| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
As previously disclosed in the Current Report on Form 8-K filed on July 31, 2024, 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”).
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”). For divestiture of the Arizona operations, the Company entered into (1) an equity purchase agreement (the “Organix EPA”) with Verano Arizona, LLC (“Arizona Buyer” and together with the Virginia Buyer, the “Buyers”), 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” and together with the Virginia EPA and the Organix EPA, the “Agreements”) with the Arizona Buyer, Salubrious Wellness Clinic, Inc. (“SWC”), the members of SWC (the “SWC Members”) and CC VA HoldCo LLC.
On August 16, 2024, (the “AZ Closing Date”) and August 21, 2024 (the “VA Closing Date,” and together with the AZ Closing Date, the “Closing Dates”), and pursuant to the Agreements, the Buyers acquired all issued and outstanding equity of (i) CC East Virginia from the Virginia Members, in the case of the Virginia Buyer, (ii) Organix from the Arizona Member, in the case of the Arizona Buyer, and (iii) SWC from the SWC Members, in the case of the Arizona Buyer.
Pursuant to the Virginia EPA, the Virginia Buyer purchased all of the issued and outstanding equity interests of CC East Virginia from the Virginia Members for total consideration of $90 million, subject to adjustments as set forth in the Virginia EPA (the “Virginia Closing Consideration”). On the VA Closing Date, the Virginia Members received 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 (the “Shares”). In addition, the Virginia Buyer issued a $30 million promissory note, subject to adjustment, to the Virginia Members (the “Promissory Note”). The Promissory Note bears interest at a rate of 7% per annum, beginning on the VA Closing Date, through maturity on the two-year anniversary of the VA Closing Date. The Promissory Note is payable in monthly payments of $1.75 million for the first 12 months, and $750,000 for the remaining 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.
Pursuant to the Organix EPA, the Arizona Buyer purchased 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 purchased all of the issued and outstanding equity interests of SWC from the SWC Members for total consideration of $5.1 million, payable in cash, subject to adjustment as described in the SWC EPA.
Item 2.01 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 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.
