Certain confidential information contained in this document, marked by [***], has been omitted because the Company has determined that the information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed.
UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE COMMON SHARES, IF ANY, ISSUABLE UPON CONVERSION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MUST NOT TRADE ANY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR COMMON SHARE ISSUABLE UPON CONVERSION THEREOF BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (I) the distribution date], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE COMMON SHARES, IF ANY, ISSUABLE UPON CONVERSION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. ANY AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE ISSUER THAT ACQUIRES THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY COMMON SHARE ISSUED UPON CONVERSION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE (OR ANY INTEREST IN ANY OF THE FOREGOING) MAY NOT RESELL SUCH SECURITY OR SHARE (OR INTEREST THEREIN), AS APPLICABLE, UNLESS IN A TRANSACTION THAT IS REGISTERED UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IN A TRANSACTION IMMEDIATELY FOLLOWING WHICH SUCH RESOLD SECURITY OR SHARE (OR INTEREST THEREIN), AS APPLICABLE, IS NOT A “RESTRICTED SECURITY” (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT).]
SENIOR UNSECURED CONVERTIBLE DEBENTURE
FROM: TerrAscend Corp. (the “Issuer”)
TO: [Holder] with its address for notice being [Address] (the “Holder”)
AMOUNT: US$[<>] unsecured convertible debentures (the “Principal”)
DATE: June 28, 2023 (the “Closing Date”)
____________________________________________________________________________
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(1) The Principal shall bear interest at the rate of 9.9% per annum from and including the Closing Date. Interest shall be calculated and compounded semi-annually and is payable on the Maturity Date. Interest is payable after as well as before maturity and after as well as before default, with interest on amounts in default or after maturity at the same rate, compounded semi-annually.
(2) The Principal shall bear interest at the rate of 9.9% per year from and including the Closing Date, or from the last Interest Payment Date to which interest shall have been paid or made available for payment hereon, whichever is later (a) 50% of such interest shall be calculated and compounded semi-annually and payable on the Maturity Date, and (b) 50% of such interest shall be calculated and payable in cash in equal, semi-annual payments in arrears on each Interest Payment Date (including the Maturity Date) in each year, the first such payment to fall due on October 1, 2023. Interest shall be payable after as well as before maturity and after as well as before default, with interest on amounts in default or after maturity at the same rate, compounded semi-annually. Any payment required to be made on any day that is not a Business Day will be made on the next succeeding Business Day.
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(A) any statute or other law that applies to it;
(B) its articles, by-laws, or unanimous shareholders agreement;
(C) subject to receipt of all required consents, any agreement to which it is a party or by which it is bound; or
(D) any judgment or other order that binds it or its assets; or
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in the case of the Issuer, to:
TerrAscend Corp.
3610 Mavis Road
Mississauga, Ontario, L5C 1W2
Attention: Lynn Gefen
Email: [***]
With a copy to:
Cassels Brock & Blackwell LLP
Suite 3200, Bay Adelaide Centre – North Tower
40 Temperance St.
Toronto, Ontario M5H 0B4
Attention: Jonathan Sherman
Email: [***]
in the case of the Holder, to the address listed the first page of this debenture.
Any Notice is effective: (i) upon personal delivery to the party to be notified, (ii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, (iii) when sent by confirmed electronic mail if sent before 5:00 p.m. local time of the recipient, if not, then on the next Business Day, or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.
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The Issuer has executed this debenture dated as of the Closing Date.
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| TERRASCEND CORP. | |
By: |
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Name: | |||
Title: |
SCHEDULE “A”
DEFINITIONS
The following definitions apply to the debenture to which this schedule is attached (this “debenture”):
“affiliate” has the meaning ascribed thereto in the Securities Act (Ontario).
“Bankruptcy Event” means, with respect to the Issuer, that (a) the Issuer fails to pay or perform its obligations generally as they become due or admits its inability to pay its debts generally, (b) the Issuer commits an act of bankruptcy within the meaning of the Bankruptcy and Insolvency Act (Canada), (c) a Bankruptcy Proceeding is instituted by or against the Issuer (excluding any Bankruptcy Proceeding being contested by the Issuer in good faith by appropriate proceedings so long as enforcement remains stayed, none of the relief sought is granted (either on an interim or permanent basis), and the Bankruptcy Proceeding is dismissed within 90 days of its commencement), or (d) the Issuer takes any action to authorize any of the actions set forth above in this definition.
“Bankruptcy Proceeding” means, with respect to the Issuer, any proceeding contemplated by any application, petition, assignment, filing of notice, or other means, whether voluntary or involuntary under the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada), or any other similar legislation of any jurisdiction seeking any moratorium, reorganization, adjustment, composition, proposal, compromise, arrangement, or other similar relief in respect of any or all of the Issuer’s obligations, seeking the winding up, liquidation, or dissolution of the Issuer or all or any part of its businesses, undertaking, properties, and assets, seeking any order declaring, finding, or adjudging the Issuer insolvent or bankrupt, seeking the appointment (provisional, interim, or permanent) of any receiver, or resulting, by operation of law, in the bankruptcy of the Issuer.
“Business Day” means a day other than a Saturday, a Sunday, or any other day on which the principal chartered banks located in Toronto, Ontario are not open for business.
“Change of Control” shall be deemed to have occurred at the time after this debenture is originally issued if either of the following occurs:
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provided, however, that a transaction or transactions described in clause (a) or clause (b) above shall not constitute a Change of Control, if at least 90% of the consideration received or to be received by the common shareholders of the Issuer, excluding cash payments for fractional shares, in connection with such transaction or transactions consists of common shares that are listed or quoted on any of the Canadian Securities Exchange, Nasdaq Global Select Market, the Toronto Stock Exchange, The New York Stock Exchange or the Nasdaq Global Market (or any of their respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions this debenture become convertible into such consideration, excluding cash payments for fractional shares (subject to the provisions hereof); and provided further, that, that a transaction or transactions described in clause (a) above shall not constitute a Change of Control, if the “person” or “group” within the meaning of Section 13(d) of the Exchange Act is, as of the date hereof, a “control person” of the Issuer within the meaning of Section 1(1) of the Securities Act (Ontario). In the case of a transaction that would have been a Change of Control but for the proviso immediately following clause (b) of this definition, if any transaction in which the Common Shares are replaced by the securities of another entity occurs, references to the Issuer in this definition shall instead be references to such other entity.
“Conversion Price” means U.S.$2.01, as adjusted from time to time as provided in Schedule "B" attached to this debenture.
“Current Market Price” means, at any date, the volume weighted average trading price per share at which the Common Shares have traded:
during the three consecutive trading days ending on the Business Day before the applicable determination date and the weighted average price shall be determined by dividing the aggregate sale price of all Common Shares sold on the exchange or market, as the case may be, during the three consecutive trading days by the number of Common Shares sold or, if not traded on any recognized exchange or market, as determined by the board of directors of the Issuer, acting reasonably.
“Event of Default” means the occurrence of one or more of the following events:
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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Interest Payment Date” means each April 1 and October 1 of each year, beginning on October 1, 2023. [NTD. only include if option (2) is selected.]
“Maturity Date” means June 23, 2026.
“Notice” means any notice, request, direction, or other document that a party can or must make or give under this debenture.
“Person” includes any individual, and any corporation, partnership, governmental body, joint venture, association, trust, or any other entity.
“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiary” means, with respect to any Person (herein referred to as the “parent”), (i) any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of capital stock or other interests (including partnership interests) is, at the time any determination is being made, owned or held, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent or (ii) a majority of the members of the board of directors (or equivalent governing body) have been appointed or designated for appointment (and actually elected by persons entitled to cast a vote in respect of, or otherwise approve, such appointment or designation) by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
“Wholly Owned Subsidiary” means, with respect to any Person, any Subsidiary of such Person, except that, solely for purposes of this definition, the reference to “more than 50%” in the definition of “Subsidiary” shall be deemed replaced by a reference to “100%”.
SCHEDULE “B”
Adjustment of Conversion Price
The Conversion Price in effect at any date shall be subject to adjustment from time to time as set forth below.
the Conversion Price in effect on the effective date of such subdivision, redivision, reduction, combination or consolidation or on the record date for such issue of Common Shares by way of a dividend or distribution, as the case may be, shall in the case of any of the events referred to in (i) and (iii) above be decreased in proportion to the number of outstanding Common Shares resulting from such subdivision, redivision or dividend, or shall, in the case of any of the events referred to in (ii) above, be increased in proportion to the number of outstanding Common Shares resulting from such reduction, combination or consolidation. Such adjustment shall be made successively whenever any event referred to in this Schedule "B" shall occur. Any such issue of Common Shares by way of a dividend or distribution shall be deemed to have been made on the record date for the dividend or distribution for the purpose of calculating the number of outstanding Common Shares under subsections (c) and (d) of this Schedule "B".
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The Issuer shall not become a party to any Merger Event unless its terms are consistent with paragraph (d) of this Schedule "B".
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Notwithstanding the foregoing, if the securities distributed by the Issuer to all holders of its Common Shares consist of capital stock of, or similar equity interests in, a Subsidiary or other business of the Issuer (the “Spinoff Securities”), the Conversion Price shall be adjusted, unless the Issuer makes an equivalent distribution to the Holder, so that the same shall be equal to the rate determined by multiplying the Conversion Price in effect on the record date fixed for the determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the sum of (A) the weighted average trading price of one Common Share over the 20 consecutive trading day period (the “Spinoff Valuation Period”) commencing on and including the fifth trading day after the date on which ex-dividend trading commences for such distribution on the stock exchange upon which the highest volume of trading of the Common Shares occurs during the applicable period and (B) the product of (i) the weighted average trading price (calculated in substantially the same way as the Current Market Price is calculated for the Common Shares) over the Spinoff Valuation Period of the Spinoff Securities or, if no such prices are available, the fair market value of the Spinoff Securities as reasonably determined by the board of directors of the Issuer (which determination shall be conclusive) multiplied by (ii) the number of Spinoff Securities distributed in respect of one Common Share and the numerator of which shall be the weighted average trading price of one Common Share over the Spinoff Valuation Period, such adjustment to become effective immediately preceding the opening of business on the 25th trading day after the date on which ex-dividend trading commences; provided, however, that the Issuer may in lieu of the foregoing adjustment elect to make adequate provision so that the Holder shall have the right to receive upon conversion thereof the amount of such Spinoff Securities that the Holder would have received if this debenture had been converted on the record date with respect to such distribution.
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For purposes of paragraph (f) of this Schedule "B", the term “issuer bid” shall mean an issuer bid under Securities Laws or a take-over bid under Securities Laws by a Subsidiary of the Issuer for the Common Shares and all references to “purchases” of Common Shares in issuer bids (and all similar references) shall mean and include the purchase of Common Shares in issuer bids and all references to “tendered Common Shares” (and all similar references) shall mean and include Common Shares tendered in issuer bids.
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The Issuer shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in this Schedule "B", deliver written notice to the Holder specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate and the amount of the adjustment specified therein shall be conclusively determined by a firm of nationally recognized chartered accountants appointed by the Issuer (who may be the auditors of the Issuer) and such advice or determination shall be conclusive and binding on all parties in interest. When so approved, the Issuer shall, except in respect of any subdivision, redivision, reduction, combination or consolidation of the Common Shares, forthwith give notice to the Holder in the manner provided in Section 19 of this debenture specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Conversion Price; provided that, if the Issuer has given notice hereunder covering all the relevant facts in respect of such event and if the Holder approves, no such notice need be given hereunder.