Item 1.01. Entry into a Material Definitive Agreement.
On March 31, 2021, KushCo Holdings, Inc. (the "Company" or "KushCo"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Greenlane
Holdings, Inc. ("Greenlane"), Merger Sub Gotham 1, LLC, a wholly-owned
subsidiary of Greenlane ("Merger Sub 1"), and Merger Sub Gotham 2, LLC, a
wholly-owned subsidiary of Greenlane ("Merger Sub 2" and, together with
Greenlane and Merger Sub I, the "Greenlane Parties"). The Merger Agreement, the
Mergers (as defined below) and the other transactions contemplated by the Merger
Agreement were unanimously approved by the Company's Board of Directors.
Merger Agreement
Pursuant to the terms of the Merger Agreement, subject to the satisfaction or
waiver of certain conditions set forth in the Merger Agreement:
•Merger Sub 1 will be merged with and into the Company, with the Company as the
surviving corporation and a wholly-owned subsidiary of Greenlane ("Initial
Surviving Corporation") ("Merger 1"); and
•the Initial Surviving Corporation will then be merged with and into Merger Sub
2 with Merger Sub 2 as the surviving limited liability company and a
wholly-owned subsidiary of Greenlane ("Merger 2," and together with Merger 1,
the "Mergers").
Under the terms of the Merger Agreement, the Company's stockholders will receive
approximately 0.2546 shares of Greenlane's Class A common stock, par value $0.01
per share (the "Class A common stock") for each share of the Company's common
stock (the "Base Exchange Ratio"), subject to adjustment as described in the
Merger Agreement (the Base Exchange Ratio, as adjusted, the "Exchange Ratio").
The Base Exchange Ratio is expected to result in the Company's stockholders
owning approximately 49.9% of the Class A common stock and existing stockholders
of Greenlane owning approximately 50.1% of the Class A common stock.
The Merger Agreement permits Greenlane to continue to pursue opportunistic and
strategic priorities prior to the closing of the Mergers, including engaging in
certain contemplated acquisitions and capital raising transactions. If Greenlane
issues additional securities prior to the closing of the Mergers in connection
with any acquisitions or capital raising transactions, then the Base Exchange
Ratio will be adjusted such that Greenlane's existing stockholders maintain an
aggregate interest of at least 50.1%, and not more than 51.9%, in Greenlane
following the completion of the Mergers.
At or immediately prior to the effective time of Merger 1, subject to the
approval of Greenlane's stockholders, Greenlane's Amended and Restated
Certificate of Incorporation will be amended and restated (the "Charter
Amendment") in order to (i) effect a conversion of each outstanding share of
Class C common stock for three shares of Class B common stock (the "Class C
Conversion"), an increase the number of authorized shares of Class B common
stock from 10,000,000 shares to 30,000,000 shares and (ii) increase the number
of authorized shares of Class A common stock from 125,000,000 million shares to
600,000,000 shares).
Following the completion of the Mergers, the size of Greenlane's Board of
Directors will be increased to seven members consisting of three directors from
the Company's existing Board of Directors, including Nicholas Kovacevich, the
Company's Chairman and Chief Executive Officer, and four directors from
Greenlane's existing Board of Directors, including Aaron LoCascio and Adam
Schoenfeld. Mr. Kovacevich will serve as Greenlane's Chief Executive Officer
following the completion of the Mergers, Mr. LoCascio will serve as Greenlane's
President and Mr. Schoenfeld will continue to serve as Greenlane's Chief
Strategy Officer. In addition, William Mote will continue to serve as
Greenlane's Chief Financial Officer.
The Mergers are subject to customary closing conditions including, among other
things, (1) the approval of the Merger Agreement by holders of a majority of the
outstanding shares of KushCo's common stock (the "Requisite KushCo Approval"),
(2) the repayment of certain KushCo indebtedness and release of related liens,
(3) approval of the Merger Agreement by holders of a majority of the voting
power of the outstanding shares of Greenlane's common stock held by stockholders
other than (i) Jacoby & Co. Inc. ("Jacoby"), an entity controlled by Greenlane's
co-founders, and its affiliates and (ii) the chief executive officer, chief
financial officer, chief operating officer, and general counsel of Greenlane,
(4) the approval of the Charter Amendment by holders of a majority of the voting
power of the outstanding shares of Greenlane's common stock, (5) the approval of
the issuance of shares of the Class A common stock in connection with Merger 1
by the affirmative vote of a majority of the votes cast by stockholders of
Greenlane entitled to vote on the matter (the items numbered (3) through (5) are
referred to herein as the "Requisite Greenlane Approvals"), (6) the approval for
the Nasdaq listing of the shares of the Class A common stock to be issued in
Merger 1, (7) the accuracy of the representations and warranties made by the
parties (subject to customary materiality qualifications), (8) the effectiveness
of a Registration Statement on Form S-4 registering the issuance of the shares
of Class A common stock to be issued by Greenlane in Merger 1, (9) the
performance by the parties in all material respects of their covenants,
obligations and agreements under the Merger Agreement, (10) the expiration or
termination of the required waiting period (and any extensions thereof) under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (11) the
delivery of tax opinions that the Mergers will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended and (12) no occurrence of a material adverse effect (which exclude
COVID-19 related effects) on KushCo or Greenlane.
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Treatment of Equity Awards
Immediately prior to the effective time of Merger 1, each KushCo stock option
(whether or not vested or exercisable) will be converted into an option to
purchase, on the same terms and conditions that apply to such option, that
number of shares of the Class A common stock multiplied by the Exchange Ratio at
an exercise price determined by dividing the per share exercise price covered by
Greenlane's option immediately prior to Merger 1 by the Exchange Ratio.
Immediately prior to Merger 1, each KushCo restricted stock unit will vest in
full and be settled and treated as a share of the KushCo's common stock in
Merger 1.
Immediately prior to Merger 1, all unvested Greenlane equity awards other than
those held by non-employee directors will become fully vested.
No Shop
Effective as of the signing of the Merger Agreement, KushCo and Greenlane are
prohibited from soliciting, initiating, seeking, encouraging, facilitating
(including by furnishing non-pubic information), continuing, or engaging in
discussions or negotiations regarding, a proposal or inquiry that constitutes or
could reasonably be expected to lead to a proposal to acquire 20% or more of
their respective assets or capital stock (an "Acquisition Proposal"). However,
if prior to obtaining the Requisite KushCo Approval or the Requisite Greenlane
Approvals, as applicable, KushCo or Greenlane receives a bona fide, unsolicited,
written Acquisition Proposal that KushCo's Board of Directors or Greenlane's
Board of Directors determines to be, or could reasonably be expected to lead to,
a "superior proposal," and KushCo's Board of Directors (or its special
committee) or Greenlane's Board of Directors, as applicable, reasonably
determines that failure to take the following actions would be inconsistent with
its fiduciary duties, then the party that received the Acquisition Proposal may
provide to the person who made the Acquisition Proposal non-public information
and engage in discussions and negotiations, under an acceptable confidentiality
agreement. Within 48 hours, the party that received the Acquisition Proposal is
required to notify the other party to the Merger Agreement regarding any
Acquisition Proposal and provide the identity of the party submitting the
proposal and a copy of the proposal or a summary of the material terms of the
proposal, and must keep the other party to the Merger Agreement reasonably
apprised of material developments.
If, prior to obtaining the Requisite KushCo Approval or the Requisite Greenlane
Approvals, as applicable, a superior proposal is received or an certain
intervening events occur, KushCo's Board of Directors or Greenlane's Board of
Directors (or its special committee), as applicable, may change its
recommendation with respect to the Merger Agreement if it reasonably determines
that failure to do so would be inconsistent with its fiduciary duties.
Termination
The Merger Agreement may be terminated under certain circumstances, including by
mutual consent or KushCo or Greenlane, as applicable, if (1) if the Mergers have
not been completed on or before December 31, 2021, subject to one thirty-day
(30) extension, (2) if there is in effect an order of a governmental entity
restraining or enjoining the Mergers (whether temporary, preliminary or
permanent) (3) upon failure of either party to obtain the requisite stockholder
approval, (4) upon a material breach by the other party that would result in the
failure of a closing condition to be capable of being satisfied before the
earlier of 30 days after written notice of the breach and December 31, 2020 or
(5) if a material adverse effect (which exclude COVID-19 related effects) occurs
with respect to the other party. Additionally, each of KushCo or Greenlane may
terminate the Merger Agreement in order to enter into an alternative transaction
that is considered a superior proposal, following a prescribed process described
above under "No Shop" above. In connection with the termination of the Merger
Agreement for such reason and under other specified circumstances set forth in
the Merger Agreement, the terminating party will be required to pay a
termination fee equal to four percent of its equity value as of the date of the
signing of the Merger Agreement.
The foregoing description of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the full text of the Merger
Agreement, which is filed as Exhibit 2.1 hereto and is incorporated herein by
reference.
Other Matters
The Merger Agreement has been included to provide investors and stockholders
with information regarding its terms. It is not intended to provide any other
factual information about the parties. The Merger Agreement contains
representations and warranties that the parties to the Merger Agreement made to
and solely for the benefit of each other and may apply contractual standards of
materiality that are different from materiality under applicable securities
laws. The assertions embodied in such representations and warranties are
qualified by information contained in the confidential disclosure schedules that
KushCo delivered to Greenlane and that Greenlane delivered to KushCo in
connection with signing the Merger Agreement. Accordingly, investors and
stockholders should not rely on such representations and warranties as
characterizations of the actual state of facts or circumstances, since they were
only made as of the date of the Merger Agreement, are modified in important part
by the underlying disclosure schedules, and qualified as a way of allocating the
risk to one of the parties if those statements prove to be inaccurate. Moreover,
information concerning the subject matter
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of such representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in
public disclosures made by the parties.
Voting Agreements
On March 31, 2021, in connection with the execution of the Merger Agreement,
KushCo and Greenlane entered into voting agreements (the "KushCo Voting
Agreements") with Mr. Kovacevich and Dallas Imbimbo, a member of KushCo's Board
of Directors.
Pursuant to the KushCo Voting Agreements, Messrs. Kovacevich and Imbimbo have
agreed, among other things, to vote or cause to be voted any issued and
outstanding shares of KushCo's common stock beneficially owned by them, or that
may otherwise become beneficially owned by them, during the term of the KushCo
Voting Agreements, (i) in favor of all proposals presented at the special
meeting of stockholders to be held by KushCo in connection with the Mergers and
related transactions, (ii) against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation of
KushCo contained in the Merger Agreement or of Mr. Kovacevich or Mr. Imbimbo
contained in the KushCo Voting Agreements, and (iii) against any Acquisition
Proposal or any other action, agreement or transaction that is intended, or
could reasonably be expected, to materially impede, interfere or be inconsistent
with, delay, postpone, discourage or materially and adversely affect the
consummation of the transactions contemplated by the Merger Agreement or the
KushCo Voting Agreements. As of March 31, 2021, Messrs. Kovacevich and Imbimbo
held approximately 12% of the issued and outstanding shares of KushCo.
The KushCo Voting Agreements will automatically terminate upon the earliest of
(i) mutual written agreement of Mr. Kovacevich or Mr. Imbimbo, as applicable and
Greenlane, (ii) the consummation of the Mergers, (iii) any change in
recommendation by KushCo's Board of Directors and (iv) a termination of the
Merger Agreement in accordance with its terms.
On March 31, 2021, in connection with the execution of the Merger Agreement,
Jacoby, a stockholder of Greenlane that is controlled by Messrs. LoCascio and
Schoenfeld, entered into a voting agreement (the "Greenlane Voting Agreement"
and, together with the KushCo Voting Agreement, the "Voting Agreements") with
KushCo and Greenlane.
Pursuant to the Greenlane Voting Agreement, Jacoby has agreed, among other
things, to vote or cause to be voted any issued and outstanding shares of
Greenlane's common stock beneficially owned by Jacoby, or that may otherwise
become beneficially owned by Jacoby, during the term of the Greenlane Voting
Agreement, (i) in favor of all proposals presented at the special meeting of
. . .
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
Exhibit
Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of March 31, 2021, by and among
Greenlane Holdings, Inc., Merger Sub Gotham 1, LLC, Merger Sub Gotham
2, LLC and KushCo Holdings, Inc.*
10.1 Voting Agreement, dated as of March 31, 2021, by and among Nicholas
Kovacevich, Greenlane Holdings, Inc. and KushCo Holdings, Inc.
10.2 Voting Agreement, dated as of March 31, 2021, by and among Dallas
Imbimbo, Greenlane Holdings, Inc. and KushCo Holdings, Inc.
10.3 Voting Agreement, dated as of March 31, 2021, by and among Jacoby & Co.
Inc., Greenlane Holdings, Inc. and KushCo Holdings, Inc.
104 Cover page formatted Inline XBRL
*The Company has omitted schedules and other similar attachments to such
agreement pursuant to Item 601(b) of Regulation S-K. The Company will furnish a
copy of such omitted document to the SEC upon request.
Important Information for Investors and Stockholders
In connection with the proposed Transaction, Greenlane expects to file with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-4
that will include a joint proxy statement of Greenlane and KushCo that also
constitutes a prospectus of Greenlane, which joint proxy statement will be
mailed or otherwise disseminated to Greenlane's and KushCo's respective
stockholders when it becomes available. Greenlane and KushCo also plan to file
other relevant documents with the SEC regarding the proposed Transaction.
INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE, BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders may obtain free copies of the registration
statement and the joint proxy statement/prospectus (if and when it becomes
available) and other relevant documents filed by Greenlane and KushCo with the
SEC at the SEC's website at www.sec.gov. Copies of the documents filed by the
companies will be available free of charge on their respective websites at
www.gnln.com and www.kushco.com.
Participants in Solicitation
This Current Report on Form 8-K relates to the proposed Transaction between
Greenlane and KushCo. This Current Report on Form 8-K is not a proxy statement
or solicitation of a proxy, consent or authorization with respect to any
securities or in respect of the potential Transaction. Greenlane, KushCo and
their respective directors and executive officers may be considered participants
in the solicitation of proxies in connection with the proposed Transaction.
Information about the directors and executive officers of Greenlane is set forth
in its proxy statement for its 2020 annual meeting of stockholders , which
was filed with the SEC on April 24, 2020. Information about the directors and
executive officers of KushCo is set forth in its proxy statement for its 2021
annual meeting of stockholders , which was filed with the SEC on December 28,
2020. These documents can be obtained free of charge from the sources indicated
above. Additional information regarding the participants in the proxy
solicitations and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with the SEC when
they become available.
No Offer or Solicitation
This communication is not intended to and shall not constitute an offer to sell
or the solicitation of an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote of approval, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the Securities
Act.
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