Item
1.01 Entry into a Material Definitive Agreement.
On
May 7, 2020, GSRX Industries Inc. (the “Corporation” or “GSRX”) entered into an option agreement (the
“Option Agreement”) with a royalty right with Natural Ventures PR, LLC (“NVPR”) allowing NVPR to acquire
100% of the issued and outstanding membership interest of GSRX’s wholly-owned subsidiary, Project 1493, LLC (the “1493
Membership Interest”). Project 1493, LLC holds all of GSRX’s currently operating and issued Puerto Rican dispensaries
and cannabis licenses.
Chemesis
International Inc. (“Chemesis”) owns an 80% interest in NVPR and is also GSRX’s largest shareholder.
The
right of NVPR to exercise the option and acquire the 1493 Membership Interest is conditional upon NVPR performing, or causing
to be performed by its parent company Chemesis, the following milestones (the “Milestones”) within the applicable
timelines set forth below:
(a)
paying US$25,000 to GSRX (the “Initial Cash Payment”), and (ii) waiving the 36-month leak-out in respect of the 729,187
common shares of Chemesis currently held by GSRX (please see news release dated April 1, 2019), which Milestones were completed
concurrently with the execution and delivery of the Option Agreement (such date, the “Effective Date”);
(b)
issuing to GSRX 5,190,000 common shares in the capital of Chemesis (the “Chemesis Shares”) within 10 months after
the Effective Date. The Chemesis Shares will be subject to a 36-month leak-out schedule; and
(c)
paying an additional US$2,475,000 to GSRX within 15 months after the Effective Date.
Immediately
upon NVPR completing, or causing Chemesis to complete, as the case may be, each of the aforementioned Milestones within the respective
timelines set out above, NVPR will be deemed to have acquired all of the 1493 Membership Interest (“Exercise of the Option”).
Upon
Exercise of the Option, NVPR and GSRX shall enter into a royalty agreement (the “Royalty Agreement”), the form of
which was negotiated concurrent with the Option Agreement, pursuant to which NVPR shall grant to GSRX a revenues interest royalty
and the right to receive payments in respect thereof equal to five percent (5%) of the revenues realized by NVPR from the operations
of Project 1493, LLC in Puerto Rico for a period of five years.
Prior
to the Exercise of the Option, either NVPR or GSRX may terminate the Option Agreement upon delivering notice to the other of its
intention to terminate. If GSRX elects to terminate, then NVPR will not acquire the 1493 Membership Interest and GSRX must, as
a condition precedent to such election: (i) return all cash payments it received under the terms of the Option Agreement; (ii)
return the Chemesis Shares (if any) it received under the terms of the Option Agreement; and (iii) pay to Chemesis a break fee
of US$100,000. If NVPR elects to terminate, then NVPR will not acquire the 1493 Membership Interest and GSRX will be entitled
to keep the Initial Cash Payment. Subject to termination of the Option Agreement as described above, the term of the Option is
15 months after the Effective Date.
The
Option shall be secured by way of the grant of a security interest in the 1493 Membership Interests in favor of NVPR pursuant
to a security agreement, pledge and assignment dated May 7, 2020 (the “Security Agreement”).
The
foregoing is a summary of certain material terms and conditions of the Option Agreement, Royalty Agreement and Security Agreement
and are not a complete description thereof. Accordingly, the foregoing is qualified in its entirety by reference to the full text
of the Option Agreement and Royalty Agreement, attached hereto as Exhibit 10.1, 10.2 and 10.3, which are incorporated herein by
reference.
On
May 6, 2020, Andalucía 511, LLC (the “Lender”), a wholly-owned subsidiary of GSRX Industries Inc., entered
into an Amended and Restated Loan Agreement with Chemesis International Inc. (the “Borrower”), which amends the repayment
terms such that $100,000 of the Loan will be immediately due and payable by the Borrower to the Lender on May 30, 2020, and (ii)
the balance of the Loan, being $177,839.43, will be immediately due and payable in full by the Borrower to the Lender on November
6, 2020. Interest shall accrue on the Loan at the Prime Rate plus 1.0% per annum. Interest shall continue to accrue on the Loan
in the event it is not repaid in full on the Maturity Date.
The
foregoing is a summary of certain material terms and conditions of the Amended and Restated Loan Agreement and is not a complete
description thereof. Accordingly, the foregoing is qualified in its entirety by reference to the full text of the Amended and
Restated Loan Agreement, attached hereto as Exhibit 10.4, which is incorporated herein by reference.