Sundial(US:SNDL)2023-04-10 21:05Implementation Agreement Overview This section provides a high-level overview of the Implementation Agreement, detailing its structure and the foundational elements governing the transactions between the parties Interpretation and Defined Terms This article provides comprehensive definitions for key terms used throughout the Implementation Agreement, covering legal, financial, and operational aspects of the involved entities and the transactions. It also establishes general rules for interpretation, such as currency and time computations - The agreement defines 'Company Acquisition Proposal' as any proposal to acquire 20% or more of Company shares/assets, or similar transactions that could materially reduce benefits to SNDL or impede the transactions3031 - Both 'Company Material Adverse Effect' and 'SNDL Material Adverse Effect' definitions include specific exclusions, such as general industry changes, global economic conditions, pandemics (with COVID-19 escalation caveat), natural disasters, changes in law, and actions required or permitted by the agreement; however, if these effects disproportionately impact the respective company, they may be considered35387783 - The term 'Transactions' collectively refers to the consummation of the transactions outlined in the Transaction Agreements, the Company Share Transfer, and the Company Share Distribution91 - All monetary references in the agreement are to Canadian dollars unless explicitly stated otherwise97 The Transactions This article outlines the specific agreements and actions to be undertaken as part of the overall transactions between SNDL and Nova Cannabis Inc., including strategic partnership, amended service agreements, asset and intellectual property transfers, and a company share distribution, specifying their sequence - The 'Transaction Agreements' include a Strategic Partnership Agreement, Amended and Restated Management and Administrative Services Agreement, Amended and Restated Investor Rights Agreement, Amended and Restated CFR Agreement, New Credit Agreement, Asset Purchase Agreement, and Intellectual Property Transfer Agreement92103 - SNDL will cause Alcanna to transfer 14,258,555 Company Shares to the Company for $1.00, which the Company will then return to treasury for cancellation71103 - SNDL is responsible for distributing Alcanna Company Shares pro rata to its shareholders, bearing Nova's costs, and ensuring compliance with applicable Securities Laws without requiring Nova to file a U.S. prospectus or registration statement103104 - The transactions will be consummated in a specific order: first, asset and intellectual property transfers; second, execution of various amended agreements; third, the Company Share Transfer; and finally, the Company Share Distribution104105 Conditions to the Transactions This article details the conditions that must be met or waived for the transactions to proceed, including mutual conditions, and specific conditions benefiting either SNDL or the Company, primarily related to approvals, compliance, and absence of material adverse effects - Mutual conditions for transaction consummation include obtaining Minority Shareholder Approval, Key Regulatory Approvals, SNDL's acquisition of 'Superette' banner stores, and the absence of any laws or actions preventing the transactions107 - SNDL's specific conditions include the accuracy of Company's representations and warranties (without a Company Material Adverse Effect), Company's material compliance with covenants, appointment of two SNDL director nominees, and no undisclosed Company Material Adverse Effect since the agreement date108 - The Company's specific conditions include the accuracy of SNDL's representations and warranties (without a SNDL Material Adverse Effect), SNDL's material compliance with covenants, and no undisclosed SNDL Material Adverse Effect since the agreement date109110 Covenants This article outlines the ongoing obligations of both the Company and SNDL during the interim period until the transactions are completed or terminated, focusing on business operations, shareholder meetings, intellectual property maintenance, and regulatory compliance efforts - The Company is obligated to convene and conduct the Company Meeting by May 30, 2023, solicit proxies for the Transaction Resolution, and provide SNDL with proxy tallies112 - The Company must prepare and file a Company Circular that complies with applicable law, includes the Fairness Opinion, Company Board Recommendation, and voting intentions of executive officers and directors115 - SNDL must operate its 'Spiritleaf' and 'Superette' cannabis retail stores in the ordinary course and maintain their assets, with restrictions on selling or encumbering related assets or securities114117 - Both parties are required to use commercially reasonable efforts to obtain Key Regulatory Approvals and other necessary consents, with SNDL responsible for paying all filing fees for Regulatory Approvals118120121123 Representations and Warranties This article establishes the representations and warranties made by both the Company and SNDL, covering their organizational status, corporate authority, compliance with laws, and the absence of material adverse effects or litigation, which serve as foundational assurances for the agreement - The Company represents and warrants regarding its organization, corporate authorization, binding obligations, governmental authorizations, non-contravention of laws/documents, compliance with Cannabis Laws, absence of material litigation, title to intellectual property, and ownership of Company Transferred Intellectual Property165167169170171172173 - SNDL represents and warrants regarding its organization, corporate authorization, binding obligations, governmental authorizations, non-contravention of laws/documents, absence of certain changes, compliance with Cannabis Laws and Money Laundering Laws, details of SNDL Transferred Stores and licenses, absence of material litigation, environmental matters, real property, contracts, and insurance177178179180181182183184185186187191192 Additional Covenants Regarding Non-Solicitation This article imposes strict non-solicitation obligations on the Company, preventing it from engaging with alternative acquisition proposals, and outlines a detailed process for responding to superior proposals, including SNDL's right to match any such offer - The Company is prohibited from soliciting, initiating, knowingly encouraging, or facilitating any inquiry, proposal, or offer that constitutes or could lead to a Company Acquisition Proposal, and must immediately cease any existing discussions130134 - The Company must promptly notify SNDL, orally and then in writing within 24 hours, of any Company Acquisition Proposal, including its material terms and the identity of the proposing party131 - If the Company receives a Superior Proposal, it must deliver a written 'Superior Proposal Notice' to SNDL, including a copy of the proposed definitive agreement; SNDL then has a 5-Business Day 'Matching Period' to review and potentially amend its terms to match the Superior Proposal133136 Term and Termination This article defines the duration of the agreement and specifies the conditions under which it may be terminated by mutual consent or unilaterally by either party due to unmet conditions, material breaches, or the occurrence of a material adverse effect - The agreement is effective from its date until the Effective Date of the transactions or its earlier termination139 - Either party may terminate if Minority Shareholder Approval is not obtained, if the transactions become illegal, or if the Effective Date does not occur by the 'Outside Date' (June 30, 2023), provided the terminating party is not in breach64140 - The Company may terminate if SNDL commits an uncured material breach of representations/warranties or covenants, or if a SNDL Material Adverse Effect occurs; conversely, SNDL may terminate for similar breaches by the Company, a Change in Recommendation by the Company Board, or a Company Material Adverse Effect140141142 General Provisions This article contains standard legal clauses governing the agreement, including provisions for amendments, waivers, expense allocation, notices, governing law, and severability, ensuring the proper administration and enforceability of the contract - If the agreement is terminated due to the Company's breach of a covenant or non-solicitation, the Company must reimburse SNDL for reasonable documented out-of-pocket costs and expenses up to an aggregate amount of [*]; a similar reimbursement obligation applies to SNDL if it breaches a covenant146147 - The agreement is governed by and interpreted in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein; parties irrevocably submit to the non-exclusive jurisdiction of the Alberta courts in Calgary156158 Schedule A: Representations and Warranties of the Company This schedule details the specific representations and warranties made by Nova Cannabis Inc. (the Company) to SNDL, covering its organizational status, corporate authority, compliance with laws, and intellectual property, which SNDL relies upon for the agreement - The Company warrants its due incorporation, valid existence, corporate power, and good standing under Canadian laws, and its authority to enter into and perform its obligations under the agreement165167 - The Company represents that it is in material compliance with all applicable laws, including Cannabis Laws, and has not received notices of violations or investigations that would have a Company Material Adverse Effect169 - The Company asserts sole and exclusive right, title, and interest in all Company Transferred Intellectual Property, free of Liens (other than Permitted Liens), and that its use does not infringe third-party IP rights170171172 Schedule B: Representations and Warranties of SNDL This schedule details the specific representations and warranties made by SNDL to the Company, covering its organizational status, corporate authority, compliance with laws, and the status of its transferred stores and assets, which the Company relies upon for the agreement - SNDL warrants its due incorporation, valid existence, corporate power, and good standing under Alberta laws, and its authority to enter into and perform its obligations under the agreement and Transaction Agreements175177 - SNDL represents that it is in material compliance with all applicable laws, including Cannabis Laws and Money Laundering Laws, related to the SNDL Transferred Stores, and has not received notices of violations or investigations that would have a SNDL Material Adverse Effect179181 - SNDL provides a list of all SNDL Transferred Stores ('Spiritleaf' and 'Superette' banners), their operational status, and related Cannabis Retail Licences, asserting that all necessary Authorizations are in full force and effect179182183 - SNDL represents that it has valid leasehold interests in the SNDL Leased Properties, that leases are in full force and effect, and that the properties are adequately serviced by utilities186187188190 Schedule C: Key Regulatory Approvals This schedule lists the essential regulatory approvals required from various governmental and securities authorities for the consummation of the transactions contemplated by the Implementation Agreement - Key Regulatory Approvals include those required under the Gaming, Liquor and Cannabis Act (Alberta), Cannabis Control (Saskatchewan) Act, Liquor, Gaming and Cannabis Control Act (Manitoba), and acquiescence/non-objection from the Cannabis Licence Act, 2018 (Ontario)195 - Regulatory Approvals from applicable Securities Authorities and acceptance of the Transactions by the TSX under Part V of the TSX Company Manual are also required195 Appendix A: Strategic Partnership Agreement This appendix contains the full text of the Strategic Partnership Agreement, outlining the framework for collaboration, intellectual property licensing, and operational support between the SNDL Group and Nova Group Interpretation and Defined Terms This article introduces the Strategic Partnership Agreement between the SNDL Group and the Nova Group, outlining its purpose to implement strategic initiatives and providing comprehensive definitions for key terms, including specific financial metrics and legal frameworks - The agreement defines 'Banners' as the cannabis retail brand banners owned by the SNDL Group, including 'Spiritleaf,' 'Value Buds,' and 'Superette'206 - The 'License Fee' calculation is based on the 'Gross Profit' of each cannabis retail store, using a variable percentage that increases with higher gross profit tiers209258 - An 'Advertising and Promotion Fee' is defined as a monthly deposit by the Nova Group, equal to a redacted percentage of Net Sales, into an advertising account206261 - The agreement specifies that all monetary references are to Canadian dollars unless otherwise stated, and is governed by the laws of Alberta and federal laws of Canada217218 Strategic Partnership Engagement and Exclusivity This article details the mutual engagement of the SNDL Group and Nova Group to implement strategic initiatives, emphasizing compliance with laws, the execution of specific Store Level License Agreements, and establishing exclusivity rights for Nova Group to operate certain cannabis retail banners within the Territory, alongside a Right of First Refusal for new stores - The parties mutually engage to implement strategic initiatives, covenanting to perform all obligations in compliance with applicable laws and to execute Store Level License Agreements for 'Value Buds,' 'Spiritleaf,' and 'Superette' banners219221223 - The Nova Group holds exclusive rights to operate cannabis retail stores under the 'Value Buds' Banner in the Territory for the duration of the Term; it also holds exclusive rights for 'Spiritleaf' and 'Superette' Banners, subject to existing franchisees and the Right of First Refusal (ROFR)228232 - The Nova Group has a Right of First Refusal (ROFR) to acquire operating rights for new cannabis retail stores identified or acquired by the SNDL Group within the Territory; this involves a 'ROFR Notice' from SNDL, an 'Election Notice' from Nova within 10 Business Days, and a 30-day exclusive negotiation period230232233234 - The SNDL Group may make 'Proposed Changes' to any System (including IP, Branding Guidelines, offerings) with 30 days' notice, which the Nova Group must implement, provided such changes are not materially adverse to Nova's business, unless required by law236 - The Nova Group is solely responsible for advertising, marketing, and promotion, but all materials require prior written approval from the SNDL Group and must comply with Branding Guidelines; Nova Group must also participate in SNDL Group's promotional programs237239 Intellectual Property This article grants the Nova Group a non-exclusive, limited license to use SNDL Intellectual Property, while firmly establishing the SNDL Group's exclusive ownership and control over its IP. It also outlines restrictions on Nova Group's use and actions regarding the IP, and specifies post-termination obligations - SNDL grants the Nova Group a non-exclusive, personal, limited, revocable, non-transferable, non-sublicensable, license-fee-bearing right and license to use and exploit the SNDL Intellectual Property in strict accordance with the Branding Guidelines241 - The Nova Group is prohibited from disputing the ownership, validity, or enforceability of the SNDL Intellectual Property, attempting to dilute its distinctiveness, or using confusingly similar marks or corporate/domain names without SNDL's prior written consent241242 - The SNDL Group retains exclusive right, title, and interest in all SNDL Intellectual Property, and may add, modify, alter, or delete elements from it with 20 Business Days' written notice243244 - Upon termination of the agreement, the Nova Group must immediately cease using the SNDL Intellectual Property, remove all branding, and assign any related domain names to the SNDL Group245246250 System Support This article details the responsibilities for costs, site selection, construction, opening of new stores, and supplier/product curation for cannabis retail stores. It emphasizes the Nova Group's financial responsibility and compliance with SNDL Group's standards, while acknowledging SNDL's support role under the MSA - The Nova Group is responsible for paying all 'Costs and Expenses' involved in designing, constructing, fixturing, equipping, furnishing, and completing the premises of any cannabis retail store, as required by the SNDL Group248 - The SNDL Group will assist the Nova Group in selecting premises for new stores and retains the right to approve the premises and lease agreements; Nova Group requires prior written approval from SNDL Group to open new stores249252 - The Nova Group must construct and equip stores in conformity with the relevant System and specifications provided by the SNDL Group, bearing all associated costs251 - The Nova Group must use only SNDL Group-approved brands or types of fixtures, equipment, and signs, purchased from approved suppliers, and engage SNDL-approved suppliers for products that align with the Systems and Branding Guidelines255256 Compensation This article details the compensation structure, including the calculation and payment of license fees based on gross profit, a specified license fee holiday period, and the Nova Group's responsibility for establishing and funding an advertising budget License Fee Calculation (Monthly Gross Profit) | Gross Profit (Monthly) | Percentage | | :--------------------- | :--------- | | ≤ $35,000 | 5.0% | | > $35,000 and < $50,000 | 5.0% + ((Gross Profit - $35,000) / $15,000) * 10% | | ≥ $50,000 | 15.0% | - The 'Total License Fee' is payable monthly by Nova to SNDL within 10 Business Days of the month-end; payment and acceptance do not prevent SNDL from disputing the calculation within a six-month period259 - A 'License Fee Holiday' is granted for the first 12 calendar months of the Term for all existing, newly opened, or acquired cannabis retail stores; for new stores opened after this holiday, no fee is payable for the first 3 months, and 50% of the fee for months 4-6259260 - The Nova Group must establish an 'Advertising Budget' by depositing a redacted percentage of Net Sales monthly for national, local, or regional advertising programs, with funds allocated by the SNDL Group in cooperation with Nova261 Additional Representations, Warranties and Covenants This article sets forth additional representations, warranties, and covenants from both the SNDL Group and the Nova Group, primarily concerning intellectual property rights, regulatory compliance, and the nature of their operational relationship - The SNDL Group warrants that it possesses all necessary rights to the SNDL Intellectual Property, its use will not infringe third-party rights, the IP remains under its exclusive control, and all marketing/branding and Branding Guidelines comply with applicable laws267 - The Nova Group covenants that it holds all necessary regulatory authorizations, will perform its obligations in accordance with applicable laws, conduct marketing/branding in compliance with laws, will not misrepresent its status as a licensee, and will not enter into agreements on behalf of the SNDL Group268273 Records and Examination Rights This article outlines the Nova Group's obligation to maintain proper books and records and grants the SNDL Group rights to examine these records to verify financial figures and address any discrepancies, with a dispute resolution process for disagreements - The Nova Group must maintain proper books, records, and documents in conformity with IFRS and all applicable laws, making them available for examination by SNDL or its authorized representatives271 - SNDL has the right to examine Nova Group's books, records, and financial/operating data with reasonable prior notice; if an examination reveals an underpayment or overpayment, parties will agree on findings and adjust payments, or resolve disputes through the Article 9 procedure272274278 - The Nova Group must promptly notify SNDL of any material facts or information that may affect the SNDL Group's performance, including known pending or threatened claims275 Indemnification This article establishes mutual indemnification obligations, where each group agrees to indemnify the other for losses arising from material breaches, misrepresentations, or legal violations, with specific procedures for asserting claims and limitations on liability - The Nova Group indemnifies the SNDL Indemnitees for claims arising from Nova Group's material breach, misrepresentation, or legal violation, unless caused by SNDL Indemnitees' fraud, wilful default, or gross negligence, or if Nova acted in accordance with the System/Branding Guidelines or SNDL's direction277279 - The SNDL Group indemnifies the Nova Indemnitees for claims arising from SNDL Group's material breach, IP infringement, misrepresentation, or legal violation, unless caused by Nova Indemnitees' fraud, wilful default, or gross negligence281284 - The Indemnified Party must promptly notify the Indemnifying Party of any claim; the Indemnifying Party has the right to assume defense, but cannot settle without the Indemnified Party's prior written consent unless it includes a full release286290 - Neither party is liable for incidental, consequential, special, punitive, or indirect damages (except for breaches of confidentiality or indemnification obligations); the maximum aggregate liability (excluding fraud, wilful misconduct, gross negligence, or breaches of confidentiality/indemnity) is the greater of aggregate fees paid in the preceding 24 months or the amount that would have been paid if not for a License Fee Holiday291294 Dispute Resolution This article outlines a multi-step dispute resolution process, beginning with good faith negotiations and escalating to arbitration for unresolved disputes, while also providing for injunctive relief to protect intellectual property rights - Disputes will first be attempted to be resolved through good faith negotiations, escalating to the CEOs of SNDL and Nova if unresolved within 15 days293 - Unresolved disputes (except for injunctive or equitable relief) will be finally resolved by arbitration before a single arbitrator in Calgary, Alberta, governed by the ADR Institute of Canada's Arbitration Rules297 - The SNDL Group may bring an action for injunctive or other equitable relief in Alberta courts to compel compliance and protect its Intellectual Property or Systems297 Confidentiality and Public Statements This article imposes strict confidentiality obligations on both parties regarding shared information and restricts public statements or disclosures without prior written consent, with exceptions for legally mandated disclosures - Each Party must treat all 'Confidential Information' as secret and may not disclose or use it except for bona fide purposes connected with the agreement, or as permitted for 'Permitted Disclosees,' Governmental Entities, or as required by applicable law296 - Neither Party nor its Representatives may issue press releases or make other public statements or disclosures regarding the agreement or transactions without the other Party's prior written consent, unless required by law (with prior notice and a reasonable opportunity to review and comment)299 Term This article defines the term of the agreement as perpetual from the Effective Date, unless terminated earlier by mutual agreement or specific events outlined in Article 12, and specifies which provisions survive termination - The agreement is effective from the Effective Date and continues in perpetuity, unless terminated earlier by mutual written agreement or under the circumstances described in Article 12301 - Certain provisions, including those related to interpretation, intellectual property, compensation, records, indemnification, dispute resolution, confidentiality, and general clauses, are explicitly stated to survive the termination of the agreement302 Termination This article outlines the specific events that constitute a default by either the Nova Group or the SNDL Group, triggering the right to terminate the agreement, and details the post-termination arrangements for facilitating a smooth transition - A 'Nova Event of Termination' includes material breaches by the Nova Group (with 30-day cure for payment, 60-day for others), bankruptcy/insolvency, actions materially harming SNDL's IP/goodwill (with 5-Business Day cure), or a Nova Change of Control Transaction with an incapable acquiror or disruption of ordinary course business304307 - A 'SNDL Event of Termination' includes material breaches by the SNDL Group (with 90-day cure) preventing Nova Group's ordinary course business, bankruptcy/insolvency, or a SNDL Change of Control Transaction with an incapable acquiror308309 - Upon termination, parties will negotiate a 'Transition-Out Work Plan'; for a Nova Event of Termination, Nova Group provides 'Transition-Out Assistance' (up to 2 years) at SNDL Group's expense; for a SNDL Event of Termination, SNDL Group provides 'Transition-Out Services' at Nova Group's expense310311 General Provisions This article includes standard legal clauses such as the affirmation of an independent contractor relationship (no partnership), provisions for notices, assignment restrictions, non-merger, the entire agreement, available remedies, waivers, severability, further assurances, and time of the essence - The parties affirm that they are independent contractors and not partners, joint venturers, fiduciaries, or trustees, and that the engagement is based on independent contractor relationships314 - Any notice must be in writing and sent electronically, hand delivered, or by prepaid courier to specified addresses; the agreement is governed by Alberta and federal Canadian laws315316217 - Neither party may assign or transfer the agreement without the other's prior written consent; in case of any invalid, illegal, or unenforceable provision, it will be severed, and remaining provisions remain in effect, with parties negotiating in good faith to modify the agreement317323 - Parties are entitled to equitable relief (injunction, specific performance) for any breach or anticipatory breach, acknowledging that damages alone may not be an adequate remedy320 Schedule A: Store Level License Agreement – Value Buds Banner This schedule outlines the specific terms and conditions for the operation of 'Value Buds' cannabis retail stores under a license granted by SNDL Inc. (Licensor) to Nova Cannabis Inc. (Sub-Licensee), covering the use of the System and Trademarks, fees, reporting, and operational obligations - The agreement grants Sub-Licensee the right to operate 'Value Buds Stores' at specified premises using the 'System' and 'Trademarks', with the agreement interpreted as separate and divisible for each premises104356 - The Nova Group retains the exclusive right to operate 'Value Buds' stores in the Territory, but Licensor reserves the right to develop or acquire competing businesses using different systems356 - Sub-Licensee must operate stores according to the System and Manual, comply with all applicable laws, maintain quality standards for 'Value Buds Products', and use only Licensor-approved furniture, fixtures, equipment, and signs377 - Sub-Licensee acknowledges Licensor's exclusive ownership of Trademarks and the System, agreeing not to dispute their validity or use confusingly similar marks; upon termination, Sub-Licensee must cease all use of Trademarks and System elements372375422 Schedule B: Store Level License Agreement – Spiritleaf Banner This schedule indicates the inclusion of a Store Level License Agreement for the 'Spiritleaf' Banner, which is expected to contain similar commercial terms to the 'Value Buds' Banner agreement but with non-exclusive provisions for its territory - The 'Spiritleaf' store level license agreement is expected to contain substantially similar commercial terms to the 'Value Buds' Banner agreement, but with non-exclusive provisions for its territory355 Schedule C: Store Level License Agreement – Superette Banner This schedule indicates the inclusion of a Store Level License Agreement for the 'Superette' Banner, which is expected to contain similar commercial terms to the 'Value Buds' Banner agreement but with non-exclusive provisions for its territory - The 'Superette' store level license agreement is expected to contain substantially similar commercial terms to the 'Value Buds' Banner agreement, but with non-exclusive provisions for its territory355 Schedule D: Corporate Policy Terms and Conditions This schedule indicates the inclusion of the Corporate Policy Terms and Conditions, which are to be implemented by SNDL and Nova to ensure confidentiality and separation of commercially sensitive information for the licensed cannabis retail stores operating under their respective banners - The Corporate Policy, to be implemented by SNDL and Nova, must ensure the confidentiality and separation of confidential and commercially sensitive information for licensed cannabis retail stores operating under each of the Banners225 Schedule E: Branding Guidelines This schedule indicates the inclusion of the Branding Guidelines, which set forth the standards, policies, and procedures for the use of the SNDL Group's Intellectual Property and the overall aesthetic and operational features of the cannabis retail stores - The 'Branding Guidelines' define the standards, policies, guidelines, procedures, color schemes, codes of conduct, methods, controls, manuals, processes, and other specifications for the use of the SNDL Group's Intellectual Property, including the SNDL Intellectual Property206 Appendix B: Amended and Restated Management and Administrative Services Agreement This appendix presents the Amended and Restated Management and Administrative Services Agreement, detailing the scope of management and administrative services provided by SNDL Inc. to Nova Cannabis Inc. and the associated compensation structure Interpretation and Defined Terms This article introduces the Amended and Restated Management and Administrative Services Agreement between SNDL Inc. (Manager) and Nova Cannabis Inc. (Nova), superseding their original agreement. It defines key terms essential for understanding the scope of services, compensation, and operational framework - The agreement defines 'Manager' as SNDL Inc. and 'Nova' as Nova Cannabis Inc., with the purpose of the agreement being for Nova to retain the Manager to provide management and administrative services to the Nova Group467468470 - Key financial terms include 'Base Fee' (initial $2,000,000 per Annual Period, with a 3-year holiday) and 'Nova Expenses' (out-of-pocket and third-party costs reimbursed to the Manager)472496498 - The agreement is governed by the laws of the Province of Alberta and the federal laws of Canada applicable therein479 Manager's Services and Powers This article details the Manager's exclusive appointment to provide comprehensive head office support services to the Nova Group, including IT, finance, HR, retail operations, real estate, and compliance. It also outlines the Manager's authority to act on Nova's behalf, while specifying restrictions and emergency powers - The Manager is exclusively appointed to provide comprehensive head office support services ('Services') to the Nova Group, including information technology, reporting, treasury, human resources, retail stores and inventory management, real estate, security, insurance, marketing, legal, corporate secretarial, shareholder meetings, continuous disclosure, administration, logistics, banking, borrowing, compliance, investor relations, M&A support, acquisitions/dispositions, equity financing, equity plans, professional services, environment/health/safety, and permits481482483484486 - The Manager is granted power and authority to provide Services and take actions on behalf of Nova, including executing contracts and making filings, without third parties needing to verify its authority487 - Restrictions on the Manager's powers include not charging fees/expenses beyond those in Article 3 without Nova Independent Directors' approval, and not committing to transactions requiring Shareholder or Nova Independent Director approval without obtaining it489 - The Manager has 'Emergency Powers' to act immediately to safeguard life/property or preserve insurance rights if prior approval from Nova Directors is not feasible, with prompt notification to them492 - The Manager acknowledges that Nova Group's performance under Strategic Partnership Agreements depends on the Manager's timely provision of Services, and Nova Group will not be in breach if Manager fails to provide related Services494 Fees and Payment of Expenses This article specifies the compensation structure for the Manager, including a Base Fee with adjustment mechanisms, the reimbursement of Nova Expenses, and the procedures for invoicing and payment, while also identifying costs directly borne by Nova Base Fee Structure | Metric | Value | | :----- | :---- | | Base Fee per Annual Period | $2,000,000 | | Initial Fee Holiday | First 3 Annual Periods | | CPI Adjustment | Annually from 5th Annual Period | | EBITDA Adjustment | 5% of Nova Group's EBITDA increase/decrease from asset acquisition/divestiture | | Minimum Base Fee | $2,000,000 per Annual Period | - The Manager is reimbursed for all 'Nova Expenses,' which are out-of-pocket and third-party fees, costs (including salaries/wages/benefits for managing Nova's operating subsidiaries), and expenses reasonably incurred in providing Services, without financial gain or loss to the Manager498 - Nova is directly responsible for costs such as insurance (if not covered by Manager), compensation for Nova Independent Directors, third-party financial/accounting/tax/legal experts, audit and legal fees, and other costs associated with being an exchange-listed reporting issuer500 - The Manager invoices Nova monthly for the Base Fee and Nova Expenses, with Nova required to pay within seven days of invoicing/month-end; overdue amounts accrue interest at CIBC prime rate + 5%501502505 Records This article mandates that the Manager maintain proper financial and operational records in accordance with IFRS and applicable laws, and grants Nova the right to examine these records to ensure transparency and compliance - The Manager must maintain proper books, records, and documents for the performance of Services, ensuring they are complete, true, and correct in conformity with IFRS and all applicable laws507 - Nova and its authorized representatives have the right to examine these books, records, and financial/operating data during normal business hours with reasonable prior notice, without unduly interfering with the Manager's business508509 Obligations and Covenants of Nova This article outlines Nova's key obligations, primarily to provide the Manager with necessary access to information and to promptly notify the Manager of any material facts or information that could impact the Manager's performance of Services - Nova must grant the Manager access to all documentation and information necessary for the Manager to provide the Services and perform its obligations511 - Nova is required to promptly notify the Manager of any material facts or information that may affect the Manager's performance, including known pending or threatened claims, suits, actions, proceedings, or orders against any member of the Nova Group511 Activities of Manager This article defines the Manager's standard of care, clarifies its limited duties, addresses potential conflicts of interest and permitted activities, and outlines the Manager's reliance on experts, delegation rights, and limitations on liability. It also covers confidentiality and compliance with Nova's policies - The Manager must discharge its duties with the diligence and care of a reasonably prudent manager of a similar business, and is only responsible for duties expressly provided in the agreement, with no implied fiduciary or other duties512513 - The Manager Group may engage in 'Permitted Activities' (including competing cannabis retail businesses) and Nova expressly consents to this, provided such activities do not materially adversely affect Nova's business unless declined by Nova and undertaken by third parties; the Manager must notify Nova of 'Conflict Matters' for Nova Independent Directors to decide514516 - The Manager may delegate the performance of Services to any person, including other members of the Manager Group, without Nova's prior written consent, but remains responsible for performance517 - The maximum aggregate liability of the Service Providers to Nova and the Nova Indemnitees is limited to the Base Fee incurred by Nova in the most recent two-year period, except in cases of fraud, wilful default, or gross negligence521 - The Manager agrees to maintain the confidentiality of Nova's 'Confidential Information' (with specified exceptions) and to comply with Nova's applicable policies and codes, including privacy requirements for personal information523524525526 Indemnification This article establishes mutual indemnification obligations, where Nova indemnifies the Manager Group and the Manager indemnifies the Nova Group for losses arising from fraud, wilful default, or gross negligence. It also outlines specific procedures for asserting claims and limitations on liability - Nova indemnifies the 'Manager Indemnitees' (Manager, its affiliates, directors, officers, employees, agents) against all 'Claims' arising from the agreement or Services, unless such Claims result from the fraud, wilful default, or gross negligence of any Manager Indemnitee528 - The Manager indemnifies the 'Nova Indemnitees' (Nova Group, its heirs, legal representatives, successors) against 'Nova Claims' arising from the Manager's fraud, wilful default, or gross negligence in performing Services, unless caused by Nova Indemnitees' fraud, wilful default, or gross negligence530 - An 'Indemnified Party' must promptly notify the 'Indemnifying Party' of any claim; the Indemnifying Party has the right to assume the defense, but cannot settle without the Indemnified Party's prior written consent unless it includes a full release532534 - The amount owing to the Indemnified Party is the net amount of out-of-pocket losses, after accounting for recoveries from other persons (excluding insurers)535 Term This article defines the term of the agreement as effective from the Effective Date until terminated by mutual written agreement or as specified in Article 9, and clarifies that certain obligations and liabilities survive termination - The agreement is effective from the Effective Date and continues in full force and effect until terminated by mutual written agreement of the Parties or under the circumstances described in Article 9539 - Any obligation or liability of the Parties that arises or is attributable to the period prior to the expiration or termination of the agreement, including payment obligations and indemnification obligations, will survive such expiration or termination540 Termination This article outlines the specific events that constitute a default by either Nova or the Manager, triggering the right to terminate the agreement, and details the post-termination arrangements for records and final payments - A 'Nova Event of Termination' includes Nova's material breach of obligations (with a 60-day cure period), bankruptcy/insolvency, or a Nova Change of Control Transaction where the acquiror is incapable of performing obligations or disrupts ordinary course business542543 - A 'Manager Event of Termination' includes the Manager's material breach of obligations (with a 90-day cure period) that prevents Nova Group's ordinary course business, bankruptcy/insolvency, or a Manager Change of Control Transaction where the acquiror is incapable of performing obligations545546 - Disputes regarding the occurrence of a termination event must be submitted to arbitration within 10 Business Days after the alleged event and cure period elapse548 - Upon termination, the Manager must deliver all 'Books and Records' and financial instruments to Nova, and will be paid for all accrued fees and Nova Expenses; the Manager may retain copies of records for legal, compliance, or tax purposes549550 Force Majeure This article addresses the consequences of Force Majeure events, allowing for the suspension of affected Services without constituting a breach, while specifying continued payment obligations for Nova and requiring prompt notice from the non-performing party - During a Force Majeure event, the provision and performance of affected Services are suspended, and the non-performing party is not considered in breach or default552 - Nova remains obligated to pay all fees earned or accrued to the Manager for the fiscal quarter of the Force Majeure event and the two subsequent months, and all Nova Expenses, whether incurred before or after the event554 - The party invoking Force Majeure must give prompt written notice of the particulars and expected duration, and use commercially reasonable efforts to remedy its inability to perform553 Resolution of Disputes and Arbitration This article outlines the arbitration process for resolving disputes, specifying the procedure for arbitrator selection and the conduct of hearings, while requiring continued performance of obligations during the dispute resolution process - Any dispute or disagreement ('Dispute') between the parties will be resolved by arbitration before one arbitrator, following the procedures outlined in this section and the Arbitration Act (Alberta)555556 - Parties must agree on an arbitrator within 30 days of an 'Arbitration Notice'; otherwise, an arbitrator will be appointed by a judge of the Court of King's Bench for Alberta558 - During the dispute resolution procedures, both parties must continue to perform their respective obligations under the agreement and refrain from exercising other remedies557 Miscellaneous This article covers various standard legal clauses, including the amendment and restatement of the original agreement, the nature of the parties' relationship, notice procedures, assignment restrictions, and general provisions for remedies, waivers, and severability - This agreement amends, restates, and supersedes the Original Agreement, with Alcanna assigning all its rights, titles, and benefits to the Manager, and Nova irrevocably consenting to this assignment559 - The parties affirm that the Manager acts as an independent contractor, and no control, partnership, joint venture, or trust relationship is created by this agreement560 - Nova may not assign its interest without the Manager's prior written consent; the Manager may not assign its interest without the prior written consent of a majority of the Nova Independent Directors, unless the assignment is to an affiliate563 - The agreement constitutes the entire agreement between the parties, superseding all prior understandings; parties are entitled to equitable relief (injunction, specific performance) for breaches566567 Appendix C: Amended and Restated Investor Rights Agreement This appendix includes the Amended and Restated Investor Rights Agreement, which grants SNDL Inc. specific rights regarding its ownership interest in Nova Cannabis Inc., including nomination, anti-dilution, and registration rights Interpretation and Defined Terms This article introduces the Amended and Restated Investor Rights Agreement between SNDL Inc. and Nova Cannabis Inc. (the Corporation), superseding their original agreement. It defines key terms related to investor rights, including nomination, anti-dilution, and registration rights, and establishes the governing legal framework - The agreement defines 'SNDL' as SNDL Inc. and 'Corporation' as Nova Cannabis Inc., with the purpose of providing SNDL with certain rights regarding its ownership interest in Nova586589 - The 'Equity Ownership Percentage' is calculated as the aggregate number of Common Shares beneficially owned or controlled by the SNDL Group (including convertible securities) divided by the total aggregate number of issued and outstanding Common Shares (including convertible securities), on a non-diluted basis591 - The agreement is governed by the laws of the Province of Alberta and the federal laws of Canada applicable therein, and parties irrevocably submit to the exclusive jurisdiction of Alberta courts598 Nomination Rights This article grants SNDL the right to nominate directors to Nova's Board based on its Equity Ownership Percentage, ensures corporate support for these nominees, and provides for a Board Observer if a nominee is not elected. It also addresses compensation, insurance, and executive appointments - The Board will consist of a minimum of five and a maximum of seven directors, including at least two independent directors; SNDL is entitled to nominate one 'SNDL Nominee' if the Strategic Partnership Agreement is in effect, and two nominees if the Strategic Partnership Agreement is in effect AND the SNDL Group holds an Equity Ownership Percentage of not less than 5%602 - The Corporation must notify SNDL of Shareholder Meetings, include SNDL Nominees in management information circulars, and solicit proxies for their election; any vacancy for an SNDL Nominee will be filled as directed by SNDL603 - If an SNDL Nominee is not elected, SNDL has the right to designate a non-voting 'Board Observer' who can attend Board meetings and receive information, subject to attorney-client privilege or genuine conflict of interest exceptions604606 - Independent SNDL Nominees will be compensated no less favorably than other independent directors and covered by the same indemnification and insurance provisions608609 - SNDL will consult with the Corporation and make recommendations for the appointment of the Chief Executive Officer and Chief Financial Officer, subject to Board approval610 Covenants This article outlines SNDL's covenants regarding the transfer of Common Shares and the notification of new share acquisitions, ensuring transparency and adherence to agreed-upon thresholds - If the SNDL Group holds an Equity Ownership Percentage of not less than 10% and intends to transfer Common Shares exceeding 1% of the then outstanding shares to non-affiliates within 30 days, SNDL must provide written notice to the Corporation within two Business Days612 - SNDL covenants to promptly notify the Corporation of any Common Shares acquired by the SNDL Group after the execution of this agreement, and acknowledges that such shares will be subject to the agreement's terms as 'Subject Securities'613 Anti-Dilution Right This article grants SNDL an Anti-Dilution Right to subscribe for additional voting or convertible securities to maintain its Equity Ownership Percentage when the Corporation issues new securities, with specific notice and exercise procedures, and outlines exceptions and termination conditions - SNDL has the 'Anti-Dilution Right' to subscribe for additional Voting Securities or Convertible Securities to maintain its Equity Ownership Percentage if the Corporation proposes to issue new securities ('Issue')615 - The Corporation must provide written notice ('Issue Notice') to SNDL (5 Business Days, or 2 for a 'bought deal') detailing the securities to be issued and their material terms; SNDL must then provide an 'Exercise Notice' within the 'Anti-Dilution Right Notice Period' (5 or 2 Business Days) to exercise its right616618 - The Anti-Dilution Right does not apply to certain issuances, including Voting Securities from existing convertible securities, Incentive Securities, pro rata distributions, or securities issued to agents/underwriters617622 - The Anti-Dilution Right terminates if the SNDL Group's Equity Ownership Percentage falls below 10%619 Top-Up Rights This article grants the Holder (SNDL Group) a 'Top-Up Right' to subscribe for additional Common Shares to maintain its Equity Ownership Percentage when certain 'Top-Up Securities' are issued, with quarterly exercise procedures and specific pricing and approval requirements - The 'Top-Up Right' allows the Holder to subscribe for additional Common Shares to maintain its Equity Ownership Percentage, provided the SNDL Group holds at least 10% Equity Ownership Percentage621 - Top-Up Events are triggered by the exercise, conversion, or exchange of Convertible Securities issued prior to the Subscription Agreement date (excluding those owned by SNDL Group), or the exercise or settlement of Incentive Securities issued prior to the Implementation Agreement date623 - The Top-Up Right is exercised quarterly; the Corporation sends a 'Top-Up Right Offer Notice' within 15 days of each fiscal quarter-end, and the Holder has 30 Business Days to accept; the subscription price is the volume weighted average price on the TSX for the five trading days preceding the acceptance notice625626631 - The Corporation must use reasonable best efforts to obtain TSX or other stock exchange approvals, and commercially reasonable efforts to obtain shareholder approval for the exercise of Top-Up Rights627 Demand and Piggy-Back Registration Rights This article grants the Holder (SNDL Group) rights to demand registration of its Common Shares for public distribution and to include its shares in the Corporation's public offerings, subject to certain limitations, underwriting considerations, and specific procedures for expenses and cutbacks - The 'Demand Registration' right allows the Holder to request the Corporation to file a prospectus to qualify its Common Shares for distribution in Canada, provided the aggregate gross sale proceeds are expected to be at least $2.5 million; this right is available after the 'Restricted Period' (24 months from Effective Date)630 - The 'Piggy-Back Registration' right allows the Holder to include its Common Shares in the Corporation's public offerings, subject to notice periods and a minimum expected gross sale proceeds of $2.5 million632 - SNDL may exercise Demand or Piggy-Back rights at any time if an 'SNDL Change of Control Transaction' occurs633 - Limitations include a maximum of two Demand/Piggy-Back Registrations in any 12-month period (and six total), and the Corporation's right to defer filing for up to 90 days due to a 'Valid Business Reason' (e.g., pending M&A, confidential information)634636 - The Holder bears all expenses for a Demand Registration, while the Corporation bears most expenses for a Piggy-Back Registration, excluding the Holder's underwriting discounts/commissions and its own legal/out-of-pocket costs640 - Underwriters may impose an 'Underwriter's Cutback' on the number of shares; for Demand Registrations, other shareholders' and Corporation's shares are reduced first; for Piggy-Back Registrations, shares are reduced proportionately between the Corporation and the Holder642644 - The rights under this article terminate if the SNDL Group's Equity Ownership Percentage falls below 10%649 Representations and Warranties of the Corporation This article details the specific representations and warranties made by Nova Cannabis Inc. (the Corporation) to SNDL, covering its organizational status, corporate authority, enforceability of the agreement, required consents, and absence of conflicts with laws or other agreements - The Corporation represents and warrants its due incorporation, valid existence, and good standing under Alberta laws, and that it possesses all necessary corporate power, authority, and capacity to execute, deliver, and perform its obligations under the agreement652656 - The Corporation affirms that the agreement constitutes a valid and legally binding obligation, and that no governmental or other third-party consents, approvals, or filings are required for its execution, delivery, or performance653654 - The Corporation warrants that the execution and delivery of the agreement will not violate any applicable law, conflict with its corporate documents, or result in a material breach or default under any other material agreement655 Representations and Warranties of SNDL This article details the specific representations and warranties made by SNDL to the Corporation, covering its corporate status, authority, enforceability of the agreement, required consents, and absence of conflicts with laws or other agreements - SNDL represents and warrants its due incorporation, valid existence, and good standing under Alberta laws, and that it possesses all necessary corporate power and authority to execute, deliver, and perform its obligations under the agreement659 - SNDL affirms that the agreement constitutes a valid and legally binding obligation, and that no governmental or other third-party consents, approvals, or filings are required for its execution, delivery, or performance660661 - SNDL warrants that the execution and delivery of the agreement will not violate any applicable law, conflict with its corporate documents, or result in a material breach or default under any other material agreement662 Non-Solicitation This article establishes mutual non-solicitation covenants, preventing both SNDL and the Corporation from actively soliciting each other's officers or employees during the term of the agreement, with exceptions for general advertisements - SNDL covenants not to knowingly solicit for hire or employment, directly or indirectly, any officer or employee of the Corporation or its subsidiaries during the term of the agreement, except through general solicitation by newspaper or similar advertisement665 - The Corporation covenants not to knowingly solicit for hire or employment, directly or indirectl