TERRASCEND CORP. : Entering into a Material Definitive Agreement, Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant, Unregistered Sale of Equity Securities (Form 8-K)

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Section 1.01 Entering into a Material Definitive Agreement.

On October 11, 2022subsidiaries of TerrAscend Corp.a Ontario society
(“TerrAscend”), TerrAscend NJ LLCa New Jersey limited liability company (“TerrAscend NJ”), HMS Processing LLCa Maryland limited liability company, HMS Hagerstown, LLCa Delaware limited liability company, and HMS Health, LLCa
Maryland limited liability company (collectively, the “Borrower”), entered into a Loan Agreement (the “Loan Agreement”) with Pelorus REIT Funds, LLC (the Lender”). Capitalized terms used in this Current Report on Form 8-K but not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.

The Loan Agreement provides for a one-time senior secured term loan (the “Loan”) in an aggregate principal amount of $45,478,000. Loan proceeds may be used to pay for certain construction work, for general business purposes TerrAscend and its subsidiaries and to pay the fees and expenses required under the loan agreement. The loan is secured by
TerrAscend, TerrAscend USA Inc.a Delaware society, Well and Good, Inc.a
Delaware society (“Well and Good”), and WBD Holding MD, Inc.a Maryland
society (“WDB-Holding“).

In accordance with the loan agreement, the maturity date of the loan is October 11, 2027. Interest accrues on the loan at the rate of one month SOFR (subject to a floor of 2.5%) plus 9.5% and is payable monthly. Amortization payments are payable monthly beginning on the thirty-sixth monthly interest payment.

The security guaranteeing the payment and performance of the obligations under the Loan consists of a first ranking security interest in the assets of each Borrower, including real estate located Boonton, New Jersey,
Phillipsburg, New Jersey and Hagerstown, Maryland, including improvements and movable property therein. Good and Good and WDB Holding also pledge their respective interests in the Borrower.

The Loan Agreement includes representations and covenants customary for financing transactions of this nature, including, among others, restrictions on indebtedness, grant of encumbrances, fundamental changes and disclosure covenants. The Loan Agreement also contains a covenant to meet a debt service coverage ratio of 1.75:1.00 and failure to meet this triggers an obligation to sweep certain amounts into an escrow account, not a case of default.

An Event of Default under the Loan Agreement includes, but is not limited to, default in payment, breach of certain covenants, insolvency, failure to pay property taxes and maintain insurance, material adverse effect , change of control and cross default and judgments, in each case subject to customary exceptions and thresholds.

As part of its conclusion of the loan agreement, the October 11, 2022,
TerrAscend entered into a promissory note (the “Promissory Note”) with
TerrAscend NJ and BWH NJ LLCa New Jersey limited liability company and Blue Marble Enterprises LLCa New Jersey limited liability company (BWH NJ LLC and Blue Marble Enterprises LLCcollectively, the “Minority Members”), pursuant to which TerrAscend NJ has agreed to pay the Minority Members the principal sum of
$25,000,000 in the event the Lender under the Loan Agreement accelerates the Loan or takes affirmative action to exercise its rights under the Mortgage granted by TerrAscend NJ in favor of the Lender with respect to real property located in Boonton, New Jersey and Phillipsburg, New Jersey (the “Trigger Event”). If the triggering event were to occur and TerrAscend NJ fails to pay all amounts due and payable under the promissory note within 90 days, TerrAscend
agrees to issue to minority members shares of its common stock in a value equal to the amount (if any) unpaid by TerrAscend NJ to minority members pursuant to the promissory note (the “Issue of TerrAscend Shares”), calculated in accordance with an average of the closing prices over the five trading days immediately following the triggering event. Assuming the formula was applied using the five trading days preceding the signing of the loan agreement, the maximum number of shares that could be issued under the TerrAscend share issue would be 16,425,540 shares.

The foregoing descriptions of the Loan Agreement and Promissory Note are qualified in their entirety by reference to the full text of the Loan Agreement and Promissory Note, copies of which will be filed as exhibits to the Annual Report of corporation on Form 10-K for the year ended December 31, 2022.

Item 2.03 Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Section 1.01 under the subheading “Loan Agreement” above is incorporated by reference into this Section 2.03.

Item 3.02 Unrecorded Sales of Equity securities.

The information set out in 1.01 regarding the above promissory note is incorporated by reference into this 3.02.

All securities issued to minority members in connection with the issue of shares of TerrAscend will be issued on the basis of the exemption from registration requirements provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Rule 506 of Regulation D promulgated under the Securities Act. These securities may not be offered or sold in United States the absence of registration or an applicable exemption from registration requirements.

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