Item 1.01 Entry into a Material Definitive
Agreement.
Strict Foreclosure Agreement
As previously disclosed, The Greenrose Holding
Company Inc. (“Holdings”) and its subsidiaries Theraplant, LLC (“Theraplant”) and True Harvest
Holdings, Inc. (“TH”, together with Holdings and Theraplant, the “Greenrose Entities”) received
notices of default under the Credit Agreement, by and among, inter alios, Holdings, TH, Theraplant, the lenders identified therein
(the “Lenders”) and DXR Finance, LLC (the “Agent”), dated November 26, 2021 (as amended, restated,
amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). As previously
disclosed, the Greenrose Entities also entered into a Forbearance Agreement on October 12, 2022, as amended and reinstated on February
6, 2023, and a Transaction Support Agreement on November 10, 2022, as amended on February 6, 2023 (the “TSA”), each
with the Lenders and Agent. Pursuant to the TSA, the Greenrose Entities were to seek and pursue a qualifying alternative transaction,
which if unsuccessful after a 50 day period (which was subsequently extended through January 30, 2023), then required the Greenrose Entities
to enter into a consensual foreclosure with DXR-GL Holdings I, LLC (“DXR-I”), DXR-GL Holdings II, LLC (“DXR-II”),
and DXR-GL Holdings III, LLC (“DXR-III”) (DXR-III, together with DXR-I and DXR-II, the “Consenting Lenders”),
Agent and a newly formed company, subject to finalizing definitive documents. The TSA sets forth the key terms and structure for the
foreclosure, as previously disclosed in Holdings’ Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
on November 13, 2022. Consistent with the terms of the TSA, the Greenrose Entities marketed themselves and their assets with the goal
of receiving binding transaction proposals for a qualifying alternative transaction to the foreclosure. No proposals were received that
satisfied the required hurdle amount or were otherwise reasonably acceptable to the Lenders.
As previously disclosed, on February 9, 2023,
the Delaware Court of Chancery issued an order to preserve the status quo at Holdings in response to a lawsuit filed by William Harley
III and Greenrose Associates, LLC seeking a determination by the court concerning, among other things, the proper officeholders of the
board of directors of Holdings (the “Status Quo Order”). The Status Quo Order limits Holdings from engaging in certain
actions (or imposes preconditions to certain actions by Holdings), including actions under the TSA. Nothing in the Status Quo Order, however,
governs or otherwise impedes the governance or management of True Harvest or any other subsidiary of the Company, including Theraplant.
On March 27, 2023, Theraplant, TH, the Agent,
the Consenting Lenders, DXR Finance Parent, LLC, a Delaware limited liability company (“DXR Parent”) and DXR Finance
HoldCo, LLC, a Delaware limited liability company (“DXR Holdco”), entered into that certain Strict Foreclosure Agreement
(the “Foreclosure Agreement”). Capitalized terms used in this report but not otherwise defined have the meaning set
forth in the Foreclosure Agreement. “NewCo” for purposes of the Foreclosure Agreement, and as used in this report,
means DXR Parent; provided that from and after the time that the Transferred Collateral is transferred to DXR Holdco or a subsidiary of
DXR Holdco, “NewCo” will mean DXR Holdco and will no longer mean DXR Parent.
Holdings is not a party to the Foreclosure Agreement,
however the Foreclosure Agreement provides that Holdings may become a party to the Foreclosure Agreement by executing a joinder at any
time prior to the earlier of: (i) 60 days after a court of competent jurisdiction has determined no Holdings Board Change (as defined
in the TSA) has occurred (the “Holdings Outside Date”) or (ii) the occurrence of a Holdings Board Change (as defined
in the TSA). If Holdings joins the Foreclosure Agreement, the remaining assets of Holdings would be foreclosed upon, and Holdings would
obtain the benefits of the Foreclosure Agreement (including the assumption of certain of its liabilities) on substantially the same terms
as Theraplant and TH.
The Foreclosure Agreement provides, among other
things, that:
| ● | At
the applicable closing, Theraplant, True Harvest and Holdings (in the event it signs a joinder
to the Foreclosure Agreement (the “Joinder”)) will assign, transfer and convey its
Transferred Collateral to NewCo in exchange for satisfaction in full and discharge of the
applicable obligations and assumption by NewCo of certain liabilities as further described
below. |
| o | If the foreclosure with respect to each of TH, Theraplant
and Holdings (in the event it signs the Joinder) occur under the Foreclosure Agreement on the same date, all outstanding
debt and obligations under the Credit Agreement (the “Obligations”), will be satisfied in full, and the liens securing
such Obligations will be fully released and extinguished at the closing other than $4,107,400 of the Obligations which will be satisfied
upon the consummation of a judicial foreclosure of certain real property. |
| o | If the closings of the foreclosures with respect
to TH, Theraplant, and Holdings (in the event it signs the Joinder), are required to occur at separate times, the Obligations will be allocated as
follows: (i) $20,000,000 of the Obligations will be satisfied in full, and the liens securing such Obligations will be fully released
and extinguished at the closing of the foreclosure of TH, (ii) $4,107,400 of the Obligations will be satisfied in full upon consummation
of a judicial foreclosure of certain real property, (iii) if Holdings becomes a party to the Foreclosure Agreement, $5,000,000 of the
Obligations will be satisfied in full, and the liens securing such Obligations will be fully released and extinguished at the closing
of the Holdings foreclosure and (iv) all of the remaining Obligations will be satisfied in full at the closing of the Theraplant foreclosure,
excluding certain Obligations under the Credit Agreement or other Loan Documents that are expressly contemplated to survive after giving
effect to the mutual release agreement. |
| ● | At
the applicable closing, NewCo will (i) assume certain liabilities of Theraplant, TH and Holdings (in the event it signs the Joinder), including accounts
payable, liabilities under assumed contracts, and liabilities arising under certain guarantees, (ii) assume certain employee liabilities
of employees and independent contractors of Holdings and all employee liabilities of Theraplant and TH, except for certain specified
severance obligations, (iii) in addition to its obligation to offer employment to all employees of TH and Theraplant on terms substantially
similar, and substantially comparable benefits, as such employees’ existing employment agreements, NewCo will maintain such terms
and benefits for a period of six months following the consummation of the Foreclosure Transaction (to the extent such employee remains
an employee of NewCo), and (iv) agree to fund certain anticipated tax liabilities. |
Conditions to Closing
The closing(s) are generally subject to certain
closing conditions as set forth in the Foreclosure Agreement. The conditions to each closing include, among others, receipt of required
regulatory approvals, the execution of a mutual release agreement and indemnification agreements in favor of certain officers, directors,
and consultants of TH, Theraplant and Holdings remaining in effect. Additionally, if the closings of Theraplant and TH do not occur on
the same day, then, as condition to the first closing to occur under the Foreclosure Agreement, Theraplant, TH, the Consenting Lenders
and Agent must agree on a 13-week cash-flow forecast for expenses of the entity not consummating such foreclosure, for the 13-week
period following the applicable closing and NewCo will fund any shortfalls in cash identified in such 13-week cash flow forecast at closing
or thereafter in accordance with the Foreclosure Agreement.
Termination
The Foreclosure Agreement may be terminated prior
to the closings: (1) by the mutual written consent of the parties; (2) by Theraplant, TH and Holdings (in the event it signs the Joinder), if the
Agent or NewCo have breached any representation or warranty or failed to comply with any covenant or agreement applicable to the Agent,
NewCo or any Consenting Lenders that would cause certain condition precedent not to be satisfied, and (i) such breach is not waived in
writing by Theraplant, TH and Holdings (in the event it signs the Joinder) or (ii) if such breach has not been waived in writing by Theraplant, TH
and Holdings (in the event it signs the Joinder) but is curable and is not cured by the Agent and NewCo prior to the earlier to occur of (A) ten days
after receipt by the Agent or NewCo of Theraplant’s, TH’s and Holdings’s (in the event it signs the Joinder) notice of their intent
to terminate the Foreclosure Agreement and (B) the date that is 90 days from the date on which the Foreclosure Agreement is first presented
by Theraplant, TH and Holdings (in the event it signs the Joinder) to the Connecticut Department of Consumer Protection in connection with the Connecticut
regulatory approval and cannabis licensing process or such other date as mutually agreed in writing by the parties if consummation of
the foreclosures has not yet occurred (such date, the “Foreclosure Outside Date”); (3) by the Agent and NewCo, if any
of Theraplant, TH and Holdings (in the event it signs the Joinder) have breached any representation or warranty or failed to comply with any covenant
applicable to Theraplant, TH and Holdings (in the event it signs the Joinder) that would cause certain condition precedent to the applicable closing
not to be satisfied, and (i) such breach is not waived by the Agent or NewCo or (ii) if such breach has not been waived by the Agent or
NewCo but is curable and is not cured by Theraplant, TH and Holdings (in the event it signs the Joinder) prior to the earlier to occur of (A) ten
days after receipt by Theraplant, TH and Holdings (in the event it signs the Joinder) of the Agent’s and NewCo’s notice of its intent
to terminate the Foreclosure Agreement and (B) the Foreclosure Outside Date; (4) by either (i) Theraplant, TH and Holdings (in the event it signs the Joinder), on the one hand, or (ii) the Agent and NewCo, on the other hand, if the applicable closing has not occurred by the Foreclosure
Outside Date provided that if (x) Holdings has not executed the Joinder or (y) only the Holdings Closing has
not yet occurred, in each case, by the Foreclosure Outside Date (and no Holdings Board Change has occurred), each of Agent, NewCo and
Theraplant and TH’s right to terminate the Foreclosure Agreement shall be suspended until the Holdings Outside Date; and (5) upon
the termination of the Transaction Support Agreement (except for the certain circumstances to permit Holdings more time to consummate
a Holdings Closing following the results of the Status Quo Order proceedings). If Holdings does not execute the Joinder, the termination rights above may be exercised by TH and Theraplant exclusively.
The foregoing description of the Foreclosure Agreement
does not purport to be complete and is subject to and qualified in its entirety by reference to the complete text of such agreement, a
copy of which is filed as Exhibit 10.1 and is incorporated herein by reference.
Forward-Looking Statements.
Statements made in this Current Report on Form
8-K (including the Exhibits hereto) that are not historical facts are “forward-looking statements” within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may relate to the Foreclosure Agreement and any other statements relating to future results, strategy and plans of Holdings (including
certain projections and business trends, and statements which may be identified by the use of the words “plans”, “expects”
or “does not expect”, “estimated”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”,
or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”,
“might”, “projects”, “will” or “will be taken”, “occur” or “be achieved”).
Such statements are provided for illustrative purposes only and are not to be relied upon as predictions or any assurance or guarantee
by any party of actual performance of Holdings. Forward-looking statements are based on the opinions and estimates of management of Holdings
and/or the estimates of management of the companies Holdings recently acquired, as the case may be, as of the date such statements are
made, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results,
level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to the Holdings’ ability to complete the transactions contemplated by
the Foreclosure Agreement, including the receipt of requisite regulatory approval and the satisfaction of the conditions to closing.