate, prevent, cure or mitigate any Release of any Hazardous Materials; any action to comply with any Hazardous Materials Laws or with any permits issued pursuant thereto; or

(b) inspect, investigate, study, monitor, assess, audit, sample, test, or evaluate any actual, potential or threatened Release of Hazardous Materials.

 

 

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Reserve Accounts” means the Blocked Account and the Construction Reserve

 

 

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Account.

 

Restoration” is defined in Section 8.6(a). “Restoration Proceeds” is defined in Section 8.6(a).

Restoration Proceeds Threshold” is defined in Section 8.6(a).

 

Restricted Cannabis Activity” shall mean in connection with the Support

Business or Cannabis Business: (a) any activity that is not permitted under applicable State Cannabis Laws; (b) knowingly distributing and selling cannabis and related products to minors that is not approved under a State Cannabis Law; (c) payments to criminal enterprises, gangs, cartels and Persons subject to sanctions in violation of Legal Requirements; (d) non-compliance with anti-terrorism laws and other Legal Requirements relating to money-laundering; (e) diversion of cannabis and related products from states where it is legal under State Cannabis Law to other states in violation of Legal Requirements; (f) the commission, or making threats of violence and the use of firearms in violation of Legal Requirements; (g) growing cannabis and related products on federal lands in violation of Legal Requirements; (h) operating a Cannabis Business without the applicable Regulatory License; and (i) directly or indirectly, aiding, abetting or otherwise participating in a common enterprise with any Person or Persons in such activities; provided, however, that clauses (b) and (c) shall not include the conduct by Canadian Parent or any other member of the TerrAscend Group that is not a Loan Party of any portion of that Cannabis Business or Support Business to the extent (i) it is conducted outside of the United States of America in compliance in all material respects with all applicable foreign laws and (ii) the conduct of same (despite the fact that it is conducted outside of the United States of America) would not adversely affect any Regulatory License applicable to the Collateral or otherwise constitute a violation of applicable State Cannabis Laws by any Loan Party.

 

Secondary Market Transaction” is defined in Section 11.1.

 

Security Agreement” means that certain Security Agreement executed by Borrower in favor of Lender, as amended, restated, supplemented or modified from time.

 

Security Instrument” means, individually and collectively, as the context may require, (a) that certain Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing executed and delivered by MD Opco and MD Propco in favor of Lender pursuant to this Agreement which encumbers all of MD Opco’s and MD Propco’s respective right, title and interest in and to MD Real Property, (a) that certain Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing executed and delivered by TerrAscend NJ in favor of Lender pursuant to this Agreement which encumbers all of TerrAscend NJ’s respective right, title and interest in and to NJ Real Property, as each of the same may be amended, restated, modified or supplemented from time to time.

 

Servicer” is defined in Section 2.16.

 

SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.

 

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SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

 

SOFR Loan” means each portion of the Loan that bears interest at a rate determined by reference to Term SOFR (other than pursuant to clause (c) of the definition of “Base Rate”).

 

Special Purpose Entity” is defined in Exhibit B.

 

State” means the State of New Jersey, with reference to TerrAscend NJ, NJ Propco and/or any Property located in the state of New Jersey, and/or the State of Maryland, with reference to MD Opco, MD Propco and/or any Property located in the state of Maryland.

 

State Cannabis Laws” shall mean any Legal Requirement enacted by any state or municipality of the United States which legalizes marijuana, cannabis and related products in some form and which implements regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis and related products that is applicable to Borrower, any Subsidiary of Borrower or, solely with respect to the definition of Change in Cannabis Law, Lender.

 

Subordinated Debt” is defined in Section 10.6(a).

 

Subordinated Indebtedness” of a Person means any Indebtedness of such Person, the payment of which is subordinated to payment of the Obligations pursuant to a subordination agreement in form and substance acceptable to Lender in its sole discretion.

 

Subordinating Party” is defined in Section 10.6(a).

 

Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with the Accounting Standard as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or

(b) that is, as of such date, otherwise controlled, by the parent and/or by the parent and one or more subsidiaries of the parent.

 

Success Fee Agreement” means that certain letter entitled Success Fee Payment dated August 30, 2018 by Well & Good, Inc., to Alex Havenick as amended by (a) that certain First Amendment to Success Fee Letter Agreement, dated as of November 25, 2020, (b) that certain Second Amendment to Success Fee Letter Agreement, dated as of July 19, 2021, and (c) that certain Third Amendment to Success Fee Letter Agreement dated on or about Effective Date.

 

Support Business” shall mean the business of managing or supporting a Cannabis Business, and all ancillary or complimentary activities related to the foregoing, including

 

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owning the real property on which any such activity is conducted.

 

Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

 

Taking” is defined in Section 8.6(a).

 

Tax” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

Tax Act” means the Income Tax Act (Canada), as amended. “Term SOFR” means,

(a)
for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for a tenor of one month has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for one month as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for one month was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and

 

(b)
for any calculation with respect to a Base Rate Loan on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “Base Rate Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00

p.m. (New York City time) on any Base Rate Term SOFR Determination Day the Term SOFR Reference Rate for a tenor of one month has not been published by the Term SOFR Administrator

 

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and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for one month as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for one month was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Base Rate Term SOFR Determination Day;

 

provided, further, that if Term SOFR determined as provided above (including pursuant to the proviso under clause (a) or clause (b) above) shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.

 

Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by Lender in its reasonable discretion).

 

Term SOFR Reference Rate” means the forward-looking term rate based on

SOFR.

 

TerrAscend Group” means Canadian Parent and each of its Subsidiaries. “TerrAscend NJ” is defined in the opening paragraph of this Agreement. “Title Company” means Stewart Title Guaranty Company.

Title Policy” means the most current version of ALTA extended coverage lender’s

title policy issued by Title Company insuring the first priority Lien of the Security Instrument in the full maximum possible amount of the Loan subject only to such exceptions approved by Lender and including such endorsements as are required by Lender.

 

Transfer” means the sale, transfer, hypothecation, encumbrance, mortgage, conveyance, lease, alienation, assignment, disposition, divestment, or leasing with option to purchase, or assignment of any assets of any Local Loan Party or any portion thereof or interest therein (whether direct or indirect, legal or equitable) (or entering into any agreement or contract to do any of the foregoing), or undertaking, suffering or causing any of the foregoing to occur voluntarily, involuntarily or by operation of law.

 

UCC” means the Uniform Commercial Code as in effect from time to time in the State; provided, however, that if by reason of mandatory provisions of law, any or all of the perfection or priority of Lender's security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State, the term “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating to such provisions.

 

Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

 

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U.S. Borrower” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

U.S. Tax Compliance Certificate” is defined in Section 2.15(e)(ii)(B)(3). “WANA License” means (a) that certain License and Consulting Agreement dated

August 11, 2022 among The CIMA Group, LLC, a Colorado limited liability company and TerrAscend NJ, as amended from time to time, and (b) that certain License and Consulting Agreement dated August 11, 2022 among The CIMA Group, LLC, a Colorado limited liability company and WDB Holdings MD, Inc. as amended from time to time.

 

1.2
Exhibits and Schedules. All exhibits and schedules attached to this Agreement are hereby incorporated into this Agreement.

 

1.3
Principles of Construction. All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise. Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. All terms used which are not specifically defined herein shall, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein; in the event that any term is defined differently in different Articles or Divisions of the UCC, the definition contained in Article or Division 9 shall control.

 

1.4
Rates. Lender does not warrant or accept any responsibility for, and shall not have any liability with respect to, (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Term SOFR Reference Rate, Term SOFR or any other Benchmark, any component definition thereof or rates referred to in the definition thereof, or with respect to any alternative, successor or replacement rate thereto (including any then-current Benchmark or any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement), as it may or may not be adjusted pursuant to Section 2.14(a)(iii), will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Term SOFR Reference Rate, Term SOFR or any other Benchmark, prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. Lender and its affiliates or other related entities may engage in transactions that affect the calculation of the Term SOFR Reference Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto and such transactions may be adverse to Borrower. Lender may select information sources or services in its reasonable discretion to ascertain the Term SOFR Reference Rate or Term SOFR, or any other Benchmark, any component definition thereof or rates referred to in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to any Borrower or any other person or

 

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entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.

 

ARTICLE II THE LOAN

2.1
Loan. Subject to the terms and conditions contained in this Agreement, and in

reliance upon the representations and warranties of Borrower set forth hereunder and in the other Loan Documents, Lender hereby agrees to lend to Borrower, and Borrower hereby agrees to borrow from Lender, the principal sum of the Loan Amount. The Loan is evidenced by the Note. The Note and all other Obligations incurred in connection with any Loan Document are secured by this Agreement and the other Loan Documents. Borrower shall receive only one borrowing hereunder up to the maximum Loan Amount and any amount borrowed and repaid hereunder may not be reborrowed. A portion of the Loan in the amount of Two Million Two Hundred Eighty Eight Thousand Seventy One and 09/100ths Dollars ($2,288,071.09) (the “Construction Reserve Funds”) has been funded and is being held by Lender in the Construction Reserve Account. For the avoidance of doubt, interest shall accrue on the Construction Reserve Funds from and after the Effective Date.

 

2.2
Use of Funds. Borrower shall use the proceeds of the Loan to pay for work related to the Construction Work that has already been completed and/or to be completed and for general corporate purposes of the TerrAscend Group, to pay fees and expenses required under this Agreement and the other Loan Documents, and for such other purposes and uses as are permitted or required under this Agreement and the other Loan Documents.

 

2.3
Loan Origination Fee; Exit Fee.

 

(a)
Loan Origination Fee. On the Effective Date, Borrower shall pay to Lender, a loan origination fee in the amount of Nine Hundred Nine Thousand Five Hundred Sixty and 00/100 Dollars ($909,560.00) (the “Loan Origination Fee”). Borrower shall receive a credit towards the Loan Origination Fee in the amount of Two Hundred Twenty Seven Thousand Three Hundred Ninety and 00/100 Dollars ($227,390.00) for an application deposit previously made by Borrower. Borrower hereby authorizes Lender to disburse on the Effective Date a portion of the Loan in such amount directly to Lender in payment of the Loan Origination Fee. The Loan Origination Fee shall be deemed earned when due and shall not be subject to reduction or be refundable under any circumstances.

 

(b)
Intentionally omitted.

 

(c)
Exit Fee. On the Maturity Date or such earlier date on which the Loan is accelerated pursuant to the terms hereof, Borrower shall be obligated to pay to Lender an additional fee of Four Hundred Fifty Four Thousand Seven Hundred Eighty and 00/100 Dollars $454,780

 

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(the “Exit Fee”). The Exit Fee shall be deemed earned when due pursuant to this Section 2.3(b), and shall not be subject to reduction or be refundable except in circumstances expressly permitted

 

 

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hereunder. If any partial prepayment of the Loan is made by Borrower prior to the Maturity Date in accordance with Section 2.10, to the extent such prepayment is permitted or required hereunder, then such partial prepayment shall be accompanied by the portion of the Exit Fee allocable to the amount being so prepaid. Upon such partial prepayment, the amount due on the Maturity Date or earlier acceleration of the Loan shall be reduced by that portion of the Exit Fee previously paid by Borrower to Lender. Notwithstanding anything in this Agreement to the contrary, if and to the extent that the Loan or any portion thereof is repaid with the proceeds of a mortgage loan from Lender (or any Affiliate thereof or syndicate including Lender or any such Affiliate) (provided that Lender (or any Affiliate thereof or syndicate including Lender or any such Affiliate) shall have no obligation to offer to provide such financing), then the Exit Fee that would otherwise be payable with respect to repayment (or portion thereof) in connection therewith shall be waived. For the avoidance of doubt, no Exit Fee (or portion thereof) shall be earned or due on any Amortization Payment.

 

2.4
Maturity Date. Upon the Maturity Date (unless earlier accelerated upon an Event of Default), all sums due and owing under this Agreement and the other Loan Documents shall be repaid in full. All payments due to Lender under this Agreement, whether upon the Maturity Date or otherwise, shall be paid in immediately available funds.

 

2.5
Intentionally Omitted.

 

2.6
Effective Date; Closing Conditions. The effective date of this Agreement and the other Loan Documents (the “Effective Date”) shall be the date upon which the Loan is deemed “closed” by Lender and Borrower. Lender’s obligation to disburse the Loan on the Effective Date is subject to the satisfaction of each of the conditions precedent set forth on Schedule 2.6 on or before the Effective Date.

 

2.7
Interest on Loan.

 

(a)
Generally. Interest shall accrue on the Loan at the Applicable Interest Rate, and shall be paid by Borrower in the amounts and at the times hereinafter provided. Lender shall provide Borrower with a monthly interest statement indicating the amount of interest payable for such month at least one Business Day prior to each Payment Date, but failure of Lender to provide such statement shall not relieve Borrower from its obligation to make the required payment. On each Payment Date, Borrower shall pay interest on the unpaid principal balance of the Loan accrued and accruing through the last day of the prior Interest Period, provided that if the Loan is funded on a date which is within the last five (5) days of a calendar month, Borrower’s first monthly interest payment shall be on the first day of the first (1st) calendar month following the date of this Agreement. Interest shall commence accruing on the Loan on October 7, 2022 notwithstanding that the Effective Date is October 11, 2022.

 

(b)
Computations. Interest shall be computed hereunder based on a 360-day year, and shall accrue for each and every day (365 days per year, 366 days per leap year) on which any Debt remains outstanding hereunder. In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is credited prior to close of business. Payments in federal funds immediately available

 

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in the place designated for payment made by Borrower prior to 11:00 am Pacific Time, shall be credited prior to close of business, while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds in the place designated for payment prior to 11:00 am, Pacific Time, at such place of payment on a day on which Lender is open for business.

 

(c)
Late Payment Charge. If any principal, interest or other sum due under any Loan Document is not paid by Borrower within five (5) Business Days after the date when due (or with respect to amounts due on the Maturity Date, to the extent not paid on the Maturity Date), and is not a result of a delay in Lender’s funding an advance pursuant to the terms and conditions of this Agreement, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5.0%) of such unpaid sum or the maximum amount permitted by applicable law (the “Late Payment Charge”), to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Such Late Payment Charge shall be added to the Obligations and secured by the Collateral.

 

(d)
Applicable Interest Rate. The “Applicable Interest Rate” upon which interest shall be calculated for the Debt shall, from and after the Effective Date, be one of the following:
(i)
provided no Event of Default has occurred and is continuing, a rate per annum equal to the lesser of (i) Adjusted Term SOFR and (ii) the maximum rate of interest, if any, which may be collected from Borrower under applicable law; and

 

(ii)
after the occurrence and during the continuance of an Event of Default, the entire unpaid Debt shall bear interest at a rate per annum equal to the Default Interest Rate (or a lesser amount at Lender’s election), and shall be payable upon demand from time to time, to the extent permitted by applicable law.

 

2.8
Loan Payments.

 

(a)
Payments on the outstanding amount of the Loan shall be paid by Borrower in accordance with the terms of this Agreement. Lender shall provide Borrower with its wire instructions for any such payment.

 

(b)
On each Payment Date from and after the thirty-sixth (36th) Payment Date, Borrower shall make amortization payments in an amount equal to One Hundred Eighty Nine Thousand Four Hundred Ninety One and 67/100 Dollars ($189,491.67) (each such amount a “Amortization Payment”); provided, that the final Amortization Payment shall be due on the Maturity Date and shall be in an amount equal to all principal and interest outstanding with respect to the Loan. No portion of the Loan repaid hereunder shall be available for re-borrowing.

 

2.9
Credit for Payments. Any payment made upon the outstanding principal balance of the Loan, or the accrued interest thereon, shall be credited as of the Business Day received, provided that such payment is made by Borrower no later than 11:00 am (Pacific Standard Time or Pacific Daylight Time, as applicable) and constitutes immediately available funds. Any payment made after such time or which does not constitute immediately available funds shall be

 

 

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credited upon the later of such funds having become unconditionally and immediately available to Lender or the following Business Day.

 

2.10
Prepayment.

 

(a)
Borrower shall have the option to prepay the Loan in whole or in part, on a regularly scheduled Payment Date (subject, in the case of a prepayment of less than all outstanding principal, to a minimum prepayment of Five Million Dollars ($5,000,000), upon not less than ten

(10) Business Days’ (but no more than one hundred-twenty (120) days’) prior written notice to Lender and the payment to Lender of (i) all outstanding principal (or portion(s) thereof) being prepaid) and accrued but unpaid interest due under the Loan and all other amounts due under the Note, this Agreement and the other Loan Documents (including, without limitation, the Exit Fee (if applicable)) plus (ii) a prepayment premium (the “Minimum Interest Payment”) equal to

(A) Seventeen Million Four Hundred Fifty Thousand and 00/100 Dollars ($17,450,000.00), minus

(B) the aggregate sum of all interest payments (excluding any default interest) actually received by Lender prior to the date of prepayment (or, in the case of a partial prepayment, an amount equal to the pro-rated amount of the Minimum Interest Payment based upon the portion of the Loan Amount being prepaid. The Exit Fee and the Minimum Interest Payment shall also be due in connection with a prepayment pursuant to acceleration of the Loan upon the occurrence and during the continuance of an Event of Default. A prepayment notice delivered to Lender pursuant to this Section 2.10 shall be irrevocable unless otherwise consented to by Lender. The parties hereto acknowledge and agree that the Minimum Interest Payment and the Exit Fee (I) are additional consideration for providing the Loan, (II) constitute reasonable liquidated damages to compensate Lender for (and is a proportionate quantification of) the actual loss of the anticipated stream of fees upon a termination of the Loan (such damages being otherwise impossible to ascertain or even estimate for various reasons, including, without limitation, because such damages would depend on, among other things, (x) when the Loan might otherwise be terminated and (y) future changes in interest rates which are not readily ascertainable on the Effective Date), and (III) are not a penalty to punish Borrower for its early termination of the Loan or for the occurrence of any Event of Default. Notwithstanding anything in this Agreement to the contrary, if and to the extent that the Loan or any portion thereof is repaid with the proceeds of a loan from Lender (or any Affiliate thereof or syndicate including Lender or any such Affiliate) (provided that Lender (or any Affiliate thereof or syndicate including Lender or any such Affiliate) shall have no obligation to offer to provide such financing), then the Minimum Interest Payment that would otherwise be payable with respect to repayment (or portion thereof) in connection therewith shall be waived.

 

(b)
TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED BY LAW, BORROWER HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 2954.10 TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PAYMENT OF A PREPAYMENT FEE, UPON ACCELERATION OF THE MATURITY DATE, AND (ii) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE NOTE IS MADE UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWER OR ANY OTHER LOAN PARTY INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE

 

 

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LOAN DOCUMENTS, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH PREPAYMENT (AND IN ADDITION TO THE EXIT FEE), THE MINIMUM INTEREST PAYMENT SPECIFIED IN SECTION 2.10. BY EXECUTING THIS AGREEMENT, BORROWER HEREBY DECLARES THAT THE AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS AGREEMENT CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR THIS WAIVER AND AGREEMENT. FURTHER, BY EXECUTING THIS AGREEMENT, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING ANY APPLICABLE LAW TO THE CONTRARY, PURSUANT TO THE TERMS OF THIS AGREEMENT AND OF THE NOTE, BORROWER HAS AGREED THAT BORROWER HAS NO RIGHT TO REPAY THE NOTE WITHOUT THE PAYMENT OF THE EXIT FEE, AND THAT BORROWER SHALL BE LIABLE FOR THE PAYMENT OF THE EXIT FEE IN CONNECTION WITH THE REPAYMENT OF THE NOTE DUE TO THE ACCELERATION OF THE NOTE IN ACCORDANCE WITH ITS TERMS AND/OR THE TERMS OF THIS AGREEMENT. FURTHERMORE, BY EXECUTING THIS AGREEMENT, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT LENDER HAS MADE THE LOAN IN RELIANCE UPON THESE AGREEMENTS OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH AGREEMENTS OF BORROWER.

 

2.11
Full Repayment and Release. Upon receipt of payment in full in immediately available funds of all amounts owing and outstanding under the Loan Documents, Lender shall release the Collateral from the Lien of the Loan Documents and issue a reconveyance in respect of the Property, provided that all of the following conditions shall be satisfied at the time of, and with respect to, such release: (a) Lender shall have received all escrow, closing and recording costs, the costs of preparing and delivering such release and any sums then due and payable under the Loan Documents; (b) Lender shall have received the entire Exit Fee in accordance with Section 2.3 and/or any Minimum Interest Payment payable hereunder; and (c) Lender shall have received a written release satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to any surety, Governmental Authority or other Person in connection with the Loan and/or the Collateral. If applicable, Lender’s obligation to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such full reconveyance, and any commitment of Lender to lend any undisbursed portion of the Loan shall be cancelled.

 

2.12
Authorization. The Loan Parties shall act under this Agreement and the other Loan Documents only through such authorized representatives as the applicable Loan Party shall designate to Lender in writing from time to time and such Persons shall continue as such Loan Party’s authorized representatives until such time as such Loan Party shall duly authorize other or additional Persons to so act on behalf of such Loan Party. Lender shall be entitled to act on the instructions of any Person identifying himself or herself as one of the Persons authorized by a Loan Party, without any duty to investigate, and the applicable Loan Party shall be bound thereby in the same manner as if any such Person were actually so authorized. The Loan Parties shall indemnify, defend and hold Lender harmless from and against any and all Liabilities and Costs arising out of

 

 

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or in any way connected with Lender’s acceptance of or acting upon any instructions or directions from any such Persons.

 

2.13
Recourse.

 

(a)
The Loan shall be full recourse to Borrower and each of the other Loan Parties. Further, Lender shall have the right to (a) proceed against any Loan Party under any Loan Document, including this Agreement, the Environmental Indemnity Agreement, or to proceed against any Guarantor under the provisions of Article X; (b) name any Loan Party in any foreclosure or similar legal action to the extent necessary to enforce Lender’s rights under the Loan Documents; and/or (c) obtain injunctive relief against each Loan Party, any Affiliate of any Loan Party or other Person, or maintain any suit or action in connection with the preservation, enforcement or foreclosure of any Lien now or hereafter securing any Obligations.

 

(b)
Notwithstanding anything to the contrary contained in this Agreement, in the Note or in the other Loan Documents, no recourse or any personal liability shall be had for the payment of the principal, interest or other amounts owed hereunder or under the Note or the other Loan Documents, or for any claim based on this Agreement, the Note or any other Loan Document, against any present or future direct or indirect, principal, partner, member, shareholder, officer, director, agent or employee of Borrower or Guarantor, any of their respective successors and assigns (other than any Guarantor), and any of the respective assets of such Persons, it being expressly understood that the sole remedies of Lender with respect to such amounts and claims shall be against Borrower and the assets of Borrower, including the Real Property and other Collateral (which may result in the decrease in the value of the ownership interest of the members of Borrower) and against Guarantor and the assets of Guarantor; provided, however, that nothing contained in this Agreement (including the provisions of this Section 2.13(b)), the Note or the other Loan Documents shall constitute (i) a waiver of any of Loan Party’s obligations herein, under the Note or the other Loan Documents, (ii) a limitation of liability of Borrower or any of its assets, or (iii) a limitation of liability of Canadian Parent or American Parent (iii) a limitation of liability of Guarantor or any of its respective assets with respect to the provisions of Article X, the Environmental Indemnity Agreement or any other guaranty or indemnity agreement given by it in connection with the Loan, as applicable.

 

2.14
Increased Costs Generally.

 

(a)
Special Provisions Applicable to Term SOFR.

 

(i)
Term SOFR may be adjusted by Lender on a prospective basis to take into account any additional or increased costs to Lender (other than Taxes which shall be governed by Section 2.15), in each case, due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, or pursuant to any Change in Law or change in the reserve requirements imposed by the Board of Governors, which additional or increased costs would increase the cost of funding or maintaining loans bearing interest at Term SOFR. In any such event, Lender shall give Borrower notice of such a determination and adjustment and, upon its receipt of the notice from Lender, Borrower may, by notice to Lender (A) require Lender to furnish to Borrower a statement

 

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setting forth in reasonable detail the basis for adjusting Term SOFR and the method for

 

 

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determining the amount of such adjustment, or (B) repay the SOFR Loans or Base Rate Loans determined with reference to Term SOFR, in each case, of such Lender with respect to which such adjustment is made (together with any amounts due under Section 2.14(a)(ii)).

 

(ii)
Subject to the provisions set forth in Section 2.14(a)(iii) below, in the event that any change in market conditions or any Change in Law shall at any time after the date hereof, in the reasonable opinion of Lender, make it unlawful or impractical for Lender to fund or maintain SOFR Loans (or Base Rate Loans determined with reference to Term SOFR) or to continue such funding or maintaining, or to determine or charge interest rates at the Term SOFR Reference Rate, Term SOFR or SOFR, Lender shall give notice of such changed circumstances to Borrower and (A) in the case of any SOFR Loans that are outstanding, such SOFR Loans will be deemed to have been converted to Base Rate Loans on the last day of the Interest Period of such SOFR Loans, if Lender may lawfully continue to maintain such SOFR Loans, or immediately, if Lender may not lawfully continue to maintain such SOFR Loans, and thereafter interest upon the SOFR Loans of Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans (and if applicable, without reference to the Term SOFR component thereof) and

(B) in the case of any such Base Rate Loans of Lender that are outstanding and that are determined with reference to Term SOFR, interest upon the Base Rate Loans of Lender after the date specified in such Lender’s notice shall accrue interest at the rate then applicable to Base Rate Loans without reference to the Term SOFR component thereof in each case, until such Lender determines that it would no longer be unlawful or impractical to do so.

 

(iii)
Benchmark Replacement Setting.

 

(A)
Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, Lender and Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. (New York City time) on the fifth (5th) Business Day after Lender has posted such proposed amendment to Borrower. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Section 2.14(a)(iii) will occur prior to the applicable Benchmark Transition Start Date.

 

(B)
Conforming Changes. In connection with the use, administration, adoption, or implementation of a Benchmark Replacement, Lender will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.

 

(C)
Notices; Standards for Decisions and Determinations. Lender will promptly notify Borrower of (1) the implementation of any Benchmark

 

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Replacement, and (2) the effectiveness of any Conforming Changes in connection with the use, administration, adoption, or implementation of a Benchmark Replacement. Any determination, decision or election that may be made by Lender pursuant to this Section 2.14(a)(iii), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.14(a)(iii).

 

(D)
Benchmark Unavailability Period. Upon Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, any outstanding affected SOFR Loans will be deemed to have been converted to Base Rate Loans at the end of the applicable Interest Period. During any Benchmark Unavailability Period, the component of the Base Rate based upon the then-current Benchmark will not be used in any determination of the Base Rate.

 

(b)
No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither Lender nor any of its participants, is required actually to match fund any Obligation as to which interest accrues at Term SOFR or the Term SOFR Reference Rate.

 

(c)
If any Regulatory Change: (i) shall subject Lender to any Taxes (other than

(A) Indemnified Taxes, (B) Taxes described in clauses (b) through (e) of the definition of Excluded Taxes and (C) Connection Income Taxes) with respect to its loans, commitments or other obligations or its deposits, reserves other liabilities or capital attributable thereto; or (ii) shall impose, modify or deem applicable any reserve, special deposit, capital, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, Lender or shall impose on Lender any other condition affecting its loans or its obligation to make such loans, and the result of any of the foregoing shall be to increase the cost (other than Taxes) to such Lender of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make the Loan, or to increase the cost to such Lender, or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) (other than in respect of Taxes) then, upon request of Lender, Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender, as the case may be, for such Taxes described in clause (i) or such additional costs incurred or reduction suffered described in clause (ii).

 

(d)
A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in Section 2.14(c) and delivered to Borrower, shall be conclusive absent manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(e)
Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section for

 

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any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender notifies Borrower of the Regulatory Change giving rise to such increased costs or reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Regulatory Change giving rise to such increased costs or reductions is retroactive, then the nine (9)-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

2.15
Taxes.

 

(a)
Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of Borrower) requires the deduction or withholding of any Tax from any such payment by any Loan Party, then such Loan Party shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by any Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) Lender receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

(b)
Payment of Other Taxes. Each Loan Party shall timely pay to the relevant Governmental Authority in accordance with applicable law any Other Taxes.

 

(c)
Indemnification by Borrower. Each Loan Party shall indemnify Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by Lender or required to be withheld or deducted from a payment to Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender shall be conclusive absent manifest error.

 

(d)
Evidence of Payments. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section, the applicable Loan Party shall deliver to Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Lender.

 

(e)
Status of Lenders.

 

(i)
Any Lender or other recipient of a payment under any Loan Document that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to Borrower, at the time or times reasonably requested by Borrower, such properly completed and executed documentation reasonably requested by Borrower as will permit such payments to be made without

 

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withholding or at a reduced rate of withholding. In addition, any Lender or other

 

 

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recipient of a payment under any Loan Document, if reasonably requested by Borrower, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower as will enable Borrower to determine whether or not such Lender or other recipient is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.15(e)(ii)(A), 2.15(e)(ii)(B) and 2.15(e)(ii)(D)) shall not be required if in Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)
Without limiting the generality of the foregoing, in the event that Borrower is a U.S. Borrower,

 

(A)
any Lender that is a U.S. Person shall deliver to Borrower on or about the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(B)
any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower (in such number of copies as shall be requested by the recipient) on or about the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower), whichever of the following is applicable:

 

(1)
in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W- 8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(2)
executed copies of IRS Form W-8ECI;

 

(3)
in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code,

(x) a certificate substantially in the form of Exhibit A-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” related to any Loan Party as described in Section 881(c)(3)(C)

 

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of the Code (a “U.S. Tax Compliance Certificate”)

 

 

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and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E; or

 

(4)
to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, a U.S. Tax

Compliance Certificate substantially in the form of Exhibit A-2 or Exhibit A-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit A-4 on behalf of each such direct and indirect partner;

 

(C)
any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower (in such number of copies as shall be requested by the recipient) on or about the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrower to determine the withholding or deduction required to be made; and

 

(D)
if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower at the time or times prescribed by law and at such time or times reasonably requested by Borrower such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower as may be necessary for any Loan Party to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Borrower in writing of its legal inability to do so.

 

(f)
Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.15 (including by the payment of additional amounts pursuant to this Section 2.15), it shall pay to the indemnifying party an amount equal to such refund

 

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(but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (f) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (f), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(g)
Survival. Each party’s obligations under this Section 2.15 shall survive any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all the Obligations.

 

2.16
Appointment of Servicer and Delegation of Lender Rights. Borrower acknowledges and agrees that, at the option of Lender, the Loan may be serviced by a servicer/trustee (the “Servicer”) selected by Lender, and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement between Lender and Servicer, provided that such delegation will not release Lender from any of its obligations under the Loan Documents. Borrower shall be responsible for paying to Servicer (on each Payment Date) Servicer’s monthly servicing fee for any period during which an Event of Default exists, provided that Borrower shall in no event be responsible for any such fee to the extent the same exceeds 0.5% (50 basis points) of the Loan Amount.

 

2.17
Original Issue Discount. For applicable income Tax purposes, the parties hereto agree that the Loan is being issued with “original issue discount” within the meaning of Section 1273(a) of the Code and Treasury Regulation Section 1.1273-1 and shall not take any position to the contrary or file any Tax return, report or declaration inconsistent with such treatment unless required to do so pursuant to a “determination” within the meaning of Section 1313(a) of the Code (or comparable provision of state or local Law).

 

2.18
Mitigation Obligations; Replacement of Lenders.

 

(a)
Designation of a Different Lending Office. If Lender requests compensation under Section 2.14, or requires Borrower to pay any Indemnified Taxes or additional amounts to Lender or any Governmental Authority for the account of Lender pursuant to Section 2.15, then Lender shall (at the request of Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of Lender, such

 

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designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or Section 2.15, as the case may be, in the future, and (ii) would not subject Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by Lender in connection with any such designation or assignment.

 

(b)
Replacement of Lenders. If any Lender requests compensation under Section 2.14, or if Borrower is required to pay any Indemnified Taxes or additional amounts to Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15 and, in each case, Lender has declined or is unable to designate a different lending office in accordance with Section 2.18(a), then Borrower may, at its sole expense and effort, upon notice to such Lender, require Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.1), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.14 or Section 2.15) and obligations under this Agreement and the related Loan Documents to the applicable assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that: (i) such Lender shall have received payment of an amount equal to the outstanding principal of its Loan, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts); (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments thereafter; (iii) such assignment does not conflict with applicable law; and (iv) a Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply. Each party hereto agrees to execute and deliver such documents necessary to evidence such assignment as reasonably requested by the applicable Lender; provided, further that any such documents shall be without recourse to or warranty by the parties thereto.

 

ARTICLE III

RESERVE ACCOUNTS GENERALLY

 

3.1
Reserve Accounts.

 

(a)
Borrower hereby pledges and assigns, and grants to Lender a first-priority perfected security interest in, the Reserve Accounts and all funds therein and any and all monies now or hereafter deposited in the Reserve Accounts as additional security for payment of the Obligations. Until expended or applied in accordance herewith, the Reserve Accounts and all funds therein shall constitute additional security for the Obligations.

 

(b)
This Agreement is, among other things, intended by the parties to be a security agreement for purposes of the UCC, in addition to the Security Agreement. Upon the occurrence and during the continuance of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in the Reserve Accounts to the payment of the Obligations in any order in its sole discretion.

 

 

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(c)
All interest on a Reserve Account shall be added to or become a part thereof. Borrower shall be responsible for payment of any Tax applicable to the interest earned on the Reserve Accounts credited or paid to any Borrower.

 

(d)
The Reserve Accounts shall be under the sole control and dominion of Lender, and except as otherwise provided in this Agreement, Borrower shall not have any right of withdrawal therefrom.

 

(e)
Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in the Reserve Accounts or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto or any Permitted Encumbrances.

 

(f)
Lender and Servicer shall not be liable for any loss sustained on the investment of any funds the Reserve Accounts. Borrower shall indemnify Lender and Servicer and hold Lender and Servicer harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys’ fees and expenses) arising from or in any way connected with the Reserve Accounts or the performance of the obligations for which the Reserve Accounts were established.

 

(g)
Any amount remaining in the Reserve Accounts after the Obligations have been paid in full in immediately available funds shall be released to Borrower or such other party that may be entitled thereto.

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES

 

To induce Lender to execute this Agreement and make the Loan, each Loan Party hereby represents, warrants and covenants to Lender as of the date hereof and continuing hereafter as follows:

 

4.1
Organization; Power; Special Purpose Entity. Each Loan Party: (a) is duly organized and validly existing in good standing under the laws of the State or Province of its formation; (b) is duly qualified to do business in each jurisdiction in which the nature of its business or assets makes such qualification necessary; (c) has the requisite power and authority to carry on its business as now being conducted; and (d) has the requisite power and authority to execute, deliver, and perform its obligations under the Loan Documents to which it is a party. Each Loan Party other than Canadian Parent is a “registered organization” within the meaning of the UCC in effect in the state where such Loan Party is organized. Each Loan Party’s organizational identification number issued by such State or Province is as set forth on Schedule

4.1. Each Loan Party is in good standing in, every jurisdiction where such qualification is required. MD Propco and, once NJ Propco joins the Loan Documents, NJ Propco shall at all times remain a Special Purpose Entity.

 

 

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4.2
Authority; Enforceability. Each Loan Party has the requisite legal power and authority to execute, deliver and perform each of the Loan Documents to which it is a party. The execution, delivery and performance of each of the Loan Documents, and the consummation of the transactions contemplated thereby, have been duly authorized by all requisite action of each Loan Party, and no proceedings or authorizations on the part of any Loan Party is necessary to consummate such transactions other than as have been received on or prior to the Effective Date and are in full force and effect. The Loan Documents have been duly executed and delivered by each Loan Party that is party thereto and are the legal, valid and binding obligations of each Loan Party, as applicable, enforceable against each Loan Party, as applicable, in accordance with their terms, subject only to bankruptcy, insolvency and other limitations on creditors’ rights generally and to equitable principles. Such Loan Documents are not subject to any right of rescission, set- off, counterclaim or defense by any Loan Party, including the defense of usury.

 

4.3
Ownership of Loan Parties. The organizational chart attached hereto as

Schedule 4.3 is complete and accurate as of the Effective Date and illustrates all Persons who

(a)
have, together with its Affiliates, at least a 20% direct or indirect ownership interest in each Loan Party to each tier or level shown thereon and their respective ownership percentages and
(b)
all direct and indirect Subsidiaries of each Loan Party. All of the issued and outstanding Equity Interests of the Loan Parties have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. There are no outstanding commitments or other obligations of any Loan Party (other than Canadian Parent) to issue, and no options, warrants or other rights of any Person to acquire, any Equity Interests of any Loan Party (other than Canadian Parent) other than as set forth in the Information Certificate. No Local Loan Party has any subsidiary other than as disclosed on the Information Certificate.

 

4.4
No Conflict. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party, and each of the transactions contemplated thereby, do not and will not: (a) conflict with or violate such Loan Party’s, as applicable, partnership agreement, operating agreement, bylaws, articles of partnership, articles of organization, articles of incorporation or other partnership, organizational or corporate documents, as applicable;

(b) conflict with, result in a breach or violation of or constitute (with or without notice or lapse of time or both) a default under any (i) material agreement to which any Loan Party, the Property or the other Collateral is subject, (ii) statute, ordinance, rule or regulation of any Governmental Authority applicable to any Loan Party, the Property or the other Collateral, or (iii) court or Governmental Authority order; or (c) result in or require the creation or imposition of any Lien upon any of the properties or assets of any Loan Party (other than Liens in favor of Lender arising pursuant to the Loan Documents).

 

4.5
Consents and Authorizations. Each Loan Party has obtained all consents and authorizations required under its organizational documents, as applicable, or pursuant to its contractual obligations with any other Person, and has obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority as may be necessary to allow such Loan Party to lawfully execute, deliver and perform its obligations under the Loan Documents.

 

 

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4.6
Financial Information. All financial statements and other financial information heretofore delivered by any Loan Party to Lender, including, without limitation, information relating to the financial condition of any Loan Party and the Property, the other Collateral, or the shareholders, managers, or members in any Loan Party, are true and correct in all material respects, fairly and accurately reflect the financial condition of the subject thereof and have been prepared in accordance with the Accounting Standard, or another accounting method approved by Lender, consistently applied. Since June 30, 2022, there has been no change that would have a Material Adverse Effect on any Loan Party, or the ability of any Loan Party to perform its respective obligations under the Loan Documents. There are no known material unrealized or anticipated losses of any Loan Party. Neither any Loan Party nor any of their respective Members (other than Members of Canadian Parent) or Affiliates has filed or been the subject of any bankruptcy, insolvency, reorganization, dissolution or similar proceeding or any proceeding for the appointment of a receiver or trustee for all or any substantial part of their respective property or assets. Neither any Loan Party nor any of their respective Affiliates, has admitted in writing its inability to pay its debts when due, made an assignment for the benefit of creditors or taken other similar action.

 

4.7
No Additional Liabilities of Borrower and/or Guarantors Not Previously Disclosed in Writing to Lender. No Local Loan Party or any of its Subsidiaries has any Indebtedness other than Permitted Indebtedness. No Parent has any Indebtedness other than Permitted Parent Indebtedness. Notwithstanding anything to the contrary contained hereunder or under any of the other Loan Documents, no Loan Party has any obligation which was not previously disclosed to Lender in writing, which obligation would have a Material Adverse Effect upon any of (a) any Loan Party’s ability to perform hereunder or under any of the other Loan Documents, (b) any Loan Party’s ability to timely and fully repay the Loan (and all amounts due in connection therewith) as required under the Note, this Agreement and the other Loan Documents, (c) any Loan Party’s ability now or in the future to operate and renovate the Property (as required hereunder). There are no material defaults, breaches or violations existing in respect of any Permitted Indebtedness or Permitted Parent Indebtedness by any party thereto and no event has occurred that, with the passage of time or the giving of notice, or both, would constitute a material default, breach or violation by any party thereunder, except to the extent that any of the foregoing have been waived in writing by the applicable holder of such Permitted Indebtedness or Permitted Parent Indebtedness. No borrower, guarantor or other party obligated in respect of the Permitted Indebtedness or Permitted Parent Indebtedness has given or received any notice of default under any of the Permitted Indebtedness or Permitted Parent Indebtedness that remains uncured or in dispute. No Permitted Indebtedness grants any Lien on any assets of any Local Loan Party or any greater priority than Lender has with respect to the Loan with respect to any payment obligations of any Loan Party. The Loan Parties have delivered to Lender true, correct and complete copies of all material documents and instruments evidencing or securing (i) any Existing Parent Indebtedness (other than with respect to the KingSett Loan) and the Success Fee Agreement.

 

4.8
Litigation; Adverse Effects; Condemnation.

 

(a)
Except as disclosure on the Information Certificate or with respect to which any Loan Party has provided notice as required hereunder, there is no action, suit, proceeding,

 

 

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governmental investigation or arbitration, at law or in equity, or before or by any Governmental Authority, pending against and served upon or, to best of any Loan Party’s knowledge, threatened against and not served upon any Loan Party, the Property or any other Collateral which (i) could result in a Material Adverse Effect upon such Person, the Property or other Collateral, or (ii) could materially and adversely affect the ability of any Loan Party to perform its obligations under the Loan Documents or (iii) involves any Loan Document or the transactions contemplated thereby.

 

(b)
Except as disclosure on the Information Certificate, in Canadian Parent’s most recent Form 10K and Form 10Q filed with the Securities and Exchange Commission as of the Effective Date or with respect to which any Loan Party has provided notice as required hereunder, no Loan Party is (i) in violation of any applicable Legal Requirements, which violation could have a Material Adverse Effect upon any Loan Party, the Property or any other Collateral, or (ii) subject to or in default with respect to any court or Governmental Authority order which could have a Material Adverse Effect upon any Loan Party, the Property or any other Collateral. There are no governmental or administrative proceedings pending or, to the best of each Loan Party’s knowledge, threatened against any Loan Party, the Property or any other Collateral, which, if adversely decided, could have a Material Adverse Effect upon any Loan Party, the Property or any other Collateral.

 

(c)
There are no known, pending or, to the best of each Loan Party’s knowledge, threatened eminent domain or condemnation proceedings affecting the Property (or any portion thereof).

 

(d)
Upon payment of the contractors identified on the closing statement prepared by the Title Company in connection with the closing of this Agreement, there are no known, pending, or to the best of each Loan Party’s knowledge, threatened claims outstanding against any Loan Party or the Property (or any portion thereof) or any other Collateral in respect of any work done on or prior to the date hereof at, on or around the Property by any contractor or third party claimant.

 

4.9
Payment of Taxes. All income and other material tax returns and reports to be filed by each Loan Party have been timely filed, and all taxes, assessments, fees and other governmental charges shown on such returns or otherwise payable by any Loan Party have been paid when due and payable, except such taxes, assessments, fees and other governmental charges if any, as (a) are being contested pursuant to a Permitted Contest or (b) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, and, as applicable, subject to such valid extensions of the filing and/or due date thereof as such Loan Party shall have obtained. No Liens have been filed and no claims are being asserted with respect to any such Taxes and no Loan Party has any knowledge of any proposed tax assessment against any Loan Party that could have a Material Adverse Effect.

 

4.10
Disclosure. The representations and warranties of each Loan Party contained in this Agreement, the other Loan Documents, the Information Certificate, and all certificates, financial statements and other documents delivered to Lender in connection herewith and therewith, do not, when taken as a whole, as of the date of such representation, warranty or other statement was made, contain any untrue statement of a material fact or omit to state a material fact necessary to

 

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make the statements contained herein or therein, in light of the circumstances under

 

 

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which they were made, not misleading (it being recognized that projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results). All organizational documents, financial statements, Leases, Material Agreements, agreements and other documents and instruments delivered by or on behalf of any Loan Party to Lender pursuant to this Agreement, the other Loan Documents are true, correct and complete copies of the originals. The foregoing representations and warranties with respect to any documents, Leases or instruments relating to the Property or the Cannabis Business or Support Business and not prepared by or on behalf of any Loan Party are made to the best of each Loan Party’s knowledge. No Loan Party has withheld any material fact from Lender in regard to any matter addressed in or material to the Loan Documents.

 

4.11
Requirements of Law and Other Covenants. Each Loan Party, the Cannabis Business, the Support Business, the Property and the other Collateral and the ownership and use thereof comply with (a) all Legal Requirements applicable to that respective Loan Party, the Cannabis Business, the Support Business or the Property (including, without limitation, State Cannabis Laws, the ADA and all Hazardous Materials Laws but excluding all US federal statutes, ordinances, rules and regulations related solely to the operation of a Cannabis Business), in all material respects, in each case that the failure to so comply could reasonably be expected to have a Material Adverse Effect or have a material adverse effect on such Loan Party’s ability to operate the Cannabis Business or any Support Business as conducted prior to such failure and (b) all restrictive covenants or other title matters affecting the Property, the other Collateral or any portion thereof. Without limiting the generality of the foregoing, each Loan Party has all required Government Approvals (including Regulatory Licenses) (excluding any United States federal Government Approvals) to operate its business as currently conducted, and all of such state and provincial Government Approvals are in full force and effect and have not been revoked, suspended, cancelled, rescinded, terminated, modified and have not expired. There are no pending or threatened actions by or before any Governmental Authority to revoke, suspend, cancel, rescind, terminate or materially adversely modify any such Government Approvals. Except as disclosure on the Information Certificate or as otherwise disclosed to Lender in writing, no Loan Party has received notice of any claim with respect to any Hazardous Materials Liability or knows of any basis for any Hazardous Materials Liability and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, no Loan Party (i) has failed to comply with any Hazardous Materials Law or to obtain, maintain or comply with any permit, license or other approval required under any Hazardous Materials Law, (ii) has become subject to any Hazardous Materials Liability, (iii) has received notice of any claim with respect to any Hazardous Materials Liability or (iv) knows of any basis for any Hazardous Materials Liability. The Property consists of one or more legal and separate lot(s) for tax assessment purposes. All requisite permits, easements and rights of way necessary for the occupancy, operation, ownership and use of the Property, the Cannabis Business and the Support Business, as applicable, have been obtained by Borrower and those that have been obtained are in full force and effect and not subject to default by any party thereto.

 

4.12
Property and Collateral Documents. The Loan Parties have heretofore delivered to Lender true, complete and correct copies of all Material Contracts. No Loan Party has otherwise discovered in the course of its due diligence investigations, any facts, matters or circumstances

 

 

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that could have a Material Adverse Effect (including, without limitation, on any Loan Party, the Cannabis Business, the Property or any other Collateral, the transactions contemplated by this Agreement or the other Loan Documents). No Lien upon the Property or the other Collateral materially adversely affects the value, operation or use of the Property or such Collateral or Borrower’s or any Guarantor’s ability to pay the Obligations. There are no outstanding options to purchase or rights of first refusal affecting all or any portion of the Property or the other Collateral except as set forth in the limited liability company agreement of TerrAscend NJ delivered to Lender in connection with the closing. To the knowledge of the Loan Parties, the survey for the Property delivered to Lender does not fail to reflect any material matter affecting the Property or the title thereto. Except as may otherwise be set forth on the survey provided to Lender, all of the Improvements included in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvement on an adjoining property encroaches upon the Property, and no easement or other encumbrance upon the Property encroaches upon any of the Improvements, except pursuant to the Cell Tower Lease and those insured against by the Title Policy insuring the Lien of the Security Instrument. The Property is taxed separately and does not include any other property, and for all purposes the Property may be mortgaged, conveyed and otherwise dealt with as a separate legal parcel. The cost basis information for the Property delivered to Lender is true, complete, and accurate in all respects.

 

4.13
Title to Assets; No Liens. Each Local Loan Party has good, marketable and indefeasible fee title to the applicable Collateral, free and clear of all Liens, except for Permitted Encumbrances. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements in connection with the transfer of the Property have been paid when due except such taxes, if any, as are being contested in good faith by appropriate proceedings and for which adequate reserves are maintained in accordance with GAAP, and subject to such valid extensions of the filing and/or due date thereof as such Borrower shall have obtained. No such taxes are currently being so contested. The Security Instrument, when properly recorded in the appropriate records, together with any UCC Financing Statements required to be filed in connection therewith, will create (a) a valid, perfected, first priority lien on Borrower’s interest in the Collateral, and (b) valid and perfected first priority security interests in and to, and perfected collateral assignments of, all personalty of Borrower (including the Leases), all in accordance with the terms thereof, in each case subject only to any Liens approved by Lender, and in each case excluding motor vehicles and deposit accounts and securities accounts (other than the Blocked Account). All mortgage, recording, stamp, intangible or other similar taxes required to be paid by any Person under applicable Legal Requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents have been or will be paid. Each Borrower owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property necessary to its business as currently conducted, and the use thereof by each Borrower does not infringe in any material respect upon the rights of any other Person, and each Borrower’s rights thereto are not subject to any licensing agreement or similar arrangement other than pursuant to the WANA License and the Cookies License. No Local Loan Party has entered into or granted any security agreements, or permitted the filing or attachment of any security interests on or affecting any of their respective assets, including the Collateral, directly or indirectly that would have priority or in any way be superior to Lender’s security interests and rights in and to the Collateral. No Local Loan Party has entered into or granted any security agreements, or permitted

 

 

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the filing or attachment of any security interests on or affecting any Excluded Asset other than Permitted Encumbrances.

 

4.14
Utilities. All utility services, including, without limitation, gas, water, sewage, electrical and telephone, necessary for the use and occupancy of the Property are available at or within the boundaries of the Property and have been connected or are available for connection by Borrower upon payment of all required connection or hook-up fees.

 

4.15
Leases. No portion of the Property has been leased or subleased to any Person except (a) the MD Real Property has been leased by MD Propco to each of MD Opco 1 and MD Opco 2 pursuant to the MD Operating Leases, as applicable, and (b) upon consummation of the Permitted Reorganization, the NJ Real Property will be leased by NJ Propco to TerrAscend NJ pursuant to the NJ Operating Lease. No Local Loan Party leases or subleases any real property other than the Property except pursuant to the Leases described on Schedule 4.15 (the “Existing Leases”). The MD Operating Lease (and, upon the consummation of the Permitted Reorganization, the NJ Operating Leases) and the Existing Leases are in full force and effect and there is no material default or breach existing thereunder by any party thereto and no event has occurred that, with the passage of time or the giving of notice, or both, would constitute a material default or breach by any party thereunder. Borrower has not given or received any notice of default under any of the Operating Leases or the Existing Leases that remains uncured or in dispute. Neither the execution or delivery of the Loan Documents nor Borrower’s performance thereunder will adversely affect its rights under the Operating Leases or the Existing Leases.

 

4.16
Affiliate Fees and Transactions. No Borrower is obligated to pay any fee or compensation to any Affiliate in connection with the acquisition, financing, operation or management of the Property, the Cannabis Business or the Support Business (collectively “Affiliate Fees”) except as set forth on Schedule 4.16.

 

4.17
Defects. There are no known defects, facts or conditions affecting the Property or any portion thereof that would make the Property unsuitable for the occupancy, use or sale thereof. To the knowledge of the Loan Parties, there are no surface or subsurface soils conditions adversely affecting the Property, including, without limitation, unstable soil or landfills.

 

4.18
Patriot Act and Related Matters.

 

(a)
Each Loan Party complies and will comply at all times with the Patriot Act and Anti-Money Laundering Laws applicable to such Loan Party. Lender shall have the right to audit each Loan Party’s compliance with the Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction of any Loan Party or the Property, including, without limitation, those relating to money laundering and terrorism. If any Loan Party fails to comply with the Patriot Act or any such requirements of Governmental Authorities, then Lender may, at its option, cause such Loan Party to comply therewith and any and all costs and expenses incurred by Lender in connection therewith shall become part of the Obligations, secured by the Collateral.

 

(b)
No Loan Party: (i) is listed on any Government Lists; (ii) is a Person who has been determined by competent authority to be subject to the prohibitions contained in

 

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Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other Presidential Executive Orders in respect thereof; (iii) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense (as defined below); (iv) is not currently under investigation by any Governmental Authority for alleged criminal activity or (v) is a Prohibited Person. For purposes hereof, the term “Patriot Act Offense” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (A) the crim