Manufacturing and Sales License Agreement, effective November 1, 2022 by and among Aphria, Inc. and Charlottes Web, Inc

Exhibit 10.1

MANUFACTURING AND SALES LICENSE AGREEMENT

This Manufacturing and Sales License Agreement (this “Agreement”) is entered into and made effective as of October 31, 2022 (the “Effective Date”), by and between Aphria, Inc., an Ontario corporation (the “Company”) with a registered office at 98 Talbot St. W., Leamington, ON N8H 1M8, and Charlotte’s Web, Inc., a Delaware, USA corporation headquartered at 700 Tech Ct., Louisville, CO 80027 (“CW”). Each of the Company and CW are referred to herein as a “Party” and collectively as the “Parties.”

RECITALS:

NOW, THEREFORE, in consideration of the following promises and for other and further consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, desiring to be legally bound, do hereby covenant and agree as follows.

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 a) Subject to the terms and conditions set out herein, including the grant of license by CW to Company in Section 7, CW hereby grants to the Company a non-transferable, non-sublicensable, exclusive license to (i) extract Hemp Extract from the biomass received from the Cultivator for the sole purpose of manufacturing Products within the Territory during the Term, and (ii) manufacture, market, distribute and sell the Products within the Territory during the Term. The Products, which are those which are listed on Exhibit A, may be expanded, or contracted, or otherwise amended, only by mutual written agreement of the Parties from time to time. However, any discontinued product may be deleted unilaterally by CW at any time upon thirty (30) days’ notice to the Company.

b) Company shall have sole discretion to set and adjust the pricing of Products during the Term. Company commits to pricing the Products at or above the mean price per mg CBD in the market as the standard price but shall have discretion to implement discounts and promotions as commercially reasonable.

c) Company shall, on the Effective Date and on a quarterly basis thereafter, submit a six-month rolling forecast (the “Forecast”) to CW that includes Company’s good faith estimate of the amount of Products to be produced, including any changes to Specifications permitted or contemplated in accordance with this Agreement, by Company for sale by Company across the Territory during such period.

 (a)       Separation. Company agrees to respect the confidentiality of the recipes, formulas and processes used to manufacture the Products, and to take all possible and necessary measures to protect this information and restrict access to such information to limited and specific employees, consultants, advisors, competitors, and prospective customers on a need-to-know basis.

 (b)       Manufacturing Standards & Procedures. Company shall adopt and maintain quality assurance procedures, perform periodic quality control tests, conduct audits and implement measures to ensure that all of the Products manufactured hereunder conform to applicable (as defined below), “Good Production Practices Guidelines” promulgated by Health Canada, any other standards, protocols, audits or tests reasonably requested by CW, its customers or distributors, the applicable Specifications (as defined below) and other applicable requirements of any governmental authority (collectively the “QA Procedures”). In the licensed Territory the Company will follow Health Canada’s Cannabis Act Regulations. CW will audit to ensure the quality standards are followed under Health Canada and its requirements. Company agrees to use industry best practices to regularly monitor and maintain (i) the quality of raw materials, and (ii) the quality and sanitary condition of all equipment used to store, handle, process, manufacture, package and deliver the Products. Company will ensure that it has qualified staff that can oversee quality and sanitary conditions of its factory, as well as professional staff that can ensure the quality of raw materials. At the request of CW, Company shall promptly submit to CW in writing a description of its QA Procedures and shall adopt and incorporate in the Specifications such additional quality control procedures (which shall be included in the definition of (“QA Procedures”) as CW may require, pending prior approval and alignment with Company. If any direct conflict in QA Procedures is found between this Agreement and the separate Quality Agreement entered by both Parties, the Quality Agreement procedures will prevail. Representatives of CW may (but shall not be obligated to), during normal business hours and upon at least forty-eight (48) hours prior notice to Company, visit and inspect Company’s facilities to view production, audit waste, collaborate on best practices and/or perform such quality control testing according to established and agreed upon specifications, methods, and labs, of the Products as CW determines to be reasonably necessary or desirable to ensure Company’s compliance with the provisions of this Agreement. Company represents and warrants that its manufacturing facilities are (and during the term of this Agreement will be) registered with all required government agencies and in compliance with all applicable regulations and standards. For purposes of this Agreement, “GPPs” means current good production practices, applicable guidance documents issued by Health Canada and similar requirements of other countries to the extent that they are relevant (as applicable).

(c)       Sourcing of Raw Materials and Packaging. Company agrees it will only use raw materials and packaging materials (“Materials”) sourced pursuant to the Specifications (as defined herein) for the manufacture of Product and approved for use in the facility by the Company. The Parties acknowledge that for Company to satisfy its obligations under this Agreement, Company shall purchase Materials and make certain other expenditures in connection with the manufacture of the Products. Thus, Company shall procure the Materials based upon the applicable demand for the Products. Company is responsible for procuring all Materials from suppliers approved by CW and ensuring the quality of the components through supplier-provided Certificate of Analysis compliance and in accordance with Company’s internal procedures for supplier and material approval; provided, that (i) all suppliers of Materials shall be designated by CW or otherwise approved by CW in writing prior to use; (ii) Company and CW will work together closely to source Materials and share best practices to maximize efficiencies; (iii) CW has the right to review Company’s quality control procedures, observe production and collaborate on best practices; and (iv) Company shall employ commercially reasonable efforts to control costs associated with the purchase of Materials.

7.       Packaging, Labels and Marketing Materials. Company shall be solely responsible for ensuring that all packaging, labeling and marketing materials relating to the Products are in compliance with any applicable federal or provincial laws and regulations. CW hereby grants to the Company a limited, royalty-free, non-transferable, exclusive license during the Term of this Agreement to use CW’s tradenames, trademarks and logos hereto (the “CW Trademarks”), solely in the Territory for the purposes of producing and distributing the packaging, labeling, and marketing materials for the Products in accordance with this Agreement. The Company undertakes to appropriately mark the Products and the marketing material to identify CW as the owner of such CW Trademarks, in a manner that is clear and evident to third parties, and mention that the use of the CW Trademarks is under license by the Company. All Product packaging, labels, and marketing materials, used by the Company with respect to the Products or including the CW Trademarks shall be preapproved in writing by CW and approved by the Company for use in Canada according to the Health Canada’s Cannabis Regulations and Packaging and labelling guide for cannabis products.

(a) Specifications. Company shall manufacture the Products in accordance with the Product specifications (the “Specifications”) set forth in the Quality Agreement attached hereto as Exhibit B. CW may amend the Specifications at any time. The Parties shall mutually agree on the allocation of expenses and costs required to implement any proposed changes to Specifications and pricing amendments prior to the effectiveness of the proposed amendment. Company shall then implement such amendment in a mutually agreed upon time frame. CW’s Quality Control and New Product Development departments shall create and send to the Company specific criteria to be incorporated into the Specifications for the New Product, including (a) the specifications of the Hemp Extract to be used in the New Product; (b) the specifications of such New Product itself; and (c) the quality release specifications for such New Product. Company shall not make any change or alteration in the Specifications or the design or manufacture of any Products (or any part or component thereof) (“Change”) without CW’s prior written consent. If a Change is required in order to correct a defect in, or a nonconformity to, the Specifications of any Product (whether such defect or nonconformity is discovered by CW or Company), then Company shall make such Change and shall bear any design, engineering, materials, or manufacturing costs incurred in making such Change.

Company within its sole discretion may appoint one or more entities to transport distribute, promote, market and sell the Products in the Territory (“Distributor”). Distributor shall not market, sell or distribute Products outside of the Territory.

(a)       Royalty Payments. Within twenty (20) days following the end of each month of a Contract Year, the Company shall send to CW an itemized report of all Net Sales revenue received by the Company from sales to third-party entities, including, but not limited to, direct-to-consumers, distributors, and provincial boards, during the previous month (itemizing each sold Product by SKU, volume and price, noting any applicable discounts permitted hereunder). Within forty-five (45) days following the end of each month of a Contract Year, the Company shall remit to CW, in immediately available funds payment for ten percent (10%) for the Net Sales for such month in Canadian dollars.

(b)       Withholding Tax. To the extent required by any applicable law, the Company may withhold from any royalty payment to CW an amount equivalent to any applicable withholding tax. If the Canada Revenue Agency (“CRA”) or any other authority asserts a claim that the Company did not properly withhold tax from amounts paid to CW, the Company will be responsible for that assessment.  If the assertion is caused by CW (because the appropriate form was not delivered, was not properly executed, or because CW failed to notify the Company of a change in circumstances that rendered a change to the withholding requirements) then CW shall indemnify the Company fully for all amounts paid, directly or indirectly, by the Company as tax or otherwise, including penalties and interest.  In this situation, CW retains the right to challenge the assessment at their own expense.  CW shall be granted the opportunity to submit the necessary forms to the Company and CRA (when appropriate) to obtain the reduced treaty withholding rate. 

(a)       Termination for Breach. This Agreement shall terminate within thirty (30) days after written notice of termination by one Party to the other for a material breach of any provision of this Agreement, or for failure to meet Minimum Marketing and Sales Spend as provided in Section 10(a) or underpayments found under audit as provided in Section 12, unless such breach is cured within such thirty-day period (if curable). Such termination shall not prejudice the rights of the non-breaching Party, who still shall have all of the rights and remedies available to it in this Agreement, at law, in equity, or otherwise. Failure to pay a royalty or other sum when due hereunder shall be deemed a material breach of this Agreement unless cured within such thirty-day period.

(b) Termination for Bankruptcy. This Agreement shall terminate immediately and automatically if an assignment is made of either Party's business for the benefit of creditors; if a receiver, trustee in bankruptcy, or like official is appointed to take all or part of either Party's property; or if either Party ceases doing business in the ordinary course.

(c) Termination due to Regulatory Authority.

(i) If a regulatory authority (including Health Canada or a provincial government wholesaler) or any third party challenges or refuses to list or sell a Product and such challenge is reasonably likely, in the mutual determination of both Parties, to impact the commercial viability of such Product, either Party may, upon thirty (30) days prior written notice to the other Party terminate its rights and obligations under this Agreement with respect to the Products that are subject to such challenge; and 

(ii) If a regulatory authority provides notice to a Party that it intends to seek the withdrawal or prohibition from the market of any of the Products, the applicable Party, at its sole discretion, shall have the right, but not the obligation to challenge the regulatory authority’s proposed action. If, following a challenge, the regulatory authority prevails in its effort to withdraw from the market any of the Products, as evidenced by a final, non- appealable administrative or legal order, then either Party may immediately upon written notice to the other Party terminate its rights and obligations under this Agreement with respect to the Products that are subject to such withdrawal without penalty or recourse, relating to the Products that are subject to such withdrawal. In the event that a Party determines not to challenge the proposed regulatory action, the other Party may immediately upon written notice to such Party terminate its rights and obligations under this Agreement with respect to such Products.

(a) Each Party is duly organized and validly existing under the laws of its jurisdiction of formation.

(b) Each Party is duly qualified to do business and is in good standing in every jurisdiction in which such qualification is required for purposes of this Agreement.

(c) Each Party has the full right, power, and authority to enter into this Agreement, to grant each other the rights set forth, including intellectual property rights, and to perform its obligations hereunder.

[signatures on following page]

IN WITNESS WHEREOF, the Parties hereunto set their hands and seals to this Manufacturing and Sales Licensing Agreement as of the date set forth below.

CHARLOTTE’S WEB, INC.

(Signature): By: /s/ Jacques Tortoroli

Name and title of authorized signatory: Jacques Tortoroli, CEO

E-mail:

Date: November 1, 2022

APHRIA INC.

(Signature): By: /s/ Blair MacNeil

Name and title of authorized signatory: Blair MacNeil, President

E-mail:

Date: November 1, 2022

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