COURT FILE NO.: CV-21-00667501-00CL

DATE: 20211012

ONTARIO

SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

BETWEEN:

GOTHAM GREEN PARTNERS, LLC and GOTHAM GREEN ADMIN 1, LLC

Applicants

– and –

IANTHUS CAPITAL HOLDINGS, INC., IANTHUS CAPITAL MANAGEMENT, LLC, OASIS INVESTMENTS II MASTER FUND LTD., HADRON HEALTHCARE AND CONSUMER SPECIAL OPPORTUNITIES MASTER FUND, SENVEST GLOBAL (KY), LP and SENVEST MASTER FUND, LP

Respondents

Matthew Milne-Smith, Chantelle Cseh, and Rui Gao for the Applicants

Paul Steep and Trevor Courtis for the Respondents, iAnthus Capital Holdings and iAnthus Capital Management, LLC

Jeffrey Levine for the Respondents, iAnthus Capital Holdings and iAnthus Capital Management, LLC

Eliot Kolers and Brian Pukier for the Respondent, Oasis Investments II Master Fund Ltd.

Timothy Pinos, John M. Picone and Ryan Jacobs, Hadron Healthcare and Consumer Special Opportunities Master Fund, Senvest Global (KY), LP and Senvest Master Fund, LP

HEARD: September 23, 2021

PENNY J.

REASONS FOR JUDGMENT

Overview

[1] This is an application for the interpretation of an agreement. The respondent iAnthus is involved in the highly regulated cannabis business in nine states in the US. As a result of severe financial problems, iAnthus agreed with certain of its lenders to a restructuring. One term of the restructuring support agreement was the transfer of 97.5% of the shares of iAnthus to the lenders. The change of ownership requires regulatory approval from certain US jurisdictions. That process has taken longer than originally planned. The lenders exercised what they say is a unilateral right to consent to an extension of the completion date to enable the regulatory approval process to reach its conclusion. iAnthus took the position that the lenders had no such right. This litigation ensued. The sole issue in dispute is the meaning to be attributed to the definition of the “outside date” by which the transaction must close, and whether that date can be unilaterally extended in certain circumstances by the lenders or whether any extension request can only be initiated by iAnthus.

[2] For the reasons that follow, the declaration sought by the lenders is granted: the Outside Date in the restructuring support agreement has been and is extended to the date on which any regulatory approval or consent condition to implementation of the Plan is satisfied or waived.

Background

[3] The applicant Gotham Green Partners, LLC is the investment advisor for a number of affiliated funds holding secured debentures issued by iAnthus. They are the secured lenders of iAnthus.

[4] The respondent, iAnthus Capital Holdings, Inc., is the publicly traded parent of the iAnthus group of companies which are also respondents. iAnthus (or, the Company) grows, processes, and distributes cannabis products in nine US states.

[5] The Respondents, Oasis Investments II Master Fund Ltd., Hadron Healthcare and Consumer Special Opportunities Master Fund, Senvest Global (KY), LP, and Senvest Master Fund, LP, are all holders of unsecured debentures issued by iAnthus, and together constitute what I will call the consenting debenture holders. They support the relief sought by Gotham on this application. Together, I will refer to Gotham and the consenting debenture holders as the Lenders.

[6] Between May 2018 and December 2019, iAnthus entities issued to Gotham secured debentures in the principal amount of US$97.5 million. These secured debentures were originally scheduled to mature in May 2021.

[7] In addition, commencing in March 2019, iAnthus issued unsecured debentures to a number of entities including the consenting debenture holders in the principal amount of US$60 million. The unsecured debentures were originally scheduled to mature in March 2023.

[8] In March 2020, iAnthus faced a severe liquidity crisis. iAnthus did not make interest payments due on March 31, 2020 under its debentures, giving rise to events of default which resulted in an acceleration of the amounts owing. By early April 2020, the entire amount of principal, interest, and fees on the secured and unsecured debentures, totalling over US$174 million, was immediately due and payable. iAnthus was unable to repay these debts. Gotham was entitled to exercise its security over the Company’s assets and property.

[9] iAnthus formed a Special Committee of the board to explore strategic alternatives to insolvency and Gotham’s exercise of its security over the Company’s assets. iAnthus retained independent legal and investment banking advice in this endeavour. As part of the strategic review, the Company contacted more than 100 parties and received 35 different non-binding indications of interest. However, none of these expressions of interest materialized into a satisfactory proposal. Ultimately, no party was willing to offer more favourable terms than the Lenders. The Special Committee and iAnthus therefore decided to pursue a transaction with the Lenders. The transaction took the form of a restructuring support agreement (RSA) executed on July 10, 2021.

[10] Upon the transaction taking effect, the Lenders would forbear from enforcement, the amounts owing by iAnthus to the holders of the secured and unsecured debentures would be reduced, the debt holders would receive new notes with an extended maturity date and reduced interest rate and emergency financing would be advanced, in exchange for which the Lenders would be issued common shares such that they would hold 97.25% of the