Exhibit 10.23

 

Execution Version

 

LIMITED CONSENT AND FIRST AMENDMENT TO
FINANCING AGREEMENT

 

LIMITED CONSENT AND FIRST AMENDMENT TO FINANCING AGREEMENT, dated as of November
8, 2019 (this “Consent”), to the Financing Agreement, dated as of August 21,
2019 (the “Financing Agreement”), by, among others, KUSHCO HOLDINGS, INC., a
Nevada corporation, as parent (the “Parent”) and certain subsidiaries of the
Parent party thereto (collectively, the “Loan Parties” and each, a “Loan
Party”), each lender from time to time party thereto (collectively, the
“Lenders” and individually, a “Lender”) and MONROE CAPITAL MANAGEMENT ADVISORS,
LLC, a Delaware limited liability company (“Monroe”), as collateral agent for
the Lenders (in such capacity, together with its successors and assigns in such
capacity, the "Collateral Agent"), and Monroe, as administrative agent for the
Lenders (in such capacity, together with its successors and assigns in such
capacity, the "Administrative Agent" and together with the Collateral Agent,
each an "Agent" and collectively, the "Agents").

 

WHEREAS, the Parent is party to the Parent Note which has a maturity date of
October 30, 2020;

 

WHEREAS, the Parent desires to enter into the Second Exchange Agreement
(substantially in the form attached as Exhibit A) with the holder of the Parent
Note and exchange the existing Parent Note with new note substantially in the
form attached as Exhibit B (such note, the “Exchanged Note” and such
transaction, the “HB Note Exchange”), which will among other things, extend the
maturity date of the Parent Note to April 29, 2021 and increase the principal
amount of the Parent Note to $23,962,500;

 

WHEREAS, the Loan Parties have requested that the Agents and the Lenders consent
to the HB Note Exchange; and

 

WHEREAS, the Lenders are willing to consent to such request subject to the terms
and conditions set forth herein, and the Loan Parties, the Agents and the
Lenders wish to amend certain terms and provisions of the Financing Agreement as
hereafter set forth.

 

NOW, THEREFORE, in consideration of the premises set forth above and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

 

1.            Definitions. Except as otherwise defined in this Consent,
capitalized terms in this Consent have the meanings ascribed to such terms in
the Financing Agreement.

 

2.            Consent.

 

(a)               Pursuant to the request by the Loan Parties, but subject to
the terms and conditions set forth herein, and in reliance upon the
representations and warranties of the Loan Parties described herein and in the
Financing Agreement, the Agent and the Lenders hereby consent to the HB Note
Exchange.

 

 

 

 

(b)               The consent set forth in this Section 2 shall be limited
precisely as written. This consent shall not operate as a consent for any other
purpose or a waiver of any Default or Event of Default which may now exist or be
hereafter arising, shall not constitute a continuing waiver of any provision of
the Agreement or any other Loan Document, or otherwise impair any right, power
or remedy of Agent or any Lender under the Financing Agreement or any other Loan
Document, which terms and conditions shall continue in full force and effect.

 

3.             Amendments.

 

(a)               Existing Definitions. The following definitions in Section
1.01 of the Financing Agreement are hereby amended and restated in their
entirety to read as follows:

 

(i)                 ""Parent Note" means any senior note issued under the Parent
SPA and any other note of the Parent issued in exchange therefor from time to
time (including the notes issued in exchange pursuant to the Parent Indebtedness
Second Exchange Agreement)."

 

(ii)              Clause (k) of the definition of "Permitted Indebtedness" is
hereby amended and restated in its entirety to read as follows:

 

"(k)      (x) Parent Indebtedness in an aggregate principal amount not to exceed
$23,962,500 plus any paid-in-kind or capitalized interest thereon and (y) any
Permitted Refinancing Indebtedness issued in replacement thereof;"

 

(b)               New Definitions. Section 1.01 of the Financing Agreement is
hereby amended by adding the following definition, in appropriate alphabetical
order:

 

(i)                 ""Parent Indebtedness Second Exchange Agreement" means the
Second Exchange Agreement, dated as of November 8, 2019, by and between the
Parent and the investor signatory thereto."

 

4.              Representations and Warranties. Each Loan Party hereby
represents and warrants to the Agents and the Lenders as follows:

 

(a)               Representations and Warranties; No Event of Default. The
representations and warranties made to any Secured Party contained herein, in
Article VI of the Financing Agreement and in each other Loan Document,
certificate or other writing delivered to any Secured Party pursuant hereto or
thereto on or prior to the date hereof are true and correct in all material
respects (except that such materiality qualifier shall not be applicable to any
representations or warranties that already are qualified or modified as to
materiality or "Material Adverse Effect" in the text thereof, which
representations and warranties shall be true and correct in all respects subject
to such qualification) on and as of such date as though made on and as of such
date, except to the extent that any such representation or warranty expressly
relates solely to an earlier date (in which case such representation or warranty
shall be true and correct on and as of such earlier date), and no Default or
Event of Default has occurred and is continuing or would result from this
Consent becoming effective as of the date hereof in accordance with its terms.

 

(b)               Organization, Good Standing, Etc. Each Loan Party (i) is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing (if applicable) under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated, and to
execute and deliver this Consent, and to consummate the transactions
contemplated hereby and by the Financing Agreement, as amended hereby, and
(iii) is duly qualified to do business in, and is in good standing in each
jurisdiction where the character of the properties owned or leased by it or in
which the transaction of its business makes such qualification necessary except
(solely for the purposes of this subclause (iii)) where the failure to be so
qualified and be in good standing could not reasonably be expected to have a
Material Adverse Effect.

 

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(c)                Authorization, Etc. The execution, delivery and performance
by each Loan Party of this Consent and each other Loan Document to which it is
or will be a party, and the performance by it of the Financing Agreement, as
amended hereby, (i) have been duly authorized by all necessary action, (ii) do
not and will not contravene (A) any of its Governing Documents, (B) any
applicable material Requirement of Law or (C) any material Contractual
Obligation binding on or otherwise affecting it or any of its properties, (iii)
do not and will not result in or require the creation of any Lien (other than
pursuant to any Loan Document) upon or with respect to any of its properties,
and (iv) do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to its operations or any of its properties,
except, in the case of clauses (ii)(C) and (iv), to the extent where such
contravention, default, noncompliance, suspension, revocation, impairment,
forfeiture or nonrenewal could not reasonably be expected to have a Material
Adverse Effect.

 

(d)               Enforceability of Loan Documents. Each of this Consent and the
Financing Agreement, as amended hereby, is, and each other Loan Document to
which any Loan Party is or will be a party, when delivered under the Financing
Agreement, as amended hereby, will be, a legal, valid and binding obligation of
such Person, enforceable against such Person in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by principles of equity.

 

(e)                Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority is
required in connection with the due execution, delivery and performance by any
Loan Party of this Consent and any other Loan Document, as amended hereby, to
which it is or will be a party.

 

5.             Conditions Precedent. This Consent shall become effective, as of
the date hereof, only upon satisfaction in full, in a manner satisfactory to the
Agents, of the following conditions precedent:

 

(a)                Representations and Warranties. The representations and
warranties made to any Secured Party contained herein, in Article VI of the
Financing Agreement and in each other Loan Document, certificate or other
writing delivered to any Secured Party pursuant hereto or thereto on or prior to
the date hereof shall be true and correct in all material respects (except that
such materiality qualifier shall not be applicable to any representations or
warranties that already are qualified or modified as to materiality or "Material
Adverse Effect" in the text thereof, which representations and warranties shall
be true and correct in all respects subject to such qualification) on and as of
such date as though made on and as of such date, except to the extent that any
such representation or warranty expressly relates solely to an earlier date (in
which case such representation or warranty shall be true and correct on and as
of such earlier date).

 

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(b)               No Default; Event of Default. No Default or Event of Default
shall have occurred and be continuing on the date hereof or result from this
Consent becoming effective in accordance with its terms.

 

(c)               Delivery of this Consent. The Agent shall have received, on or
before the date hereof, this Consent, duly executed by the Loan Parties, each
Agent and each Lender.

 

(d)               Parent Indebtedness. Each condition precedent under the Parent
Indebtedness Second Exchange Agreement (as defined in the Financing Agreement
after giving effect to this Consent) shall have been (or simultaneously with the
effectiveness hereof will be) satisfied, and each of the Exchanged Note, the
Parent Indebtedness Second Exchange Agreement and any other document executed in
connection therewith, in each case, in form and substance reasonably
satisfactory to the Agent shall be in full force and effect. The Agent shall
have received executed copies of each of the Exchanged Note, the Parent
Indebtedness Second Exchange Agreement and any other document executed in
connection therewith.

 

(e)               Payment of Fees, Etc. The Borrowers shall have paid on or
before the date hereof all fees, costs, expenses and taxes then payable, if any,
pursuant to Section 2.06 or 12.04 of the Financing Agreement.

 

6.            Continued Effectiveness of the Financing Agreement and Other Loan
Documents. Each Loan Party hereby (a) acknowledges and consents to this Consent,
(b) confirms and agrees that the Financing Agreement, as amended hereby, and
each other Loan Document to which it is a party is, and shall continue to be, in
full force and effect and is hereby ratified and confirmed in all respects,
except that on and after the date hereof, all references in any such Loan
Document to "the Financing Agreement", the "Agreement", "thereto", "thereof",
"thereunder" or words of like import referring to the Financing Agreement shall
mean the Financing Agreement as amended by this Consent, and (c) confirms and
agrees that, to the extent that any such Loan Document purports to assign or
pledge to the Collateral Agent, for the benefit of the Agents and the Lenders,
or to grant to the Collateral Agent, for the benefit of the Agents and the
Lenders, a security interest in or Lien on any Collateral as security for the
Obligations of the Loan Parties from time to time existing in respect of the
Financing Agreement (as amended hereby) and the other Loan Documents, such
pledge, assignment and/or grant of the security interest or Lien is hereby
ratified and confirmed in all respects. This Consent does not and shall not
affect any of the obligations of the Loan Parties, other than as expressly
provided herein, including, without limitation, the Loan Parties' obligations to
repay the Loans in accordance with the terms of Financing Agreement, as amended
hereby, or the obligations of the Loan Parties under any Loan Document to which
they are a party, all of which obligations shall remain in full force and
effect. The execution, delivery and effectiveness of this Consent shall not
operate as a waiver of any right, power or remedy of any Agent or any Lender
under the Financing Agreement or any other Loan Document nor constitute a waiver
of any provision of the Financing Agreement or any other Loan Document.

 

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7.             No Novation. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Financing
Agreement or instruments securing the same, which shall remain in full force and
effect, except as modified hereby.

 

8.             Release. Each Loan Party hereby acknowledges and agrees that: (a)
neither it nor any of its Subsidiaries has any claim or cause of action against
any Agent or any Lender (or any of the directors, officers, employees, agents,
attorneys or consultants of any of the foregoing) by reason of any act, omission
or thing whatsoever done or omitted to be done, in each case, on or prior to the
date hereof directly arising out of, connected with or related to this
Amendment, the Financing Agreement or any other Loan Document, or any act, event
or transaction related or attendant thereto, or the agreements of any Agent or
any Lender contained therein, or the possession, use, operation or control of
any of the assets of any Loan Party in connection therewith, or the making of
any Loans or other advances thereunder, or the management of such Loans or other
advances or the Collateral thereunder and (b) the Agents and the Lenders have
heretofore properly performed and satisfied in a timely manner all of their
obligations to the Loan Parties, and all of their Subsidiaries and Affiliates.
Notwithstanding the foregoing, the Agents and the Lenders wish (and the Loan
Parties agree) to eliminate any possibility that any past conditions, acts,
omissions, events or circumstances would impair or otherwise adversely affect
any of their rights, interests, security and/or remedies. Accordingly, for and
in consideration of the agreements contained in this Consent and other good and
valuable consideration, each Loan Party (for itself and its Subsidiaries and
Affiliates and the successors, assigns, heirs and representatives of each of the
foregoing) (collectively, the "Releasors") does hereby fully, finally,
unconditionally and irrevocably release, waive and forever discharge the Agents
and the Lenders, together with their respective Affiliates and Related Funds,
and each of the directors, officers, employees, agents, attorneys and
consultants of each of the foregoing (collectively, the "Released Parties"),
from any and all debts, claims, allegations, obligations, damages, costs,
attorneys' fees, suits, demands, liabilities, actions, proceedings and causes of
action, in each case, whether known or unknown, contingent or fixed, direct or
indirect, and of whatever nature or description, and whether in law or in
equity, under contract, tort, statute or otherwise, which any Releasor has
heretofore had or now or hereafter can, shall or may have against any Released
Party by reason of any act, omission or thing whatsoever done or omitted to be
done, in each case, on or prior to the date hereof directly arising out of,
connected with or related to this Consent, the Financing Agreement or any other
Loan Document, or any act, event or transaction related or attendant thereto, or
the agreements of any Agent or any Lender contained therein, or the possession,
use, operation or control of any of the assets of any Loan Party in connection
therewith, or the making of any Loans or other advances thereunder, or the
management of such Loans or other advances or the Collateral (each, a "Claim").
Each Loan Party represents and warrants that it has no knowledge of any Claim by
any Releasor against any Released Party or of any facts or acts or omissions of
any Released Party which on the date hereof would be the basis of a Claim by any
Releasor against any Released Party which would not be released hereby.

 

9.             Headings. Headings herein are for convenience only and shall not
be relied upon in interpreting or enforcing this Consent.

 

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10.           Miscellaneous. This Consent may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this Consent by
signing any such counterpart. Delivery of an executed counterpart of this
Consent by facsimile or electronic mail shall be equally effective as delivery
of an original executed counterpart of this Consent. Each Loan Party hereby
acknowledges and agrees that this Consent constitutes a "Loan Document" under
the Financing Agreement. Accordingly, it shall be an immediate Event of Default
under the Financing Agreement if (i) any representation or warranty made by any
Loan Party under or in connection with this Consent shall have been incorrect in
any respect when made or deemed made, or (ii) any Loan Party shall fail to
perform or observe any term, covenant or agreement contained in this Consent.
Any provision of this Consent that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction. This Consent and the rights and obligations of the parties
hereunder shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of New York.

 

[signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Consent to be duly
executed and delivered by their officers as of the date first above written.

 

LOAN PARTIES:

 

  KUSHCO HOLDINGS, INC.           By: /s/ Christopher Tedford     Name:
Christopher Tedford     Title: Chief Financial Officer           KIM
INTERNATIONAL CORPORATION           By: /s/ Christopher Tedford     Name:
Christopher Tedford     Title: Chief Financial Officer         KUSH ENERGY, LLC
          By: /s/ Christopher Tedford     Name: Christopher Tedford     Title:
Chief Financial Officer           ZACH DARLING CREATIVE ASSOCIATES, LLC        
  By: /s/ Zach Darling     Name: Zach Darling     Title: Manager  

 

 

[Signature Page to Limited Consent]

 

 

 

 

  THE HYBRID CREATIVE LLC           By: Zack Darling Creative Associates, LLC,  
  its manager           By: /s/ Zach Darling         Name: Zach Darling    
Title: Manager           KCH DISTRIBUTION INC.           By: /s/ Christopher
Tedford     Name: Christopher Tedford     Title: Chief Financial Officer        
  KUSH SUPPLY CO. LLC           By: KushCo Holdings, Inc,     its Manager      
    By: /s/ Christopher Tedford     Name: Christopher Tedford     Title: Chief
Financial Officer           CELERITAS INDUSTRIES, LLC           By: KushCo
Holdings, Inc,     its Manager           By: /s/ Christopher Tedford     Name:
Christopher Tedford     Title: Chief Financial Officer           KOLETO
INNOVATIONS LLC           By: KushCo Holdings, Inc,     its Manager          
By: /s/ Christopher Tedford     Name: Christopher Tedford     Title: Chief
Financial Officer  

 

[Signature Page to Limited Consent]

 

 

 

  

AGENT:       MONROE CAPITAL MANAGEMENT ADVISORS, LLC,   as Administrative Agent
and Collateral Agent       By: /s/ Mike Meyer     Name: Mike Meyer   Title:
Director  

 

[Signature Page to Limited Consent]

 

 

 

 

LENDERS:       Monroe PRIvate credit Fund A LP,     By: Monroe private Credit
Fund A LLC, its general partner       By: /s/ Mike Meyer   Name:  Mike Meyer  
Title:      Director           Monroe capital PRIvate credit Fund I LP,     By:
Monroe CAPital private Credit Fund I LLC, its general partner       By: /s/ Mike
Meyer   Name:  Mike Meyer   Title: Director           Monroe Capital private
credit fund III LP,     By: Monroe Capital private credit fund IIi LLC, its
general partner       By: /s/ Mike Meyer   Name:  Mike Meyer   Title:     
Director           Monroe Capital Private Credit fund iiI (Unleveraged) LP,    
By: Monroe Capital private credit Fund iIi LLC, its general partner       By:
/s/ Mike Meyer   Name:  Mike Meyer   Title:      Director  

 

[Signature Page to Limited Consent]

 

 

 

 

Monroe Capital Fund SV S.a.r.l., acting in respect of its Fund III (Unleveraged)
Compartment,       By:  Monroe Capital Management Advisors LLC,   as Investment
Manager       By: /s/ Mike Meyer   Name:  Mike Meyer   Title:      Director    
      Monroe Capital Private Credit Fund III (Lux) Financing Holdco LP,      
By:  Monroe Capital Private Credit Fund III (Lux) Financing Holdco GP LLC,   its
General Partner       By:  Monroe Capital Management Advisors LLC, as Manager  
    By: /s/ Mike Meyer   Name:  Mike Meyer   Title:      Director          
Monroe (NP) U.S. Private Debt Fund LP       By: Monroe (NP) U.S. Private Debt
Fund GP Ltd.,   its general partner       By: /s/ Mike Meyer   Name:  Mike Meyer
  Title:      Director  

 

[Signature Page to Limited Consent]

 

 

 

 

EXHIBIT A

 

Second Exchange Agreement

 

 

 

 

EXHIBIT B

 

Exchanged Note