UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 1.01. | Entry into a Material Definitive Agreement. |
On July 29, 2024, The Cannabist Company Holdings Inc. (the “Company”) entered into agreements to sell all of the ownership interests of three of the Company’s subsidiaries to subsidiaries of Verano Holdings Corp. (“Verano”). Upon closing of the transactions contemplated by these agreements, the Company will exit the Eastern Virginia and Arizona markets.
For divestiture of its Eastern Virginia operations, the Company entered into an equity purchase agreement (the “Virginia EPA”) with Verano Holdings, LLC (“Virginia Buyer”), Verano, Columbia Care Eastern Virginia LLC, a subsidiary of the Company (“CC East Virginia”), and the members of Columbia Care Eastern Virginia LLC (the “Virginia Members”). Pursuant to the Virginia EPA, the Virginia Buyer will purchase all of the issued and outstanding equity interests of CC East Virginia from the Virginia Members for total consideration of $90 million (the “Virginia Closing Consideration”), subject to adjustment as described in the Virginia EPA. Upon the closing of the transaction under the Virginia EPA, the Virginia Members will receive their pro rata portion of the Virginia Closing Consideration, consisting of: $20 million in cash and $40 million of Class A subordinate voting shares of Verano. In addition, the Virgina Closing Consideration consists of a $30 million promissory note issued by the Buyer to the Virginia Members (the “Promissory Note”). The Promissory Note will bear interest at a rate of 7% per annum, beginning on the closing date of the Virginia EPA (the “Virginia Closing Date”), through maturity on the two-year anniversary of the Virginia Closing Date. The Promissory Note will be payable in monthly payments of $1.75 million for the first 12 months, and $750,000 for the remaining 12 months.
The principal amount of the Promissory Note is subject to adjustment for cash, working capital (as compared to a target), indebtedness, and transaction expenses and payments of CC East Virginia. The Promissory Note may be prepaid by the Virginia Buyer at any time, without premium or penalty. The Promissory Note contains customary events of default, upon which the Company, on behalf of the Virginia Members, may declare all amounts outstanding under the Promissory Note due.
For divestiture of the Arizona operations, the Company entered into (1) an equity purchase agreement (the “Organix EPA”) with Verano Arizona, LLC (“Arizona Buyer”), 203 Organix L.L.C. (“Organix”), CC VA HoldCo LLC and Columbia Care-Arizona, Prescott, L.L.C. (the “Arizona Member”) and (2) an equity purchase agreement (the “SWC EPA”) with the Arizona Buyer, Salubrious Wellness Clinic, Inc. (“SWC”), the members of SWC (the “SWC Members”) and CC VA HoldCo LLC. Pursuant to the Organix EPA, the Arizona Buyer will purchase all of the issued and outstanding equity interests of Organix from the Arizona Member for total consideration of $9.9 million, payable in cash, subject to adjustment as described in the Organix EPA. Pursuant to the SWC EPA, the Arizona Buyer will purchase all of the issued and outstanding equity interests of SWC from the members of SWC for total consideration of $5.1 million, payable in cash, subject to adjustment as described in the SWC EPA.
The transactions contemplated by each of the Virginia EPA, Organix EPA and the SWC EPA (together, the “Agreements,” and each an “Agreement”) are subject to certain closing conditions, including approval of applicable regulatory bodies.
Item 1.01 of this Current Report on Form 8-K contains only brief descriptions of the material terms of and does not purport to be a complete description of the rights and obligations of the parties to each of the Virginia EPA, the Promissory Note, the Organix EPA and the SWC EPA. Such descriptions are qualified in their entirety by reference to the full text of the Virginia EPA, the form of the Promissory Note, the Organix EPA and the SWC EPA, which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| # | Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon its request. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE CANNABIST COMPANY HOLDINGS INC. | ||
| By: | /s/ David Sirolly | |
| Name: | David Sirolly | |
| Title: | Chief Legal Officer & General Counsel | |
Date: July 31, 2024