Subsequent Events |
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| Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsequent Events |
Note 14—Subsequent Events Legal Proceedings Please refer to Note 11 for further discussion. Event of Default and Financial Restructuring The Company is currently in default of the obligations under the Company’s long-term debt as discussed in Note 1. As part of the Restructuring Support Agreement with the Secured Lenders and a majority of the Unsecured Lenders, dated July 10, 2020, the Secured Lenders, the Unsecured Lenders and the existing holders of the Company’s common shares at the closing of the Recapitalization Transaction (“Existing Shareholders”) are to be allocated and issued, approximately, the amounts of Restructured Senior Debt (as defined below), Interim Financing (as defined below), 8% Senior Unsecured Debentures (as defined below) and percentage of the pro forma common equity, as presented in the following table:
Upon consummation of the Recapitalization Transaction, a new board of directors (the “New Board”) will be composed of the following members: (i) three nominees will be designated by the Secured Lenders; (ii) three nominees will be designated by the Consenting Unsecured Lenders; and (iii) one nominee will be designated by the director nominees of the Secured Lenders and Consenting Unsecured Lenders to serve as a member of the Company’s New Board and the Company’s Chief Executive Officer. Pursuant to the terms of the proposed Recapitalization Transaction, the Collateral Agent, the Secured Lenders and the Consenting Unsecured Lenders agreed to forbear from further exercising any rights or remedies in connection with any events of default that now exist or may in the future arise under any of the purchase agreements with respect of the Secured Notes and all other agreements delivered in connection therewith, the purchase agreements with respect of the Unsecured Lenders and all other agreements delivered in connection therewith and any other agreement to which the Collateral Agent, Secured Lenders, or Consenting Unsecured Lenders are a party to (collectively, the “Defaults”) and shall take such steps as are necessary to stop any ongoing enforcement efforts in relation thereto. Upon consummation of the Recapitalization Transaction, the Collateral Agent, Secured Lenders and Consenting Unsecured Lenders are also expected to irrevocably waive all Defaults and take all steps required to withdraw, revoke and/or terminate any enforcement efforts in relation thereto. State-level regulatory approvals remain outstanding in Massachusetts, New Jersey and New York. On January 7, 2022, the New Jersey CRC approved the Company’s acquisition Completion of the Recapitalization Transaction is subject to receipt of the Requisite Approvals. If the Requisite Approvals are obtained, the Plan of Arrangement will bind all Secured Lenders, Unsecured Lenders and Existing Shareholders. The Plan of Arrangement was approved by the Court on October 5, 2020. On January 29, 2021, a notice of appeal with respect to the final approval for the Plan of Arrangement received by the Company on November 5, 2020 was dismissed by the British Columbia Court of Appeal. The Company is in progress of obtaining the remaining Requisite Approvals. Specifically, certain of the transactions contemplated by the Recapitalization Transaction have triggered the requirement for an approval by state-level regulators in certain U.S. states with jurisdiction over the licensed cannabis operations of entities owned, in whole or in part, or controlled, directly or indirectly, by the Company in such states. On February 23, 2021, the Nevada Cannabis Compliance Board approved the proposed change of ownership and control of the Company’s wholly-owned subsidiary, GMNV, contemplated by the Recapitalization Transaction. On June 17, 2021, the CCC issued the June 17 Approval. On June 15, 2021, the Company and the Lenders agreed to amend the Outside Date by which the Recapitalization Transaction pursuant to the Plan of Arrangement is required to be implemented by from June 30, 2021 to August 31, 2021. On August 12, 2021, Mayflower’s pending application for its Allston Retail License was approved by the CCC at its August, 2021 public meeting. As a result of this August 12, 2021 approval, Mayflower was required to submit the New COC Application, which was submitted on November 10, 2021 and is currently pending before the CCC. The New COC Application must be approved by the CCC before the June 17 Approval can be effectuated. On August 20, 2021, the Vermont DPS confirmed that it does not require prior approval of the Recapitalization Transaction, except for background checks of the prospective new directors and Interim Chief Executive Officer of the Company to be appointed upon the closing of the Recapitalization Transaction, which background checks have been completed. On October 29, 2021, the OMMU approved the proposed change of ownership and control of the Company’s wholly-owned subsidiary, McCrory’s, contemplated by the Recapitalization Transaction. On November 19, 2021, the Petition was filed by the Petitioners with the OMMU challenging the OMMU’s approval of the Variance Request and requesting a formal administrative hearing before an ALJ at the Florida Division of Administrative Hearings. As a result of the Petition, the OMMU informed the Company that the OMMU’s prior approval of the Variance Request is not an enforceable agency order until such time that there is a final resolution of the Petition and a final agency order is issued by the OMMU. On May 4, 2022, the OMMU issued a final agency order, accepting the recommendation of the ALJ and dismissing the Petition. On August 20, 2021, the Applicants filed the Application with the OSCJ, which sought, among other things, a declaration that the Outside Date be extended to the date on which any regulatory approval or consent condition to implementation of the Plan of Arrangement is satisfied or waived. On October 12, 2021, the OSCJ issued his decision granting the Applicant’s relief sought in the Decision. Specifically, the OSCJ granted the declaration sought by the Applicants and ordered that the Outside Date in the Restructuring Support Agreement be extended to the date on which any regulatory approval or consent condition to implementation of the Plan of Arrangement is satisfied or waived. On November 10, 2021, the Company filed a Notice of Appeal with the Ontario Court of Appeal and a hearing on the appeal is currently scheduled for June 9, 2022. See Note 11 for further discussion. On April 1, 2022, the MMCC approved the proposed change of ownership and control of the Company’s wholly-owned subsidiary, S8, contemplated by the Recapitalization Transaction. S8 currently controls 4 licensed entities in Maryland through management services agreements. For Resignation of Interim Chief Executive Officer Effective as of May 6, 2022 (the “Resignation Date”), Randy Maslow, the Company’s Interim Chief Executive Officer and President and a member of the Board of Directors, resigned from his executive positions with the Company, including all positions with the Company’s subsidiaries and its affiliates, and from the Company’s Board of Directors and committees. In connection with the resignation, Mr. Maslow and the Company executed a separation agreement (the “Separation Agreement”), pursuant to which, Mr. Maslow will receive certain compensation and benefits valued to substantially equal the value of entitlements he would have received under Section 4(g) of his Employment Agreement. Specifically, Mr. Maslow will receive total cash compensation in the amount of approximately $12.2 million (the “Separation Payment”), of which approximately $5.1 million was paid out on May 6, 2022 (made up, in part of a portion of severance payment of approximately $4.8 million, and unpaid 2021 bonus of $300,000). The remainder of the Separation Payment will be paid out in equal installments of approximately $0.9 million per month over the next eight months following the Resignation Date, which shall be accelerated upon the closing of the Recapitalization Transaction, a Material Financing or in the event of a Board Change, as such terms are described in the Separation Agreement. In addition, the Company shall pay the monthly premium for Mr. Maslow’s continued participation in the Company’s health and dental insurance benefits pursuant to COBRA for one year from May 6, 2022. Furthermore, Mr. Maslow’s compensation and benefits includes, among other items, an extension of exercise period of options to acquire the Company’s common shares which were held by Mr. Maslow until the earlier of (i) five years from the Resignation Date; (ii) the original expiration dates of the applicable option; or (iii) the closing of the Recapitalization Transaction. Finally, under the Separation Agreement, Mr. Maslow agreed to relinquish all entitlements to his right to receive a grant of restricted stock units under the long-term incentive plan that was announced on January 7, 2022, the issuance of which was contingent on the closing of the Recapitalization Transaction. Mr. Maslow will continue to serve the Company in a consulting role for a period of six months following the Resignation Date (provided that such period may be extended by additional six months by the Company) at a base compensation of $25,000 per month. Under the Separation Agreement, it was agreed that Mr. Maslow’s non-competition covenant will expire upon termination of the consulting term. In consideration for receipt of these compensation and benefits, Mr. Maslow provided a release to the Company (and the Company provided a release to Mr. Maslow), agreed to provide certain cooperation to the Company, agreed to a certain confidentiality and return of property covenants, to mutual non-disparagement covenants and to negotiate in good faith a potential extension of Mr. Maslow’s non-competition covenants. Appointment of Interim Chief Executive Officer The Board appointed Robert Galvin as the Company’s Interim Chief Executive Officer and a member of the Board, effective May 6, 2022. Mr. Galvin has served as the Company’s Interim Chief Operating Officer since November 2020. In addition, since February 2019, Mr. Galvin has served as an operations and administrative advisor to the Company. From February 2019 to December 2019, Mr. Galvin also served as a member of the Board. Prior to the Company, Mr. Galvin served as a member of the board of directors and as audit committee chair of MPX Bioceutical Corporation (“MPX”) from November 2017 until the MPX Acquisition. Mr. Galvin will serve as Interim Chief Executive Officer of the Company pursuant to his employment agreement dated October 12, 2019 and effective as of January 1, 2019, as subsequently amended on April 4, 2020. |
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