Preview
1 Marshall J. Hogan (#286147)
mhogan@swlaw.com
2 Andrew B Still (#312444)
astill@swlaw.com
3 SNELL & WILMER L.L.P.
600 Anton Boulevard, Suite 1400
4 Costa Mesa, CA 92626-7689
Telephone: 714.427.7000
5 Facsimile: 714.427.7799
6 Bryce A. Suzuki (pro hac vice forthcoming)
bsuzuki@swlaw.com
7 SNELL & WILMER L.L.P.
One East Washington Street, Suite 2700
8 Phoenix, AZ 85004
Telephone: 602.382.6000
9 Facsimile: 602.382.6070
10 Attorneys for Plaintiff
EAST WEST BANK
11
SNELL & WILMER
COSTA MESA, CALIFORNIA 92626-7689
600 ANTON BLVD, SUITE 1400
12
SUPERIOR COURT OF THE STATE OF CALIFORNIA
LAW OFFICES
13
L.L.P.
14 COUNTY OF SANTA BARBARA-SOUTH COUNTY DIVISION
15
16 EAST WEST BANK, a California state CASE NO. 23CV02629
banking corporation,
17 Assigned to: Hon. Colleen K. Stern
Plaintiff,
18 STIPULATION RE: ORDER
vs.
19 (1) APPOINTING RECEIVER; AND
HERBL, INC., a California corporation,
20 dba HERBL, HERBL DISTRIBUTION (2) ISSUING PRELIMINARY
SOLUTIONS, and HDS NATURALS, INJUCTION
21
Defendant.
22
Hearing Information:
23 Date: June 28, 2023
Time: 8:30 A.M.
24 Dept.:5
25 Complaint Filed: June 20, 2023
26
27
28
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STIPULATION RE: APPOINTMENT OF RECEIVER
4858-7460-5152.1
1 Plaintiff East West Bank (“Plaintiff” or “EWB”) and Defendant Herbl, Inc. (“Defendant”
2 or “Herbl”) hereby stipulate and agree to the immediate appointment of Kevin Singer as Receiver
3 (the “Receiver”) of Defendant and all assets of Defendant pursuant to that certain Order (1)
4 Approving Stipulation for Appointment of Receiver, (2) Appointing Receiver; and (3) Issuing
5 Preliminary Injunction (the “Receivership Order”) attached hereto as Exhibit A.
6 RECITALS
7 1. On or around March 21, 2022, EWB and Defendant executed and entered into that certain
8 Business Loan Agreement (the “Loan Agreement”), pursuant to which, among other things, EWB
9 agreed to provide a revolving line of credit to Defendant in the original principal amount of up to
10 $15 million.
11 2. As part of the same transaction, Defendant executed and delivered: (1) that certain
SNELL & WILMER
COSTA MESA, CALIFORNIA 92626-7689
600 ANTON BLVD, SUITE 1400
12 Promissory Note (the “Note”), wherein Defendant agreed to pay EWB the principal sum of $15
LAW OFFICES
13 million, or so much as may be outstanding, together with interest on the unpaid outstanding
L.L.P.
14 principal balance of each advance; and (2) that certain Commercial Security Agreement (the
15 “Security Agreement”) wherein Defendant granted to EWB a security interest in all, or
16 substantially all, of Defendant’s personal property, whether then owned or thereafter acquired,
17 whether then existing or thereafter arising, and wherever located, to secure Defendant’s
18 obligations under the Loan Agreement and Note (“Collateral”). The Loan Agreement, Note,
19 Security Agreement, all as may be amended from time to time, and all related documents and
20 filings are referred to herein collectively as the “Loan Documents.”
21 3. On or around March 29, 2022, EWB filed UCC-1 financing statement with the California
22 Office of the Secretary of State, File No. U220179442334, which financing statement included a
23 collateral description matching that of the Security Agreement. EWB’s security interest in the
24 Collateral is perfected, valid, and enforceable.
25 4. On or around November 14, 2022, EWB sent to Defendant notice of several defaults
26 under the Loan Agreement.
27 5. EWB and Defendant entered into that certain Forbearance and Repayment Agreement
28 dated as of November 11, 2022 (the “Forbearance Agreement”), whereby EWB agreed to forbear
-2-
STIPULATION RE: APPOINTMENT OF RECEIVER
4858-7460-5152.1
1 temporarily from exercising its legal remedies provided, among other things, that Defendant by
2 no later than December 31, 2022, either (i) raise additional equity with an amount of no less than
3 $10 million, or (ii) refinance with another lender and pay off the Loan in full.
4 6. On or around December 21, 2022, EWB sent to Defendant notice of several additional
5 defaults under the Loan Agreement.
6 7. Defendant failed to raise the additional equity or to refinance and repay the Loan in full by
7 December 31, 2022, or at any time thereafter to date.
8 8. On or around January 6, 2023, EWB and Defendant entered into that certain Change in
9 Terms Agreement (the “First Amendment”), which provided, among other things, that (i) the
10 Principal Amount of the Note is decreased to $4,834,024.42, and (ii) the interest rate and interest
11 calculation method are amended and restated as set forth therein.
SNELL & WILMER
COSTA MESA, CALIFORNIA 92626-7689
600 ANTON BLVD, SUITE 1400
12 9. On or around January 9, 2023, EWB sent to Defendant another notice of certain defaults
LAW OFFICES
13 under the terms of the Loan Agreement.
L.L.P.
14 10. On or around March 21, 2023, EWB and Defendant entered into that certain Second
15 Amendment to Loan Agreement and Forbearance Agreement (the “Second Amendment”),
16 wherein Defendant expressly acknowledged certain defaults.
17 11. In the Second Amendment, Defendant “irrevocably consent[ed] to the appointment of a
18 receiver acceptable to [EWB], in [EWB]’s sole and absolute discretion following the expiration
19 of the Forbearance Period,” and agreed it would not contest the appointment of a receiver. It
20 agreed that EWB’s “right to obtain such an order [appointing a receiver] from such court [is] as a
21 matter of right and without regard to the then value of the Collateral or the interest of [Defendant]
22 therein.”
23 12. Despite EWB’s efforts, at the time of the execution of this Stipulation, Defendant has
24 failed to remedy its numerous defaults under the Loan Documents, including by failing to
25 maintain the minimum required Debt Coverage Ratio (as defined in the Loan Documents),
26 Effective Tangible Net Worth (as defined in the Loan Documents), and Eligible Accounts Ratio
27 (as defined in the Loan Documents). In addition, Defendant has experienced a material adverse
28 change in its financial position, has become insolvent, and is generally not, or is unable to, pay its
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STIPULATION RE: APPOINTMENT OF RECEIVER
4858-7460-5152.1
1 debts as they become due.
2 13. EWB and Defendant enter into this Stipulation in connection with a Third Amendment to
3 Loan Agreement and Forbearance Agreement (the “Third Amendment”) and agree that upon the
4 occurrence of an Event of Default under the Third Amendment, EWB shall have the right to file
5 this Stipulation for the immediate appointment of a receiver pursuant to the terms of this
6 Stipulation and the Order (s defined below).
7 14. Unless a receiver is promptly appointed, EWB believes its Collateral will be irreparably
8 harmed, which will result in significant damages to EWB and other parties in interest.
9 STIPULATION
10 A. The above-stated recitals are true and accurate and are fully incorporated into this
11 Stipulation.
SNELL & WILMER
COSTA MESA, CALIFORNIA 92626-7689
600 ANTON BLVD, SUITE 1400
12 B. EWB and Defendant agree to entry of the Order (1) Approving Stipulation for Entry of
LAW OFFICES
13 Order Appointing Receiver; (2) Appointing Receiver; and (3) Issuing Preliminary Injunction
L.L.P.
14 (“Order”), substantially in the same form as that attached as Exhibit A to this Stipulation.
15 Without limiting the foregoing, Defendant consents and agree to the appointment of Kevin Singer
16 of Receivership Specialists as the receiver under the terms and conditions set forth the Order, to
17 the terms and conditions of the injunction set forth in the Order, and to perform any and all acts
18 required by the Order.
19 C. The Parties have had an opportunity to consult with legal counsel of their own choosing
20 concerning their rights and obligations with respect this Stipulation and the Order, including
21 without limitation the advisability of entering into this Stipulation. To the extent any party has not
22 consulted its own legal counsel concerning its rights and obligations relating to this Stipulation
23 and the Order, the party willingly did not do so and voluntarily, knowingly, and freely, without
24 coercion, duress, or undue influence, executed this Stipulation by the party’s own choice and
25 decision.
26 D. This Stipulation may be signed in one or more counterparts, which shall together
27 constitute one agreement. A faxed, scanned or electronically generated signature on this
28 Stipulation will be deemed effective and binding as if it were an original signature.
-4-
STIPULATION RE: APPOINTMENT OF RECEIVER
4858-7460-5152.1
I E. This Stipulation is dated May 1
_,2023.
2
3 1 2023
Dated: May _,
4 SNELL & WILMER r.r-.p
5
6 By:
Marshall J. Hogan
7
Attomeys for Plaintiff
8 East West Bank
9
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STIPULATION RE: APPOTNTMENT OF R-ECEIVER
4li5lr-?.t6r)-5t52 I
Exhibit A
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1 Marshall J. Hogan (#286147)
mhogan@swlaw.com
2 Andrew B Still (#312444)
astill@swlaw.com
3 SNELL & WILMER L.L.P.
600 Anton Boulevard, Suite 1400
4 Costa Mesa, CA 92626-7689
Telephone: 714.427.7000
5 Facsimile: 714.427.7799
6 Bryce A. Suzuki (pro hac vice forthcoming)
bsuzuki@swlaw.com
7 SNELL & WILMER L.L.P.
One East Washington Street, Suite 2700
8 Phoenix, AZ 85004
Telephone: 602.382.6000
9 Facsimile: 602.382.6070
10 Attorneys for Plaintiff
EAST WEST BANK
11
12
Costa Mesa, California 92626-7689
SUPERIOR COURT OF THE STATE OF CALIFORNIA
600 Anton Boulevard, Suite 1400
Wilmer
13
LAW OFFICES
(714) 427-7000
14 COUNTY OF SANTA BARBARA– SOUTH COUNTY DIVISION
Snell &L.L.P.
15
16 EAST WEST BANK, a California state CASE NO. 23CV02629
banking corporation,
17 Assigned to: Hon. Colleen K. Stern
Plaintiff,
18 [PROPOSED] ORDER
vs.
19 (1) APPROVING STIPULATION FOR
HERBL, INC., a California corporation, APPOPINTMENT OF RECEIVER;
20 dba HERBL, HERBL DISTRIBUTION
SOLUTIONS, and HDS NATURALS, (2) APPOINTING RECEIVER; AND
21
Defendant. (3) ISSUING PRELIMINARY
22 INJUNCTION
23 Hearing Information:
Date: June 27, 2023
24 Time: 8:30 A.M.
Dept.:5
25
Complaint Filed: June 20, 2023
26
27
28
[PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION
4871-1287-1263.6 -7-
1 The Court, having considered (i) the Complaint filed by Plaintiff East West Bank
2 (“Plaintiff”), (ii) the Stipulation for Appointment of Receiver and Issuance of Preliminary
3 Injunction (“Stipulation”); (iii) the Nomination of Kevin Singer as Receiver; and (iv) the Oath of
4 Receiver; and good cause appearing, makes and enters the following Order:
5 IT IS ORDERED that the Stipulation is granted.
6 RECEIVER’S APPOINTMENT AND DUTIES
7 IT IS FURTHER ORDERED that:
8 1. Kevin Singer shall be and is appointed as Receiver (“Receiver”) of defendant
9 HERBL, Inc. (“Defendant”) and all the assets of Defendant (collectively, the “Receivership
10 Estate”), with the full power of a general equity receiver.
11 2. Upon the entry of this Order, and because the Receiver has already filed his Oath
12 of Receiver, the Receiver shall be vested with all the powers and responsibilities of a general
Costa Mesa, California 92626-7689
600 Anton Boulevard, Suite 1400
Wilmer
13 equity receiver as provided by law to receivers and as specifically set forth herein.
LAW OFFICES
(714) 427-7000
14 3. The Receiver is authorized and directed to perform the following duties:
Snell &L.L.P.
15 a. Take possession, custody and control of the Receivership Estate.
16 b. Assume full control of Defendant, including by removing, as the Receiver
17 deems necessary or advisable, any director, officer, manager, independent contractor, employee,
18 or agent of any Defendant, from control of, management of, or participation in, the affairs of
19 Defendant.
20 c. Acquire from Defendant, its members, officers, managers, accountants,
21 managing members, and agents, all keys, contracts, agreements, all books and records, books of
22 account, ledgers, operating statement, budgets, all banking records, tax bills wherever located,
23 applicable to the Receivership Estate, documentation pertaining to all contracts, completed or in
24 progress, all lease and/or rental agreements, leasehold interests, and all documents, records and
25 accounts pertaining to the operation, development, and operation of Defendant and the
26 Receivership Estate, expressly including, but not be limited to, all information contained on
27 computers and any and all software relating thereto, including any and all passwords, usernames,
28 security questions to access any systems or online portals or accounts necessary to operate or
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[PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION
4871-1287-1263.6 -8-
1 administer the business and/or any of the Receivership Estate.
2 d. Notify the United States Post Office or other mail depository of this Order
3 and instruct it to divert mail to the Receiver;
4 e. Notify applicable local, state and federal taxing authorities of the
5 commencement of the receivership and communicate with said authorities on behalf of the
6 Receivership Estate.
7 f. Open one or more bank accounts for the deposit of assets subject to the
8 receivership, deposit all assets collected in such designated account(s) and, make all payments
9 and disbursements from the Receivership Estate from such account(s).
10 g. Subject to an operating budget reasonably acceptable to Plaintiff, continue
11 to conduct the business, or cease operation of the business, of Defendants in such manner, and to
12 such extent, and for such duration as Receiver may in good faith deem to be necessary or
Costa Mesa, California 92626-7689
600 Anton Boulevard, Suite 1400
Wilmer
13 appropriate to operate the businesses profitably and lawfully, if at all.
LAW OFFICES
(714) 427-7000
14 h. Terminate or, subject to an operating budget reasonably acceptable to
Snell &L.L.P.
15 Plaintiff, retain existing employees or related parties in order to continue any business operations,
16 and in case of such retention, all payroll taxes, workers’ compensation insurance, and related
17 costs will be carried and reported as those of Defendant or such related parties, and not of the
18 Receivership Estate.
19 i. Demand, receive, take control of, and collect all income, rents, issues,
20 profits, proceeds, sales, and all other monies arising from assets of the Receivership Estate,
21 including but not limited to, cash, bank accounts, funds in safety deposit boxes, funds in safes,
22 accounts receivable, monies, checks, drafts, securities, letters of credit and any tangible and
23 intangible pledges as security for the letters of credit; collect debts and compromise same; and
24 take any action respecting assets of the Receivership Estate which the Court may authorize. The
25 Receiver shall have the authority to change signatures to the Receiver on signature cards for
26 existing accounts, and to transfer existing accounts, or funds in existing accounts, into account(s)
27 established by the Receiver. Receiver shall have the authority to receive and endorse checks
28 constituting income from the Receivership Estate.
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[PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION
4871-1287-1263.6 -9-
1 j. Instruct any individuals making payments to Defendant to instead make all
2 payments to Receiver.
3 k. Subject to an operating budget reasonably acceptable to Plaintiff, enter into
4 contracts and purchase insurance as the Receiver reasonably deems necessary. If the Receivership
5 Estate has insufficient funds to purchase adequate insurance coverage for the Receivership Estate,
6 funds may be supplied by Plaintiff, or Receiver will seek instructions from the Court with respect
7 to whether insurance will be obtained and how it is to be paid for. Consistent with existing law,
8 the Receiver shall not be responsible for claims or damages arising from not procuring or inability
9 to obtain insurance.
10 l. Subject to an operating budget reasonably acceptable to Plaintiff, obtain
11 and pay for any licenses or permits that the Receiver reasonably believes to be necessary for
12 operation of the Receivership Estate. The Receiver is authorized to assume and utilize and pre-
Costa Mesa, California 92626-7689
600 Anton Boulevard, Suite 1400
Wilmer
13 existing licenses or permits, including without limitation licenses governed by the California
LAW OFFICES
(714) 427-7000
14 Department of Cannabis Control, subject to applicable regulations and requirements. This Order
Snell &L.L.P.
15 shall constitute sufficient documentation under section 15024(b)(4) of Article 3, Division 19 of
16 Title 4 of the California Code of Regulations to show that the Defendant is incapable of
17 performing the duties associated with any license issued under the Medicinal and Adult-Use
18 Cannabis Regulation and Safety Act throughout the term of the receivership. The Receiver may
19 also enter into agreements with local and state government to use or extend licenses, permits, or
20 other authorizations currently in place with respect to the Receivership Estate.
21 m. Subject to an operating budget reasonably acceptable to Plaintiff, incur
22 expenses as Receiver deems advisable or necessary for the care, preservation, and maintenance of
23 the Receivership Estate.
24 n. Maintain accurate records of all receipts and expenditures that the Receiver
25 makes.
26 o. Choose, engage, and employ agents, employees, attorneys, accountants,
27 appraisers, property managers, and other independent contractors and technical specialists as
28 Receiver deems advisable or necessary in the performance of duties and responsibilities under the
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[PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION
4871-1287-1263.6 - 10 -
1 authority granted by this Order. Subject to an operating budget reasonably acceptable to Plaintiff,
2 Receiver shall be permitted to pay such individuals out of funds that come into his possession as
3 Receiver to administer the Receivership Estate. Any liability arising therefrom shall be the sole
4 risk and obligation of the Receivership Estate, and not the personal liability of the Receiver.
5 p. Do all things and incur the risks and obligations in managing assets of the
6 Receivership Estate as ordinarily incurred by owners, managers, and operators of similar assets;
7 provided, however, that no such risk or obligation so incurred shall be the personal risk or
8 obligation of Receiver, but shall be the risk and obligation of the Receivership Estate.
9 q. Subject to Plaintiff’s reasonable approval and paragraph 3.x., infra, sell any
10 assets of the Receivership Estate in Receiver’s possession on a commercially reasonable basis.
11 r. Use any tax identification or social security numbers previously used in
12 collection with the operation of assets or documents of the Receivership Estate. For the avoidance
Costa Mesa, California 92626-7689
600 Anton Boulevard, Suite 1400
Wilmer
13 of doubt, the Receiver may use the State and Federal taxpayer identification numbers of
LAW OFFICES
(714) 427-7000
14 Defendant in connection with all accounts and accounting for the Receivership Estate.
Snell &L.L.P.
15 s. Issue subpoenas and conduct and participate in discovery, take depositions,
16 pursue contempt actions, and otherwise pursue all remedies available on behalf of the
17 Receivership Estate and/or to ensure compliance with Receiver’s authority granted herein.
18 t. Cooperate with reasonable requests for information or assistance from
19 applicable law enforcement agencies.
20 u. Institute, adjust, appear in, intervene in, defend, or compromise or
21 otherwise dispose of legal actions in state, federal, or foreign courts or arbitration proceedings as
22 the Receiver deems necessary or advisable to recover, protect, maintain, or sell assets of the
23 Receivership Estate, or that the Receiver deems necessary or advisable to carry out the Receiver’s
24 mandate under this Order, including, but not limited to, actions challenging fraudulent or voidable
25 transfers.
26 v. Exercise any power authorized by statute or ordered by the Court.
27 w. Apply to this Court, at any time, for further or other instructions or orders
28 or for additional or other powers necessary to enable Receiver to properly perform his duties.
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[PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION
4871-1287-1263.6 - 11 -
1 x. Market for sale, and subject to notice to all parties and with the consent of
2 the Court, sell all, or substantially all, of the receivership assets, including the Defendant’s
3 business as a going concern, execute all documents required for such sale, and undertake any and
4 all duties required to effectuate such sale. All applications for approval of such sale, or any other
5 sale of assets with a proposed purchase price of more than $250,000, shall be brought before this
6 Court by the Receiver on noticed motion or if time does not allow, by ex parte notice to all
7 parties. Where such application is brought on ex parte notice, all parties shall, unless the Court
8 indicates otherwise, have seven (7) calendar days within which they may file objections together
9 with supporting evidence as to the price or terms of such sale, in which case the Court may either
10 order further briefing, and/or set a hearing for further argument or rule on the pleadings then on
11 file. If no objection is filed within said seven (7) day time period to any ex parte application, the
12 Court will conclude that there is no opposition to the Receiver’s application.
Costa Mesa, California 92626-7689
600 Anton Boulevard, Suite 1400
Wilmer
13 y. Upon a sale of assets pursuant to the immediately preceding paragraph, the
LAW OFFICES
(714) 427-7000
14 Receiver shall disburse, or if appropriate, instruct escrow to distribute all net funds resulting from
Snell &L.L.P.
15 said sale(s) as follows:
16 (i) First to the payment of all fees and expenses incurred by the
17 Receiver and its professionals in managing the Receivership Estate;
18 (ii) Second to the expenses of administering the receivership;
19 (iii) Third to the payment of Plaintiff’s claim;
20 (iv) Fourth to the payment of any taxes which, if not paid, would form
21 the basis for a lien on the Receivership Estate; and
22 (v) The remainder to be held by the Receiver until further order of this
23 Court in an interest-bearing segregated account with all liens attaching to those
24 funds in the priority in which they are entitled to be paid. However, the Receiver,
25 at any time, may use these segregated funds to pay any taxes, fines, fees or other
26 governmental agency costs or assessments attributable to the Property as they
27 become due.
28 4. All expenses of the operation of Defendant’s business are the risk of the
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[PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION
4871-1287-1263.6 - 12 -
1 Receivership Estate and not the personal obligation of the Receiver.
2 5. A conformed copy of this Order shall be as good as a certified copy for the
3 Receiver’s purposes of taking possession and control of Defendant’s business and the assets and
4 documents subject to this
Preview
1 Marshall J. Hogan (#286147) mhogan@swlaw.com 2 Andrew B Still (#312444) astill@swlaw.com 3 SNELL & WILMER L.L.P. 600 Anton Boulevard, Suite 1400 4 Costa Mesa, CA 92626-7689 Telephone: 714.427.7000 5 Facsimile: 714.427.7799 6 Bryce A. Suzuki (pro hac vice forthcoming) bsuzuki@swlaw.com 7 SNELL & WILMER L.L.P. One East Washington Street, Suite 2700 8 Phoenix, AZ 85004 Telephone: 602.382.6000 9 Facsimile: 602.382.6070 10 Attorneys for Plaintiff EAST WEST BANK 11 SNELL & WILMER COSTA MESA, CALIFORNIA 92626-7689 600 ANTON BLVD, SUITE 1400 12 SUPERIOR COURT OF THE STATE OF CALIFORNIA LAW OFFICES 13 L.L.P. 14 COUNTY OF SANTA BARBARA-SOUTH COUNTY DIVISION 15 16 EAST WEST BANK, a California state CASE NO. 23CV02629 banking corporation, 17 Assigned to: Hon. Colleen K. Stern Plaintiff, 18 STIPULATION RE: ORDER vs. 19 (1) APPOINTING RECEIVER; AND HERBL, INC., a California corporation, 20 dba HERBL, HERBL DISTRIBUTION (2) ISSUING PRELIMINARY SOLUTIONS, and HDS NATURALS, INJUCTION 21 Defendant. 22 Hearing Information: 23 Date: June 28, 2023 Time: 8:30 A.M. 24 Dept.:5 25 Complaint Filed: June 20, 2023 26 27 28 -1- STIPULATION RE: APPOINTMENT OF RECEIVER 4858-7460-5152.1 1 Plaintiff East West Bank (“Plaintiff” or “EWB”) and Defendant Herbl, Inc. (“Defendant” 2 or “Herbl”) hereby stipulate and agree to the immediate appointment of Kevin Singer as Receiver 3 (the “Receiver”) of Defendant and all assets of Defendant pursuant to that certain Order (1) 4 Approving Stipulation for Appointment of Receiver, (2) Appointing Receiver; and (3) Issuing 5 Preliminary Injunction (the “Receivership Order”) attached hereto as Exhibit A. 6 RECITALS 7 1. On or around March 21, 2022, EWB and Defendant executed and entered into that certain 8 Business Loan Agreement (the “Loan Agreement”), pursuant to which, among other things, EWB 9 agreed to provide a revolving line of credit to Defendant in the original principal amount of up to 10 $15 million. 11 2. As part of the same transaction, Defendant executed and delivered: (1) that certain SNELL & WILMER COSTA MESA, CALIFORNIA 92626-7689 600 ANTON BLVD, SUITE 1400 12 Promissory Note (the “Note”), wherein Defendant agreed to pay EWB the principal sum of $15 LAW OFFICES 13 million, or so much as may be outstanding, together with interest on the unpaid outstanding L.L.P. 14 principal balance of each advance; and (2) that certain Commercial Security Agreement (the 15 “Security Agreement”) wherein Defendant granted to EWB a security interest in all, or 16 substantially all, of Defendant’s personal property, whether then owned or thereafter acquired, 17 whether then existing or thereafter arising, and wherever located, to secure Defendant’s 18 obligations under the Loan Agreement and Note (“Collateral”). The Loan Agreement, Note, 19 Security Agreement, all as may be amended from time to time, and all related documents and 20 filings are referred to herein collectively as the “Loan Documents.” 21 3. On or around March 29, 2022, EWB filed UCC-1 financing statement with the California 22 Office of the Secretary of State, File No. U220179442334, which financing statement included a 23 collateral description matching that of the Security Agreement. EWB’s security interest in the 24 Collateral is perfected, valid, and enforceable. 25 4. On or around November 14, 2022, EWB sent to Defendant notice of several defaults 26 under the Loan Agreement. 27 5. EWB and Defendant entered into that certain Forbearance and Repayment Agreement 28 dated as of November 11, 2022 (the “Forbearance Agreement”), whereby EWB agreed to forbear -2- STIPULATION RE: APPOINTMENT OF RECEIVER 4858-7460-5152.1 1 temporarily from exercising its legal remedies provided, among other things, that Defendant by 2 no later than December 31, 2022, either (i) raise additional equity with an amount of no less than 3 $10 million, or (ii) refinance with another lender and pay off the Loan in full. 4 6. On or around December 21, 2022, EWB sent to Defendant notice of several additional 5 defaults under the Loan Agreement. 6 7. Defendant failed to raise the additional equity or to refinance and repay the Loan in full by 7 December 31, 2022, or at any time thereafter to date. 8 8. On or around January 6, 2023, EWB and Defendant entered into that certain Change in 9 Terms Agreement (the “First Amendment”), which provided, among other things, that (i) the 10 Principal Amount of the Note is decreased to $4,834,024.42, and (ii) the interest rate and interest 11 calculation method are amended and restated as set forth therein. SNELL & WILMER COSTA MESA, CALIFORNIA 92626-7689 600 ANTON BLVD, SUITE 1400 12 9. On or around January 9, 2023, EWB sent to Defendant another notice of certain defaults LAW OFFICES 13 under the terms of the Loan Agreement. L.L.P. 14 10. On or around March 21, 2023, EWB and Defendant entered into that certain Second 15 Amendment to Loan Agreement and Forbearance Agreement (the “Second Amendment”), 16 wherein Defendant expressly acknowledged certain defaults. 17 11. In the Second Amendment, Defendant “irrevocably consent[ed] to the appointment of a 18 receiver acceptable to [EWB], in [EWB]’s sole and absolute discretion following the expiration 19 of the Forbearance Period,” and agreed it would not contest the appointment of a receiver. It 20 agreed that EWB’s “right to obtain such an order [appointing a receiver] from such court [is] as a 21 matter of right and without regard to the then value of the Collateral or the interest of [Defendant] 22 therein.” 23 12. Despite EWB’s efforts, at the time of the execution of this Stipulation, Defendant has 24 failed to remedy its numerous defaults under the Loan Documents, including by failing to 25 maintain the minimum required Debt Coverage Ratio (as defined in the Loan Documents), 26 Effective Tangible Net Worth (as defined in the Loan Documents), and Eligible Accounts Ratio 27 (as defined in the Loan Documents). In addition, Defendant has experienced a material adverse 28 change in its financial position, has become insolvent, and is generally not, or is unable to, pay its -3- STIPULATION RE: APPOINTMENT OF RECEIVER 4858-7460-5152.1 1 debts as they become due. 2 13. EWB and Defendant enter into this Stipulation in connection with a Third Amendment to 3 Loan Agreement and Forbearance Agreement (the “Third Amendment”) and agree that upon the 4 occurrence of an Event of Default under the Third Amendment, EWB shall have the right to file 5 this Stipulation for the immediate appointment of a receiver pursuant to the terms of this 6 Stipulation and the Order (s defined below). 7 14. Unless a receiver is promptly appointed, EWB believes its Collateral will be irreparably 8 harmed, which will result in significant damages to EWB and other parties in interest. 9 STIPULATION 10 A. The above-stated recitals are true and accurate and are fully incorporated into this 11 Stipulation. SNELL & WILMER COSTA MESA, CALIFORNIA 92626-7689 600 ANTON BLVD, SUITE 1400 12 B. EWB and Defendant agree to entry of the Order (1) Approving Stipulation for Entry of LAW OFFICES 13 Order Appointing Receiver; (2) Appointing Receiver; and (3) Issuing Preliminary Injunction L.L.P. 14 (“Order”), substantially in the same form as that attached as Exhibit A to this Stipulation. 15 Without limiting the foregoing, Defendant consents and agree to the appointment of Kevin Singer 16 of Receivership Specialists as the receiver under the terms and conditions set forth the Order, to 17 the terms and conditions of the injunction set forth in the Order, and to perform any and all acts 18 required by the Order. 19 C. The Parties have had an opportunity to consult with legal counsel of their own choosing 20 concerning their rights and obligations with respect this Stipulation and the Order, including 21 without limitation the advisability of entering into this Stipulation. To the extent any party has not 22 consulted its own legal counsel concerning its rights and obligations relating to this Stipulation 23 and the Order, the party willingly did not do so and voluntarily, knowingly, and freely, without 24 coercion, duress, or undue influence, executed this Stipulation by the party’s own choice and 25 decision. 26 D. This Stipulation may be signed in one or more counterparts, which shall together 27 constitute one agreement. A faxed, scanned or electronically generated signature on this 28 Stipulation will be deemed effective and binding as if it were an original signature. -4- STIPULATION RE: APPOINTMENT OF RECEIVER 4858-7460-5152.1 I E. This Stipulation is dated May 1 _,2023. 2 3 1 2023 Dated: May _, 4 SNELL & WILMER r.r-.p 5 6 By: Marshall J. Hogan 7 Attomeys for Plaintiff 8 East West Bank 9 l0 HIlRBL. INC ll >l Jl E4 *i t2 By: *t-=Vi 13 diAFi il z!, '{i t4 2t a: l5 l6 17 l8 l9 20 2l 22 z) 24 25 26 27 28 STIPULATION RE: APPOTNTMENT OF R-ECEIVER 4li5lr-?.t6r)-5t52 I Exhibit A -6- 1 Marshall J. Hogan (#286147) mhogan@swlaw.com 2 Andrew B Still (#312444) astill@swlaw.com 3 SNELL & WILMER L.L.P. 600 Anton Boulevard, Suite 1400 4 Costa Mesa, CA 92626-7689 Telephone: 714.427.7000 5 Facsimile: 714.427.7799 6 Bryce A. Suzuki (pro hac vice forthcoming) bsuzuki@swlaw.com 7 SNELL & WILMER L.L.P. One East Washington Street, Suite 2700 8 Phoenix, AZ 85004 Telephone: 602.382.6000 9 Facsimile: 602.382.6070 10 Attorneys for Plaintiff EAST WEST BANK 11 12 Costa Mesa, California 92626-7689 SUPERIOR COURT OF THE STATE OF CALIFORNIA 600 Anton Boulevard, Suite 1400 Wilmer 13 LAW OFFICES (714) 427-7000 14 COUNTY OF SANTA BARBARA– SOUTH COUNTY DIVISION Snell &L.L.P. 15 16 EAST WEST BANK, a California state CASE NO. 23CV02629 banking corporation, 17 Assigned to: Hon. Colleen K. Stern Plaintiff, 18 [PROPOSED] ORDER vs. 19 (1) APPROVING STIPULATION FOR HERBL, INC., a California corporation, APPOPINTMENT OF RECEIVER; 20 dba HERBL, HERBL DISTRIBUTION SOLUTIONS, and HDS NATURALS, (2) APPOINTING RECEIVER; AND 21 Defendant. (3) ISSUING PRELIMINARY 22 INJUNCTION 23 Hearing Information: Date: June 27, 2023 24 Time: 8:30 A.M. Dept.:5 25 Complaint Filed: June 20, 2023 26 27 28 [PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION 4871-1287-1263.6 -7- 1 The Court, having considered (i) the Complaint filed by Plaintiff East West Bank 2 (“Plaintiff”), (ii) the Stipulation for Appointment of Receiver and Issuance of Preliminary 3 Injunction (“Stipulation”); (iii) the Nomination of Kevin Singer as Receiver; and (iv) the Oath of 4 Receiver; and good cause appearing, makes and enters the following Order: 5 IT IS ORDERED that the Stipulation is granted. 6 RECEIVER’S APPOINTMENT AND DUTIES 7 IT IS FURTHER ORDERED that: 8 1. Kevin Singer shall be and is appointed as Receiver (“Receiver”) of defendant 9 HERBL, Inc. (“Defendant”) and all the assets of Defendant (collectively, the “Receivership 10 Estate”), with the full power of a general equity receiver. 11 2. Upon the entry of this Order, and because the Receiver has already filed his Oath 12 of Receiver, the Receiver shall be vested with all the powers and responsibilities of a general Costa Mesa, California 92626-7689 600 Anton Boulevard, Suite 1400 Wilmer 13 equity receiver as provided by law to receivers and as specifically set forth herein. LAW OFFICES (714) 427-7000 14 3. The Receiver is authorized and directed to perform the following duties: Snell &L.L.P. 15 a. Take possession, custody and control of the Receivership Estate. 16 b. Assume full control of Defendant, including by removing, as the Receiver 17 deems necessary or advisable, any director, officer, manager, independent contractor, employee, 18 or agent of any Defendant, from control of, management of, or participation in, the affairs of 19 Defendant. 20 c. Acquire from Defendant, its members, officers, managers, accountants, 21 managing members, and agents, all keys, contracts, agreements, all books and records, books of 22 account, ledgers, operating statement, budgets, all banking records, tax bills wherever located, 23 applicable to the Receivership Estate, documentation pertaining to all contracts, completed or in 24 progress, all lease and/or rental agreements, leasehold interests, and all documents, records and 25 accounts pertaining to the operation, development, and operation of Defendant and the 26 Receivership Estate, expressly including, but not be limited to, all information contained on 27 computers and any and all software relating thereto, including any and all passwords, usernames, 28 security questions to access any systems or online portals or accounts necessary to operate or -2- [PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION 4871-1287-1263.6 -8- 1 administer the business and/or any of the Receivership Estate. 2 d. Notify the United States Post Office or other mail depository of this Order 3 and instruct it to divert mail to the Receiver; 4 e. Notify applicable local, state and federal taxing authorities of the 5 commencement of the receivership and communicate with said authorities on behalf of the 6 Receivership Estate. 7 f. Open one or more bank accounts for the deposit of assets subject to the 8 receivership, deposit all assets collected in such designated account(s) and, make all payments 9 and disbursements from the Receivership Estate from such account(s). 10 g. Subject to an operating budget reasonably acceptable to Plaintiff, continue 11 to conduct the business, or cease operation of the business, of Defendants in such manner, and to 12 such extent, and for such duration as Receiver may in good faith deem to be necessary or Costa Mesa, California 92626-7689 600 Anton Boulevard, Suite 1400 Wilmer 13 appropriate to operate the businesses profitably and lawfully, if at all. LAW OFFICES (714) 427-7000 14 h. Terminate or, subject to an operating budget reasonably acceptable to Snell &L.L.P. 15 Plaintiff, retain existing employees or related parties in order to continue any business operations, 16 and in case of such retention, all payroll taxes, workers’ compensation insurance, and related 17 costs will be carried and reported as those of Defendant or such related parties, and not of the 18 Receivership Estate. 19 i. Demand, receive, take control of, and collect all income, rents, issues, 20 profits, proceeds, sales, and all other monies arising from assets of the Receivership Estate, 21 including but not limited to, cash, bank accounts, funds in safety deposit boxes, funds in safes, 22 accounts receivable, monies, checks, drafts, securities, letters of credit and any tangible and 23 intangible pledges as security for the letters of credit; collect debts and compromise same; and 24 take any action respecting assets of the Receivership Estate which the Court may authorize. The 25 Receiver shall have the authority to change signatures to the Receiver on signature cards for 26 existing accounts, and to transfer existing accounts, or funds in existing accounts, into account(s) 27 established by the Receiver. Receiver shall have the authority to receive and endorse checks 28 constituting income from the Receivership Estate. -3- [PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION 4871-1287-1263.6 -9- 1 j. Instruct any individuals making payments to Defendant to instead make all 2 payments to Receiver. 3 k. Subject to an operating budget reasonably acceptable to Plaintiff, enter into 4 contracts and purchase insurance as the Receiver reasonably deems necessary. If the Receivership 5 Estate has insufficient funds to purchase adequate insurance coverage for the Receivership Estate, 6 funds may be supplied by Plaintiff, or Receiver will seek instructions from the Court with respect 7 to whether insurance will be obtained and how it is to be paid for. Consistent with existing law, 8 the Receiver shall not be responsible for claims or damages arising from not procuring or inability 9 to obtain insurance. 10 l. Subject to an operating budget reasonably acceptable to Plaintiff, obtain 11 and pay for any licenses or permits that the Receiver reasonably believes to be necessary for 12 operation of the Receivership Estate. The Receiver is authorized to assume and utilize and pre- Costa Mesa, California 92626-7689 600 Anton Boulevard, Suite 1400 Wilmer 13 existing licenses or permits, including without limitation licenses governed by the California LAW OFFICES (714) 427-7000 14 Department of Cannabis Control, subject to applicable regulations and requirements. This Order Snell &L.L.P. 15 shall constitute sufficient documentation under section 15024(b)(4) of Article 3, Division 19 of 16 Title 4 of the California Code of Regulations to show that the Defendant is incapable of 17 performing the duties associated with any license issued under the Medicinal and Adult-Use 18 Cannabis Regulation and Safety Act throughout the term of the receivership. The Receiver may 19 also enter into agreements with local and state government to use or extend licenses, permits, or 20 other authorizations currently in place with respect to the Receivership Estate. 21 m. Subject to an operating budget reasonably acceptable to Plaintiff, incur 22 expenses as Receiver deems advisable or necessary for the care, preservation, and maintenance of 23 the Receivership Estate. 24 n. Maintain accurate records of all receipts and expenditures that the Receiver 25 makes. 26 o. Choose, engage, and employ agents, employees, attorneys, accountants, 27 appraisers, property managers, and other independent contractors and technical specialists as 28 Receiver deems advisable or necessary in the performance of duties and responsibilities under the -4- [PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION 4871-1287-1263.6 - 10 - 1 authority granted by this Order. Subject to an operating budget reasonably acceptable to Plaintiff, 2 Receiver shall be permitted to pay such individuals out of funds that come into his possession as 3 Receiver to administer the Receivership Estate. Any liability arising therefrom shall be the sole 4 risk and obligation of the Receivership Estate, and not the personal liability of the Receiver. 5 p. Do all things and incur the risks and obligations in managing assets of the 6 Receivership Estate as ordinarily incurred by owners, managers, and operators of similar assets; 7 provided, however, that no such risk or obligation so incurred shall be the personal risk or 8 obligation of Receiver, but shall be the risk and obligation of the Receivership Estate. 9 q. Subject to Plaintiff’s reasonable approval and paragraph 3.x., infra, sell any 10 assets of the Receivership Estate in Receiver’s possession on a commercially reasonable basis. 11 r. Use any tax identification or social security numbers previously used in 12 collection with the operation of assets or documents of the Receivership Estate. For the avoidance Costa Mesa, California 92626-7689 600 Anton Boulevard, Suite 1400 Wilmer 13 of doubt, the Receiver may use the State and Federal taxpayer identification numbers of LAW OFFICES (714) 427-7000 14 Defendant in connection with all accounts and accounting for the Receivership Estate. Snell &L.L.P. 15 s. Issue subpoenas and conduct and participate in discovery, take depositions, 16 pursue contempt actions, and otherwise pursue all remedies available on behalf of the 17 Receivership Estate and/or to ensure compliance with Receiver’s authority granted herein. 18 t. Cooperate with reasonable requests for information or assistance from 19 applicable law enforcement agencies. 20 u. Institute, adjust, appear in, intervene in, defend, or compromise or 21 otherwise dispose of legal actions in state, federal, or foreign courts or arbitration proceedings as 22 the Receiver deems necessary or advisable to recover, protect, maintain, or sell assets of the 23 Receivership Estate, or that the Receiver deems necessary or advisable to carry out the Receiver’s 24 mandate under this Order, including, but not limited to, actions challenging fraudulent or voidable 25 transfers. 26 v. Exercise any power authorized by statute or ordered by the Court. 27 w. Apply to this Court, at any time, for further or other instructions or orders 28 or for additional or other powers necessary to enable Receiver to properly perform his duties. -5- [PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION 4871-1287-1263.6 - 11 - 1 x. Market for sale, and subject to notice to all parties and with the consent of 2 the Court, sell all, or substantially all, of the receivership assets, including the Defendant’s 3 business as a going concern, execute all documents required for such sale, and undertake any and 4 all duties required to effectuate such sale. All applications for approval of such sale, or any other 5 sale of assets with a proposed purchase price of more than $250,000, shall be brought before this 6 Court by the Receiver on noticed motion or if time does not allow, by ex parte notice to all 7 parties. Where such application is brought on ex parte notice, all parties shall, unless the Court 8 indicates otherwise, have seven (7) calendar days within which they may file objections together 9 with supporting evidence as to the price or terms of such sale, in which case the Court may either 10 order further briefing, and/or set a hearing for further argument or rule on the pleadings then on 11 file. If no objection is filed within said seven (7) day time period to any ex parte application, the 12 Court will conclude that there is no opposition to the Receiver’s application. Costa Mesa, California 92626-7689 600 Anton Boulevard, Suite 1400 Wilmer 13 y. Upon a sale of assets pursuant to the immediately preceding paragraph, the LAW OFFICES (714) 427-7000 14 Receiver shall disburse, or if appropriate, instruct escrow to distribute all net funds resulting from Snell &L.L.P. 15 said sale(s) as follows: 16 (i) First to the payment of all fees and expenses incurred by the 17 Receiver and its professionals in managing the Receivership Estate; 18 (ii) Second to the expenses of administering the receivership; 19 (iii) Third to the payment of Plaintiff’s claim; 20 (iv) Fourth to the payment of any taxes which, if not paid, would form 21 the basis for a lien on the Receivership Estate; and 22 (v) The remainder to be held by the Receiver until further order of this 23 Court in an interest-bearing segregated account with all liens attaching to those 24 funds in the priority in which they are entitled to be paid. However, the Receiver, 25 at any time, may use these segregated funds to pay any taxes, fines, fees or other 26 governmental agency costs or assessments attributable to the Property as they 27 become due. 28 4. All expenses of the operation of Defendant’s business are the risk of the -6- [PROPOSED] ORDER APPOINTING RECEIVER AND ISSUING PRELIMINARY INJUNCTION 4871-1287-1263.6 - 12 - 1 Receivership Estate and not the personal obligation of the Receiver. 2 5. A conformed copy of this Order shall be as good as a certified copy for the 3 Receiver’s purposes of taking possession and control of Defendant’s business and the assets and 4 documents subject to this