Item 1.01 Entry Into A Material Definitive Agreement.
Execution of Transaction Support Agreement, Amendment No. 2 to Credit Agreement
and Forbearance Agreement
On November 10, 2022, The Greenrose Holding Company Inc. (the "Company"),
together with its wholly-owned subsidiaries Theraplant, LLC ("Theraplant") and
True Harvest Holdings, Inc. ("TH", and together with Theraplant and the Company,
the "Greenrose Entities"), entered into that certain Transaction Support
Agreement with the Note Holders (as defined below) and the Lenders (the "Credit
Agreement Consenting Lenders", and collectively with the Note Holders, the
"Consenting Lenders") party to that certain Credit Agreement dated November 26,
2021 (as amended by that certain Amendment No. 1 to Credit Agreement, dated as
of December 31, 2021, and as further amended by Amendment No. 2 to Credit
Agreement (as defined below), the "Credit Agreement") and DXR Finance, LLC (the
"Agent"), in its capacity as Agent under the Credit Agreement (the "Transaction
Support Agreement").
The Transaction Support Agreement contemplates that the Greenrose Entities will
pursue either a Qualified Alternative Transaction Proposal (as defined below) or
a consensual Foreclosure (as defined below), in each case as described in more
detail below. To the extent the Greenrose Entities pursue the Foreclosure, the
Foreclosure will provide for, among other things: (i) the continuation of the
Theraplant and TH businesses as a going concern; (ii) the assumption of employee
liabilities, accounts payable and liabilities under assumed contracts; and (iii)
NewCo (as defined below) will be obligated to offer each employee of Theraplant
and TH employment at NewCo at (but subject to) closing of the Foreclosure on
substantially the same terms as such employees' existing employment
arrangements.
For up to 50 days following entry into the Transaction Support Agreement, the
Greenrose Entities, with the assistance of their advisors, including Ducera
Securities LLC, will use commercially reasonable efforts to market themselves
and their assets with the goal of receiving binding transaction proposals for,
including but not limited to, a sale, disposition, reorganization, merger,
financing or other type of transaction that, among other conditions, satisfies
the payment obligations owed by the Greenrose Entities under the Credit
Agreement, the DXR Secured Promissory Note (as defined below) and related loan
documents (the "Obligations"), or is on such other terms as are acceptable to
the Greenrose Entities, the Consenting Lenders and the Agent (such a proposal, a
"Qualifying Alternative Transaction Proposal"). If the Greenrose Entities have
not received an alternative transaction proposal that reasonably could become a
binding Qualifying Alternative Transaction Proposal by not later than 30 days
following the entry into the Transaction Support Agreement, then the marketing
period shall end and the Greenrose Entities' obligations under the Transaction
Support Agreement with respect to the Foreclosure shall commence from and after
the date upon which the Consenting Lenders deliver the Foreclosure Agreement. In
the event that the Greenrose Entities receive more than one Qualifying
Alternative Transaction Proposal, the Greenrose Entities shall hold an auction
to determine the winning proposal.
On November 10, 2022, concurrently with the execution of the Transaction Support
Agreement, the Greenrose Entities, as Guarantors, entered into an Amendment No.
2 to the Credit Agreement with the Credit Agreement Consenting Lenders and DXR
Finance, LLC, as Agent ("Amendment No. 2 to the Credit Agreement") pursuant to
which the Credit Agreement Consenting Lenders agreed to fund an additional $10
million of loans, with $5 million to be borrowed immediately on the effective
date of the Amendment No. 2 to the Credit Agreement and $5 million to be
borrowed in one or more draws thereafter on or before December 31, 2022.
Amendment No. 2 to the Credit Agreement also provided for certain amendments to
the Credit Agreement to facilitate the transactions contemplated by the
Transaction Support Agreement. In addition, as consideration for the Credit
Agreement Lenders' entry into Amendment No. 2 to Credit Agreement, the make
whole period applicable to the loans under the Credit Agreement was extended by
three (3) months to the thirty third month anniversary of the original closing
date of the Credit Agreement.
If the Greenrose Entities fail to enter into a binding, fully executed
Qualifying Alternative Transaction Proposal within the time periods specified in
the Transaction Support Agreement, the Consenting Lenders and Agent will
effectuate a foreclosure through the formation of a newly-formed company
("NewCo") that will transmit an offer, in the form of a foreclosure agreement
(the "Foreclosure Agreement"), to the Greenrose Entities to accept the Agent's
collateral (which constitutes substantially all assets of the Greenrose
Entities) (the "Foreclosure"). Upon consummation of the Foreclosure, NewCo will
also (i) assume certain liabilities of the Greenrose Entities, including
employee liabilities, accounts payable and liabilities under assumed contracts
and (ii) agree to fund the Greenrose Entities' anticipated tax liabilities
(collectively, the "NewCo Liabilities"). The consummation of the Foreclosure is
subject to conditions set forth in the Transaction Support Agreement, including
the provision by the Consenting Lenders of sufficient wind-down funding, receipt
of required regulatory approvals and the execution of a mutual release agreement
between the Greenrose Entities, on the one hand, and NewCo, the Agent and
Consenting Lenders, on the other hand, and new indemnification agreements
between NewCo and current officers and directors of the Greenrose Entities.
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The Transaction Support Agreement may be automatically terminated upon the
occurrence of specified events, including, without limitation, the consummation
of the Foreclosure, any material breach of the Transaction Support Agreement
that is not cured within ten days of receipt of written notice, or the date that
is 90 days from the date on which the Greenrose Entities present the Transaction
Support Agreement to the Connecticut Department of Consumer Protection. For a
period of 25 days after the entry into the Transaction Support Agreement (the
"Limited Diligence Out Period"), the Agent and Consenting Lenders may also
terminate the Transaction Support Agreement to the extent that the Greenrose
Entities (i) breach their obligation to make certain information available to
the Agent and Consenting Lenders in connection with their diligence review of
the NewCo Liabilities and fail to cure such breach within either five days'
notice of such breach or by the expiration of the Limited Diligence Out Period
or (ii) the Agent or Consenting Lenders discover material NewCo Liabilities
which were not previously disclosed by the Greenrose Entities.
On November 10, 2022, concurrently with the execution of the Transaction Support
Agreement, the Greenrose Entities, as Guarantors, entered into a forbearance
agreement with the Lenders party to the Credit Agreement, the holders (the "Note
Holders") of that certain Secured Promissory Note in an original principal
amount of $15,300,000 dated as of October 12, 2022 (the "DXR Secured Promissory
Note") and DXR Finance, LLC, as Agent (the "Forbearance Agreement"). Pursuant to
the Forbearance Agreement the parties thereto agreed that that the Lenders, the
Note Holders and the Agent will provide a limited forbearance (as set forth in
Section 2.02 of the Forbearance Agreement) by terms of which the Lenders and the
Agent will forbear from accelerating the Obligations and otherwise exercising
any rights, remedies, powers, privileges and defenses under the Credit
Agreement, the DXR Secured Promissory Note and related loan documents as a
result of the existence of certain types of Events of Default, for the
Forbearance Period (as defined in the Forbearance Agreement) that will expire on
the Forbearance Termination Date (as defined in the Forbearance Agreement).
In connection with the Transaction Support Agreement, the Company paid to the
Agent for the benefit of the Credit Agreement Lenders party to the Forbearance
Agreement a forbearance payment equal to 1.00% of the principal amount of loans
outstanding under the Credit Agreement immediately prior to the effectiveness of
the Forbearance Agreement, and will pay (subject to the occurrence of certain
events as more fully described in the Forbearance Agreement) such additional
forbearance payments as provided in the Forbearance Agreement.
The foregoing descriptions of the Transaction Support Agreement, Amendment No. 2
to the Credit Agreement and the Forbearance Agreement do not purport to be
complete and are subject to and qualified in its entirety by reference to the
complete text of such agreement, copies of which are filed as Exhibits 10.1,
10.2 and 10.3, respectively and are incorporated herein by reference.
Although the Greenrose Entities intend to pursue the transactions described
herein in accordance with the terms and conditions set forth in the Transaction
Support Agreement, there can be no assurance that the Greenrose Entities will be
successful in consummating transactions on the terms and conditions set forth in
the Transaction Support Agreement.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is incorporated by reference
into this Item 2.03.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Exhibit Description
10.1 Transaction Support Agreement
10.2* Amendment No. 2 to Credit Agreement
10.3 Forbearance Agreement
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained
in Exhibit 10.1)
* Certain schedules and exhibits to this agreement have been omitted in
accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted
schedule and/or exhibit will be furnished as a supplement to the SEC upon
request.
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