Item
1.01.
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Entry
Into a Material Definitive Agreement.
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On
January 16, 2020, CalEthos, Inc., a Nevada corporation (the “Company”), entered into a Stock Purchase Agreement
dated as of January 15, 2020 (the “Purchase Agreement”) with Terra Tech Corp., a Nevada corporation (the “Seller”),
pursuant to which the Company will purchase from the Seller (the “Share Purchase”) all of the issued and outstanding
capital stock of 1815 Carnegie Santa Ana Corp., a California corporation and a wholly-owned subsidiary of the Seller (“Carnegie
Corp.”), for an aggregate purchase price of $6.0 million consisting of (i) $3.0 million in cash and (ii) $3.0 million
in shares of the Company’s common stock (the “Share Consideration”).
The
primary assets of Carnegie Corp. are the state and local licenses and permits required to operate a cannabis dispensary at the
approximately 29,500-square-foot industrial building located at 1815 Carnegie Avenue, Santa Ana, California (the “Property”).
The Purchase Agreement contemplates that in connection with the closing of the Share Purchase, the Company will enter into a five-year
real property lease of the Property from an affiliate of the Seller, which lease will provide the Company two five-year renewal
options. The Company intends to build out the Property for use in the operation of a large-format dispensary, retail store and
event center to serve the needs of the rapidly growing Southern California cannabis market.
The
Purchase Agreement contains customary representations, warranties and covenants of the Company, on one hand, and the Seller, on
the other hand, including, among others, covenants by the Seller with respect to the operations of Carnegie Corp. during the period
between execution of the Purchase Agreement and the closing of the Share Purchase (the “Closing”). The Purchase
Agreement also provides that each party will indemnify the other party following the Closing for breaches of the warranties and
covenants of such party, as well as certain other matters, subject to certain specified limitations, including, among other things,
limitations on the period during which a party may make certain claims for indemnification and limitations on the amounts for
which a party may be liable.
Pursuant
to the Purchase Agreement, the Closing is conditioned upon, among other things, the Company raising a minimum of $4 million of
gross proceeds from the its sale of debt or equity securities and other customary closing conditions. The Purchase Agreement also
provides for limited termination rights, including, among others, by the mutual consent of the Company and the Seller, upon certain
breaches of representations, warranties, covenants or agreements, and in the event the Share Purchase has not been consummated
before February 28, 2020, subject to the ability of the parties to extend under certain circumstances.
The
foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1, which is incorporated
herein by reference thereto.
The
Purchase Agreement has been filed as an exhibit hereto to provide investors and security holders with information regarding its
terms and is not intended to provide any factual information about the Company or the Seller. The representations, warranties
and covenants set forth in the Purchase Agreement were made solely between the parties to the Purchase Agreement and may be subject
to important qualifications and limitations agreed to by the parties in connection with negotiating its terms, including being
qualified by confidential disclosures exchanged between the parties in connection with the execution of the Purchase Agreement.
Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from
what may be viewed as material to investors or security holders, or may have been used for the purpose of allocating risk between
the parties to the Purchase Agreement rather than establishing matters as facts. Information concerning the subject matter of
the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may
not be fully reflected in the Company’s public disclosures. For the foregoing reasons, no person should rely on the warranties
as statements of factual information at the time they were made or otherwise.