Glass House Brands Inc 6-K, filed Jun 17, 2026
Glass House Brands Inc. (GLAS)
About this 6-K
Glass House Brands Inc filed this 6-K on June 17, 2026.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE
ACT OF 1934
| For the month of June, 2026 | Commission File Number 000-56261 |
Glass House Brands Inc.
(Translation of registrant’s name into English)
3645 Long Beach Blvd.
Long Beach, California
90807
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F x
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Glass House Brands Inc. | |
| Date: June 17, 2026 | /s/ Kyle Kazan |
| By: Kyle Kazan | |
| Title: Chief Executive Officer |
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EXHIBIT INDEX
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Exhibit 99.1
FORM 51-102F3
MATERIAL CHANGE REPORT
| Item 1. | Name and Address of Company |
Glass House Brands Inc. (the "Company")
3645 Long Beach Boulevard
Long Beach, California 90807
| Item 2. | Date of Material Change |
June 16, 2026
| Item 3. | News Release |
The news release disclosing the material change was disseminated by the Company on June 17, 2026 through GlobeNewswire and is available on SEDAR+ (www.sedarplus.ca) under the Company's issuer profile.
| Item 4. | Summary of Material Change |
On June 17, 2026, the Company announced that it has applied to list its subordinate voting shares (the "Subordinate Voting Shares") on the New York Stock Exchange ("NYSE") and that it has entered into the Deconsolidation Transaction (as defined below).
| Item 5. | Full Description of Material Change |
On June 17, 2026, the Company announced that it has applied to list its Subordinate Voting Shares on the NYSE.
On June 12, 2026, the Company and its indirect wholly owned subsidiary, GHB Usub, LLC ("Company Subsidiary"), entered into several agreements (which were later released from escrow) to facilitate the deconsolidation of the financial results of its former indirect wholly owned subsidiary, Glass House Retail, LLC ("GHR"), from the Company's financial results in accordance with U.S. generally accepted accounting principles (the "Deconsolidation Transaction") and segregate the Company's dual-use cannabis business from its medical cannabis business in order to apply to list the Subordinate Voting Shares on the NYSE. As further described below, as a result of the implementation of the Deconsolidation Transaction, Company Subsidiary holds non-voting and non-participating units (the "Non-Voting Units") in the capital of GHR, which now holds the Company's former dual-use cannabis business, other than businesses the transfer of which is subject to regulatory approval, which businesses will, automatically and without any action on the part of the Company or any other party, transfer to GHR upon the receipt of regulatory approval. The Non-Voting Units do not carry voting rights or rights to receive dividends, do not provide the Company with the ability to direct the business, operations or activities of GHR, or provide other rights upon dissolution of GHR, and are only convertible into Class B units of GHR (the "Common Units") following the date that the NYSE permits the listing of companies that consolidate the financial statements of companies that cultivate, distribute or possess marijuana (as defined in 21 U.S.C 802) for non-medical uses in the United States (the "Stock Exchange Permissibility Date").
In connection with the Deconsolidation Transaction, among other things:
| 1. | GHR and its members (including Company Subsidiary), entered into a limited liability company agreement, dated June 12, 2026 (the "LLC Agreement"), which provides for, among other things, three classes of units (the "Units"): the Class A units (the "Voting Units"), the Common Units and the Non-Voting Units. The GHR Investor (as defined below) holds all of the Voting Units, which provide for standard voting and dividend rights, including rights upon dissolution of GHR. The Common Units also provide for standard voting and dividend rights, including rights upon dissolution of GHR. The LLC Agreement provides that upon conversion of all of the Non-Voting Units into Common Units, the Voting Units will be equal to no less than 10% of the total issued and outstanding Units following such issuance. Accordingly, in no circumstances will Company Subsidiary, at the time of such conversions, own more than 90% of the Units. In addition, pursuant to the terms of the LLC Agreement, Company Subsidiary has the right to appoint one member to the GHR board of managers (the "GHR Board") and the GHR Investor has the right to appoint two members to the GHR Board. | |
| 2. | GHR and the Company entered into a Class A Unit Purchase Agreement (the "Class A Unit Purchase Agreement") with NSJB Investments LLC (the "GHR Investor"), dated June 12, 2026, pursuant to which, among other things, the GHR Investor acquired Voting Units representing a 10% economic ownership interest in GHR for approximately US$2.5 million (the "Investment"). In connection with the Investment, the GHR Investor appointed Jared Beilke and Nicholas Sarris to the GHR Board and Company Subsidiary appointed Kyle Kazan to the GHR Board. | |
| 3. | The Company, Company Subsidiary and GHR entered into a protection agreement, dated June 12, 2026 (the "Protection Agreement"), to provide for certain covenants in order to preserve the value of the Non-Voting Units held by Company Subsidiary until such time as the Non-Voting Units are converted into Common Units in accordance with their terms, provided that, such conversion shall only be permitted following the Stock Exchange Permissibility Date, but does not provide the Company or Company Subsidiary with the ability to direct the business, operations or activities of GHR. |
In connection with the Deconsolidation Transaction, the Company and GHR entered into a management services agreement (the "MSA"), pursuant to which, among other things, a subsidiary of the Company agreed to provide certain consulting, advisory and administrative services to GHR for a fee arrangement consisting of reimbursement of costs plus a 5% margin, subject to a cap. Each of the parties to the MSA has the ability to terminate the MSA at any time upon 90 days' notice.
The foregoing descriptions of the LLC Agreement, the Class A Unit Purchase Agreement and the Protection Agreement do not purport to be complete and are qualified by reference to the full text of such agreements, which are available on SEDAR+ (www.sedarplus.ca) and are incorporated herein by reference.
| Item 6. | Reliance on subsection 7.1(2) of National Instrument 51-102 |
Not applicable.
| Item 7. | Omitted Information |
Not applicable.
| Item 8. | Executive Officer |
Benjamin Vega
General Counsel and Corporate Secretary
Tel: (562) 264-5078
| Item 9. | Date of Report |
June 17, 2026.
This material change report contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as "forward-looking statements"). Forward-looking statements reflect current expectations or beliefs regarding future events or the Company's future performance or financial results. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward- looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates", "targets" or "believes", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. All forward-looking statements, including those herein, are qualified by this cautionary statement. Although the Company believes that the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the statements. Accordingly, readers should not place undue reliance on forward-looking statements. There are certain factors that could cause actual results to differ materially from those in the forward-looking information, including those risks disclosed in the Company's Annual Information Form available on SEDAR+ at www.sedarplus.ca and in the Company's Form 40-F available on EDGAR at www.sec.gov. For more information on the Company, investors are encouraged to review the Company's public filings on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. The forward-looking statements and financial outlooks contained in this material change report speak only as of the date of this material change report or as of the date or dates specified in such statements. The Company disclaims any intention or obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise, other than as required by law.
Exhibit 99.2
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GLASS HOUSE RETAIL, LLC
A California Limited Liability Company
Dated as of June 12, 2026
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SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF GLASS HOUSE RETAIL, LLC
This Second Amended and Restated Limited Liability Company Agreement (this "Agreement") of Glass House Retail, LLC, a California limited liability company (the "Company"), is entered into as of June 12, 2026 (the "Effective Date"), by and among the Company, NSJB Investments LLC, a California limited liability company (the "Investor"), and GHB Usub, LLC, a Delaware limited liability company ("Holdings", and together with the Investor, the "Members", and each individually, a "Member").
RECITALS
WHEREAS, the Company was formed as a California limited liability company on October 27, 2020 by the filing of Articles of Organization with the California Secretary of State pursuant to the California Revised Uniform Limited Liability Company Act (Cal. Corp. Code §§ 17701.01 et seq., as amended from time to time, the "Act");
WHEREAS, the Company entered into that certain Operating Agreement dated as of October 27, 2020, which was subsequently amended and restated by the First Amended and Restated Operating Agreement dated as of December 20, 2021 (the "Prior Agreement");
WHEREAS, pursuant to the Prior Agreement, Holdings owns one hundred percent (100%) of the membership interests of the Company;
WHEREAS, concurrently herewith, the Company, the Investor, and Holdings are entering into (i) that certain Class A Unit Purchase Agreement, dated as of the date hereof (the "Unit Purchase Agreement"), pursuant to which the Investor is acquiring one hundred (100) Class A Units of the Company for aggregate consideration of $2,500,000, and (ii) that certain Protection Agreement, dated as of the date hereof (the "Protection Agreement"), by and among Glass House Brands Inc., Holdings, and the Company;
WHEREAS, the Members desire to amend and restate the Prior Agreement in its entirety to (i) establish a three-class unit structure consisting of Class A Units, Class B Units, and Exchangeable Units, (ii) set forth the rights, preferences, and obligations of each class of Units, and (iii) govern the management and affairs of the Company following the Deconsolidation Transaction (as defined below);
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NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.
As used in this Agreement, the following terms have the meanings set forth below:
"Act" means the California Revised Uniform Limited Liability Company Act (Cal. Corp. Code §§ 17701.01 et seq.), as amended from time to time.
"Additional Member" has the meaning set forth in Section 3.03.
"Affiliate" means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person.
"Agreement" has the meaning set forth in the preamble.
"Applicable Premium Trigger Event" has the meaning set forth in the Unit Purchase Agreement.
"Board" means the Board of Managers of the Company, as constituted from time to time in accordance with Article VI.
"Cannabis Laws" means all applicable state and local laws, rules, regulations, orders, and licensing requirements relating to the cultivation, manufacture, distribution, dispensing, testing, or sale of cannabis or cannabis products, including without limitation the California Medicinal and Adult-Use Cannabis Regulation and Safety Act (Cal. Bus. & Prof. Code §§ 26000 et seq.) and all regulations promulgated thereunder by the California Department of Cannabis Control.
"Cannabis License" means any license, permit, authorization, approval, or registration issued by any Governmental Authority (including the California Department of Cannabis Control and any applicable local jurisdiction) authorizing the conduct of any cannabis-related activity.
"Cannabis Regulatory Body" means the California Department of Cannabis Control, or any successor agency thereto, and any applicable local licensing authority with jurisdiction over any Cannabis License held by the Company or any Subsidiary.
"Class A Units" has the meaning set forth in Section 3.01(a).
"Class B Units" has the meaning set forth in Section 3.01(b).
"Conversion Event" means the occurrence of both (i) the Triggering Event Date and (ii) the delivery by Holdings to the Company of a written notice electing to convert all (and not less than all) of the Exchangeable Units held by Holdings into Class B Units.
"Covered Person" has the meaning set forth in Section 10.01.
"Deconsolidation Transaction" means the transactions contemplated by this Agreement, the Unit Purchase Agreement, and the Protection Agreement, pursuant to which the Company is separated from the consolidated financial statements of Glass House Brands Inc. for U.S. GAAP purposes.
"Distributions" has the meaning set forth in Section 5.01.
"Effective Date" has the meaning set forth in the preamble.
"Exchangeable Units" has the meaning set forth in Section 3.01(c).
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"Final Order Date" means the date on which the U.S. Department of Justice issues a final order reclassifying marijuana for adult non-medical (recreational) use to Schedule III of the Controlled Substances Act (21 U.S.C. § 811 et seq.).
"Fiscal Year" means the calendar year, or such other annual accounting period as the Board may from time to time designate.
"Governmental Authority" means any federal, state, local, or foreign governmental or regulatory authority, agency, court, instrumentality, or self-regulatory organization.
"Holdings" has the meaning set forth in the preamble.
"Interim Period" means the period commencing on the Effective Date and ending on the date on which all Exchangeable Units have been converted into Class B Units pursuant to Section 3.04.
"Investor" has the meaning set forth in the preamble.
"Manager" means each individual serving as a member of the Board, as designated pursuant to Article VI.
"Members" has the meaning set forth in the preamble.
"Non-Voting Units" means the Exchangeable Units.
"Parent" means Glass House Brands Inc., a British Columbia corporation, and its successors and permitted assigns.
"Person" means any individual, corporation, limited liability company, partnership, trust, estate, association, governmental authority, or other entity.
"Prior Agreement" has the meaning set forth in the recitals.
"Profits Interest" has the meaning set forth in the Unit Purchase Agreement.
"Protection Agreement" has the meaning set forth in the recitals.
"Repurchase/Put Price" has the meaning set forth in the Unit Purchase Agreement.
"Stock Exchange Permissibility Date" means the date on which the New York Stock Exchange (or such other U.S. national securities exchange on which the Parent's shares are listed or proposed to be listed) first permits the listing of companies that consolidate the financial results of entities involved in the cultivation, distribution, or possession of marijuana (as defined in 21 U.S.C. § 802) for non-medical (adult-use) purposes in the United States, as such date is reasonably determined by Parent.
"Subsidiary" means any Person directly or indirectly controlled by the Company.
"Transfer" means any direct or indirect sale, assignment, transfer, pledge, hypothecation, encumbrance, or other disposition of a Unit or any economic or other interest therein, whether voluntary or involuntary.
"Triggering Event Date" means the Stock Exchange Permissibility Date.
"Unit Purchase Agreement" has the meaning set forth in the recitals.
"Units" means, collectively, the Class A Units, the Class B Units, and the Exchangeable Units.
"Voting Units" means the Class A Units and, following issuance, the Class B Units.
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ARTICLE II
ORGANIZATION
Section 2.01 Formation.
The Company was formed pursuant to the Act by the filing of Articles of Organization with the California Secretary of State on October 27, 2020. The Members hereby agree to be bound by the terms of this Agreement.
Section 2.02 Name.
The name of the Company is Glass House Retail, LLC. The Company may conduct business under such assumed names as the Board may determine from time to time.
Section 2.03 Principal Office.
The principal office of the Company shall be located at 3645 Long Beach Boulevard, Long Beach, California 90807, or such other location as the Board may from time to time designate.
Section 2.04 Registered Agent.
The office and registered agent for service of process on the Company in the State of California shall be as designated in the Articles of Organization, or such other office or person as the Board may designate in the manner provided by the Act.
Section 2.05 Purpose.
The purpose of the Company is to operate and manage cannabis retail dispensaries and related operations in the State of California, including by holding, directly or indirectly through Subsidiaries, Cannabis Licenses necessary therefor, and to engage in any and all lawful acts or activities for which limited liability companies may be organized under the Act and as are necessary, incidental, or convenient to the foregoing.
Section 2.06 Term.
The term of the Company shall be perpetual unless the Company is dissolved in accordance with Article XI.
Section 2.07 No State Law Partnership.
The Members intend that the Company not be a partnership (including a limited partnership) or joint venture for any purpose, and no Member shall be deemed a partner or co-venturer of any other Member or of the Company by reason of this Agreement. The Act shall govern the relationship among the Members and between the Members and the Company, except as this Agreement otherwise provides.
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ARTICLE III
UNITS; CAPITAL STRUCTURE
Section 3.01 Authorization of Units.
The limited liability company interests of the Company shall be represented by units ("Units") divided into three classes as follows:
(a) Class A Units. The Company is authorized to issue up to one hundred (100) Class A Units ("Class A Units"). Class A Units shall: (i) be entitled to one (1) vote per Unit on all matters submitted to a vote of the Members or the Board, as applicable; (ii) be entitled to receive Distributions and liquidation proceeds in accordance with Article V and Article XI; and (iii) be convertible into Class B Units upon occurrence of a Conversion Event in the manner set forth in Section 3.04, subject to the adjustment set forth in Section 3.05. As of the Effective Date, the Investor holds one hundred (100) Class A Units, representing all outstanding Class A Units.
(b) Class B Units. The Company is authorized to issue Class B Units ("Class B Units") solely upon the conversion of Exchangeable Units pursuant to Section 3.04 or upon the conversion of Class A Units pursuant to Section 3.05. No Class B Units shall be issued prior to the Triggering Event Date. Class B Units shall: (i) be entitled to one (1) vote per Unit on all matters submitted to a vote of the Members or the Board, as applicable; and (ii) be entitled to receive Distributions and liquidation proceeds in accordance with Article V and Article XI. Class B Units shall have economics identical to Class A Units.
(c) Exchangeable Units. The Company is authorized to issue up to nine hundred (900) Exchangeable Units ("Exchangeable Units"). Exchangeable Units shall: (i) carry no voting rights and shall not be entitled to vote on any matter submitted to the Members; (ii) carry no right to receive Distributions of any kind, whether in cash, in kind, or upon liquidation, unless and until converted into Class B Units; (iii) carry no right to receive any portion of liquidation proceeds; and (iv) be convertible into Class B Units solely following the Triggering Event Date, in the manner set forth in Section 3.04. As of the Effective Date, Holdings holds nine hundred (900) Exchangeable Units, representing all outstanding Exchangeable Units. The Exchangeable Units shall not be issued to, transferred to, or held by any Person other than Holdings and its permitted transferees without the prior written consent of the Board.
A schedule of the Units outstanding as of the Effective Date is set forth on Exhibit A attached hereto.
Section 3.02 Certificates.
The Company shall not be required to issue certificates to evidence Units. The Company shall maintain a register of Units in its books and records, and such register shall constitute the definitive record of Unit ownership. Any Transfer of Units must be reflected in the Company's register to be effective.
Section 3.03 Admission of Additional Members.
Except as expressly permitted pursuant to Section 3.04 (conversion of Exchangeable Units) and the Unit Purchase Agreement, no additional Member may be admitted to the Company and no additional Units may be issued without (i) the prior written consent of Holdings and (ii) compliance with all applicable Cannabis Laws, including any required regulatory approvals from each applicable Cannabis Regulatory Body.
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Section 3.04 Conversion of Exchangeable Units.
(a) Trigger and Election. Following the Triggering Event Date, Holdings shall have the right, but not the obligation, to convert all (and not less than all) of the Exchangeable Units held by Holdings into Class B Units by delivering a written notice of election (a "Conversion Notice") to the Company and the Investor specifying the date of conversion (the "Conversion Date"), which date shall be no fewer than five (5) Business Days following delivery of the Conversion Notice.
(b) Conversion Ratio. Each Exchangeable Unit shall convert into one (1) Class B Unit, subject to adjustment for any Unit splits, combinations, reclassifications, or similar events affecting Units.
(c) Regulatory Conditions. No conversion of Exchangeable Units shall be effective unless and until all requisite approvals from each applicable Cannabis Regulatory Body have been obtained, including any required change-of-ownership approvals from the California Department of Cannabis Control and each applicable local jurisdiction. Holdings shall be responsible for obtaining all such approvals at its sole cost and expense, and shall use commercially reasonable efforts to obtain such approvals as promptly as practicable following delivery of a Conversion Notice.
(d) Effect of Conversion. Upon the Conversion Date, the Exchangeable Units shall automatically convert into Class B Units and shall cease to exist as Exchangeable Units. Holdings shall thereafter be a holder of Class B Units with the full voting and economic rights associated therewith. The Company shall promptly update its Unit register to reflect the conversion.
Section 3.05 Class A Unit Adjustment Upon Conversion.
Upon any conversion of Exchangeable Units pursuant to Section 3.04, if, following the issuance of Class B Units to Holdings, the Class A Units would represent less than ten percent (10%) of the total issued and outstanding Units (treating all Units, including the newly issued Class B Units, on an as-converted basis), the Company shall automatically issue to the Investor, without further consideration, such additional Class A Units as are necessary so that, immediately following such issuance, the Class A Units represent not less than ten percent (10%) of the total issued and outstanding Units. For the avoidance of doubt, in no event shall Holdings hold, following conversion of all Exchangeable Units, more than ninety percent (90%) of all outstanding Units.
Section 3.06 No Preemptive Rights.
Except as expressly set forth herein or in the Unit Purchase Agreement, no Member shall have any preemptive, preferential, or other right to subscribe for or acquire additional Units.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.01 Initial Capital Contributions.
(a) The Investor's initial capital contribution shall be the cash consideration paid by the Investor pursuant to the Unit Purchase Agreement in exchange for the Class A Units.
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(b) Holdings' initial capital contribution shall be the net assets of the Company transferred to the Company pursuant to the Deconsolidation Transaction as of the Effective Date, as reflected on the Company's books and records.
Section 4.02 No Additional Obligations.
Except as expressly provided in this Agreement or as the Board may determine, no Member shall be required to make any additional capital contribution to the Company. No Member shall have any personal liability for any obligation of the Company by reason of being a Member.
Section 4.03 Capital Accounts.
The Company shall maintain a separate capital account for each Member in accordance with the applicable Treasury Regulations under Section 704(b) of the Internal Revenue Code. Each Member's capital account shall be (a) credited with such Member's capital contributions and allocations of income and gain, and (b) debited with such Member's allocations of loss and deduction and amounts distributed to such Member (including any Distributions).
Section 4.04 Return of Capital.
No Member shall have the right to demand or receive the return of such Member's capital contribution, except upon dissolution and winding up of the Company in accordance with Article XI. No Member shall be entitled to receive any interest on such Member's capital contribution.
ARTICLE V
DISTRIBUTIONS
Section 5.01 Distributions.
(a) General. Subject to the limitations set forth in this Article V and the Protection Agreement, distributions of available cash of the Company ("Distributions") shall be made to the holders of Class A Units and Class B Units (and not to holders of Exchangeable Units) at such times and in such amounts as the Board may determine in its discretion. For the avoidance of doubt, holders of Exchangeable Units shall have no right to receive any Distribution of any kind, whether in cash, in kind, or otherwise, unless and until such Exchangeable Units have been converted into Class B Units pursuant to Section 3.04.
(b) Distribution Caps During Interim Period. Notwithstanding Section 5.01(a), and without limiting any additional restrictions set forth in the Protection Agreement, Distributions to holders of Class A Units shall not exceed $25,000 (the "Monthly Distribution Cap"). No Distribution shall be made pursuant to this Section 5.01(b) if, after giving effect thereto, the Company would not have sufficient cash to meet its reasonably anticipated operating expenses and obligations.
(c) Pari Passu. All Distributions shall be made to holders of Class A Units and Class B Units pro rata in proportion to the number of Class A Units and Class B Units held by each such holder as a percentage of total outstanding Class A Units and Class B Units.
(d) Withholding. The Company may withhold from any Distribution any amounts required to be withheld under applicable federal, state, local, or foreign tax law. Any amounts so withheld shall be treated as having been distributed to the Member on whose account such withholding was made.
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(e) Tax Distributions. The Company will make best efforts to provide the holders of Class A Units with annual tax Distributions, as reasonably determined by the Board.
Section 5.02 Limitations on Distributions.
No Distribution shall be made if, after giving effect to such Distribution, the Company would not be able to pay its debts as they become due in the ordinary course of business or the Company's total assets would be less than the sum of its total liabilities, in each case determined in accordance with the Act. The Board shall be entitled to establish such reasonable reserves as it deems necessary or appropriate prior to making any Distribution.
ARTICLE VI
MANAGEMENT
Section 6.01 Board of Managers.
The business and affairs of the Company shall be managed by or under the direction of the Board. The Board shall consist of not fewer than one (1) and not more than three (3) Managers, as determined from time to time in accordance with this Article VI. The initial Board shall consist of three (3) Managers.
Section 6.02 Designation of Managers.
(a) Investor Designation. For so long as the Investor holds more than fifty percent (50%) of the outstanding Class A Units, the Investor shall have the right to designate two (2) Managers (the "Investor Managers"). The initial Investor Managers are Jared Beilke and Nicholas Sarris.
(b) Holdings Designation. Holdings shall have the right to designate one (1) Manager (the "Holdings Manager"); provided, however, that (i) the Holdings Manager shall at no time constitute a majority of the total number of Managers serving on the Board, and (ii) for so long as any Exchangeable Units remain outstanding, Holdings shall not be entitled to appoint more than one (1) Manager. The initial Holdings Manager is Kyle Kazan.
(c) Limitations on Holdings Manager's Vote. Notwithstanding Section 6.01 and any other provision of this Agreement, during the Interim Period, the Holdings Manager shall not have the right to vote in his or her capacity as a Manager on any of the following matters (collectively, the "Reserved Operational Matters"):
(i) Approval of the Company's annual business plan or budget;
(ii) The appointment, removal, or replacement of any executive officer of the Company or any Subsidiary;
(iii) Compensation of executive officers of the Company or any Subsidiary;
(iv) Any matter that the Protection Agreement expressly requires the consent of Holdings in its capacity as a Member (as opposed to in its capacity as a Manager); or
(v) Any other matter as to which Holdings' consent is required pursuant to the Protection Agreement.
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(d) Removal and Replacement. Any Manager may be removed at any time, with or without cause, by the Member that designated such Manager. Vacancies on the Board shall be filled by the Member entitled to designate the vacant seat. In addition, any Manager shall be automatically and immediately removed from the Board if: (i) any Cannabis Regulatory Body determines that such Manager is not suitable to hold an interest or position in a cannabis business; (ii) any Cannabis Regulatory Body revokes or threatens to revoke a Cannabis License citing the unsuitability of such Manager; (iii) continued service of such Manager is made a condition of any regulatory proceeding affecting any Cannabis License; or (iv) such Manager repeatedly fails to attend required meetings with licensing authorities.
Section 6.03 Board Actions; Meetings.
(a) Meetings. The Board shall meet at least quarterly and at such other times as any Manager may request. Meetings may be held in person, by telephone, video conference, or other means of communication by which all participants can hear each other. Notice of any meeting shall be provided to each Manager at least five (5) Business Days in advance (or such shorter period as all Managers may agree).
(b) Quorum and Voting. A quorum shall consist of a majority of the total number of Managers then serving on the Board, provided that at least one Investor Manager is present. Except as set forth in Section 6.02(c) and Section 6.04, all decisions of the Board shall be made by a majority vote of the Managers present at a duly called meeting at which a quorum is present, or by written consent of a majority of all Managers then serving on the Board.
(c) Written Consent. Any action required or permitted to be taken at a meeting of the Board may be taken without a meeting if all Managers entitled to vote on such action consent thereto in writing.
Section 6.04 Supermajority and Unanimous Approval Matters.
During the Interim Period, the following actions shall require the unanimous approval of all Managers (including the Holdings Manager, except to the extent the Holdings Manager's vote is restricted pursuant to Section 6.02(c)):
(a) Any amendment to this Agreement, the Articles of Organization, or the Protection Agreement;
(b) Any merger, consolidation, restructuring, or recapitalization of the Company;
(c) Any dissolution or liquidation of the Company;
(d) Any issuance of Units or other securities of the Company (other than as expressly provided herein);
(e) Any sale of all or substantially all of the assets of the Company;
(f) Any incurrence of indebtedness exceeding $500,000 in the aggregate at any time outstanding; and
(g) Any transaction that would prevent, impede, delay, or restrict the conversion of Exchangeable Units into Class B Units pursuant to Section 3.04.
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For the avoidance of doubt, the foregoing list supplements, and does not supersede, any consent rights of Holdings set forth in the Protection Agreement. Any action by the Company that is not permitted by or would breach the Protection Agreement shall be void and of no force or effect.
Section 6.05 Officers.
The Board may, from time to time, designate one or more officers of the Company (each, an "Officer") with such titles and delegated authorities as the Board may determine. Any Officer shall serve until removed by the Board. The initial Officers are set forth on Exhibit B attached hereto. Any action taken by an Officer within the scope of such Officer's delegated authority shall bind the Company.
Section 6.06 No Control by Holdings.
Notwithstanding any other provision of this Agreement or the Protection Agreement, during the Interim Period, neither Parent nor Holdings shall have, nor shall be deemed to have, control of or the right to direct the business, operations, or activities of the Company or any Subsidiary. The covenants and consent rights set forth in the Protection Agreement are intended solely to preserve the value of the Exchangeable Units and do not, and shall not be construed to, constitute control of the Company by Holdings or Parent. The parties acknowledge and agree that this Section 6.06 is essential to achieving and maintaining GAAP deconsolidation of the Company from the Parent's consolidated financial statements.
Section 6.07 Fiduciary Duties.
Each Manager shall owe to the Company and the Members the fiduciary duties of loyalty and care imposed by applicable California law. Notwithstanding the foregoing, to the maximum extent permitted by the Act, no Manager shall be liable to the Company or to any Member for any act or omission made in good faith reliance on the provisions of this Agreement. To the fullest extent permitted under the Act, each Manager and each of its Affiliates may engage in, invest in, manage, advise, acquire, hold, develop, finance, pursue, or participate in any business, investment, transaction, venture, or opportunity, whether or not competitive with the Company and whether or not within the same or similar line of business as the Company, without any duty to present, offer, communicate, or otherwise make available that business, investment, transaction, venture, or opportunity to the Company or any Member.
ARTICLE VII
VOTING RIGHTS OF MEMBERS
Section 7.01 Voting Rights.
(a) Only holders of Voting Units (Class A Units and, following issuance, Class B Units) shall have the right to vote on any matter submitted to a vote of the Members. Each Voting Unit shall entitle the holder thereof to one (1) vote per Unit.
(b) Holders of Exchangeable Units shall have no voting rights and shall not be entitled to vote or consent on any matter, including without limitation any matter relating to the management, operation, or affairs of the Company.
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Section 7.02 Member Meetings; Written Consent.
The Members shall act by written consent or at meetings called and held in accordance with the Act. Any action required or permitted to be taken by the Members may be taken without a meeting if consented to in writing by Members holding a majority of the outstanding Voting Units entitled to vote thereon (or such higher percentage as may be required by this Agreement or the Act for a specific action).
Section 7.03 Matters Requiring Holdings Consent.
In addition to any voting rights set forth in Section 7.01, and notwithstanding the absence of voting rights attaching to Exchangeable Units, the following actions shall require the prior written consent of Holdings (in its capacity as holder of Exchangeable Units), which consent shall not be unreasonably withheld, conditioned, or delayed to the extent inconsistent with the Protection Agreement:
(a) Any amendment to this Agreement that would adversely affect the rights of Holdings as holder of Exchangeable Units in a manner disproportionate to the effect on holders of Voting Units;
(b) Any action that would result in the Exchangeable Units being entitled to fewer Class B Units upon conversion than would result under Section 3.04 on the date of this Agreement; and
(c) Any action expressly requiring Holdings' consent pursuant to the Protection Agreement.
ARTICLE VIII
TRANSFERS OF UNITS
Section 8.01 Restrictions on Transfer.
No Member may Transfer all or any portion of such Member's Units without the prior written consent of the Board, which consent may be granted or withheld in the Board's sole and absolute discretion, except for Transfers expressly permitted pursuant to Section 8.02. Any purported Transfer in violation of this Article VIII shall be null and void and of no force or effect, and the Company shall not recognize any such Transfer or register any such transferee as a Member.
Section 8.02 Permitted Transfers.
Notwithstanding Section 8.01:
(a) Holdings may Transfer Exchangeable Units to any wholly owned Subsidiary of Parent, provided that: (i) such transferee assumes all obligations of Holdings hereunder and under the Protection Agreement with respect to the transferred Units; (ii) all requisite Cannabis Regulatory Body approvals have been obtained; and (iii) such Transfer would not result in a breach of the Protection Agreement.
(b) The Investor may Transfer Class A Units to any Affiliate of the Investor, subject to: (i) the Board's reasonable consent; (ii) such transferee assuming all obligations of the Investor hereunder and under the Unit Purchase Agreement; (ii) such transferee can make all of the representations and warranties of Investor set forth in the Unit Purchase Agreement, (iii) such transferee would not be an Affected Member, and (iv) all requisite Cannabis Regulatory Body approvals having been obtained.
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(c) Any Transfer pursuant to the call right or put right set forth in the Unit Purchase Agreement.
No Transfer of any Units shall be effective unless the transferee has executed and delivered to the Company a joinder agreement in form and substance reasonably acceptable to the Board, pursuant to which the transferee agrees to be bound by all terms and conditions of this Agreement applicable to the transferring Member.
Section 8.03 Regulatory Compliance.
All Transfers of Units are subject to compliance with applicable Cannabis Laws and the prior approval of each applicable Cannabis Regulatory Body. The Company shall not record any Transfer in its Unit register until all required regulatory approvals have been obtained. Each Member agrees to cooperate with the Company and all applicable Cannabis Regulatory Bodies in connection with any required regulatory review of a proposed Transfer.
Section 8.04 Automatic Divestiture. If, during anytime while the Company or any Subsidiary holds a local or state license pursuant to applicable Cannabis Laws, any of the following occur to a Member or to a member, partner, or shareholder of an entity that is a Member, subject to the below, all interests of such Member (the "Affected Member") in the Company will automatically and immediately terminate, and the Affected Member will cease to be a Member:
(a) The Affected Member is charged with or convicted of any criminal offense, if a conviction of the offense in question would, pursuant to a Cannabis Law, disqualify the Affected Member from owning a marijuana business. However, where an Affected Member is only charged with a criminal offense and not convicted, and where the Cannabis Regulatory Body and local licensing authorities are subject to a stay order, then the Affected Member’s Units shall not be subject to divestiture under this Section 8.04;
(b) The Affected Member or any entity that it owns or controls incurs a revocation of any marijuana business license, and it is determined by the Board that such revocation has a material adverse effect upon the issuance or continued good standing of the Company’s marijuana business license;
(c) A Cannabis Regulatory Body or local licensing authority issues a formal recommendation stating that the Affected Member is unfit to have an ownership or economic interest in a marijuana business;
(d) A Cannabis Regulatory Body or local licensing authority issues a formal recommendation against the issuance to the Company of a marijuana business license or revokes a marijuana business license, which recommendation cites the participation of the Affected Member as a material factor in the decision, or a Cannabis Regulatory Body or local licensing authority conditions the issuance of a marijuana business license on the Company removing the Affected Member in the Company.
(e) A Cannabis Regulatory Body or local licensing authority advises the Company or any Subsidiary in writing, or it is otherwise determined by court order, that a decision on the Company’s or any Subsidiary’s marijuana business license is being delayed beyond one (1) year following the filing of the Company’s or any Subsidiary’s application for a marijuana business license, and the Company or any Subsidiary is advised before or after said date that the sole reason for such delay is the participation of or concerns about the Affected Member.
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(f) The Affected Member demonstrates a repeated failure to attend meetings with a Cannabis Regulatory Body or any local licensing authority as may be required for the Company or any Subsidiary business to be conducted. As used herein, repeated failure to attend shall be demonstrated by failure to attend any meeting without good cause, or any two (2) meeting with any licensing authority.
(g) The Affected Member fails to provide information to the Cannabis Regulatory Body which is requested by or required by a Cannabis Regulatory Body.
(h) If the Affected Member is a partnership or other business entity and not a natural person, a member of the Affected Member is disqualified from obtaining an ownership interest in a licensed marijuana business by final written determination of a Cannabis Regulatory Body, unless such member is divested from the Affected Member in a timely manner.
Section 8.05 Right to Transfer. In addition to the rights provided to an Affected Member in Section 8.06(a) below, prior to the automatic divestiture described above, for a period of twenty-one (21) days after a Member becomes an Affected Member such Affected Member shall have the right to Transfer its Units to an individual or entity that would not, upon such Transfer, be an Affected Member. Any such proposed Transfer that is not to a Permitted Transferee of the Affected Member shall be subject to the approval of the Board, acting in their sole discretion.
Section 8.06 Settling of Accounts Following Automatic Divestiture.
(a) The Company shall continue in existence notwithstanding the automatic termination of any Member pursuant to Section 8.04 above. Notwithstanding any provision of this Agreement to the contrary, if the Affected Member is an entity and the occurrence of any of the events enumerated in Section 8.04 above is due to a member, partner, shareholder or manager of the Affected Member, the Affected Member shall have an option to redeem its Units within 90 days of such divestiture and shall be restored to its ownership position before the divestiture events occur if the Board, a court of law, or a Cannabis Regulatory Body provides a written assurance or order that Affected Member has removed the member, shareholder or manager that caused any of the events enumerated in Section 8.04 above, pursuant to the terms of the Affected Member’s governing documents.
(b) Provided that there is no Transfer of the Affected Members Units pursuant to Section 8.05 above and the Affected Member’s Units is cancelled, the Company shall be liable for the terminated ownership interest of the Affected Member as follows: the Company shall deliver a note (the "Payoff Note") to the Affected Member for 100% of the for market value determined by the Managers based on the implied value of the Company pursuant to the most recent financing round, unless it is reasonably determined by the Company, that there has been (x) a material negative impact on the valuation of the Company since the most recent financing round or (y) the most recent financing round was completed more than 12 months prior to the date the Managers has notice of the event resulting in a member becoming an Affected Member, in which case the fair market value of the terminated ownership interest shall be determined by the Company, operating in good faith. The Payoff Note shall be payable over a three (3) year period and shall bear interest at a rate equal to the prime rate published in the Wall Street Journal on the date of payment plus one percent (1.0%) per annum or shall be discounted (using the same rate) to present value if an earlier payoff is required under the applicable Cannabis Law. The terms of the Payoff Note shall include equal monthly payments and shall be reasonable and customary for a transaction of this type. The Company may sell the Affected Member’s Units, in accordance with the terms of this Agreement, to finance the Payoff Note or for any other lawful reason.
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ARTICLE IX
BOOKS, RECORDS, AND REPORTING
Section 9.01 Books and Records.
The Company shall keep complete and accurate books and records of account of the Company's business and financial condition in accordance with U.S. generally accepted accounting principles ("GAAP"), applied consistently with prior periods.
Section 9.02 Financial Reporting.
The Company shall provide to Holdings (in addition to any reporting required under the Protection Agreement):
(a) Monthly unaudited financial statements (balance sheet, income statement, and statement of cash flows) within fifteen (15) calendar days following the end of each calendar month;
(b) Annual audited financial statements within ninety (90) days following the end of each Fiscal Year; and
(c) Such other financial information as Holdings may reasonably request from time to time.
Section 9.03 Regulatory Reporting.
The Company shall promptly notify Holdings in writing of: (i) any written notice, inquiry, or citation from any Cannabis Regulatory Body relating to any Cannabis License; (ii) any threatened or pending revocation, suspension, or modification of any Cannabis License; and (iii) any material change in the Company's relationship with any Governmental Authority affecting the Company's cannabis operations.
ARTICLE X
INDEMNIFICATION AND LIABILITY
Section 10.01 Indemnification.
To the fullest extent permitted by the Act, the Company shall indemnify and hold harmless each Manager, Officer, and Member, and each of their respective Affiliates, officers, directors, members, employees, and agents (each, a "Covered Person") from and against any and all claims, demands, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to any act or omission of such Covered Person on behalf of the Company in good faith and in a manner reasonably believed to be in the best interests of the Company, except to the extent such act or omission constitutes fraud, gross negligence, or willful misconduct. Any indemnification hereunder shall be made solely from the assets of the Company, and no Member shall have any personal liability therefor.
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Section 10.02 Limitation of Liability.
To the fullest extent permitted by the Act, no Covered Person shall be liable to the Company or to any Member for any loss, damage, or claim arising from any act or omission made in good faith reliance on the provisions of this Agreement.
Section 10.03 Insurance.
The Company may purchase and maintain directors' and officers' liability insurance and such other insurance as the Board deems appropriate to protect the Company and any Covered Person.
ARTICLE XI
DISSOLUTION AND WINDING UP
Section 11.01 Dissolution Events.
The Company shall dissolve and its affairs shall be wound up upon the occurrence of any of the following events:
(a) The unanimous written consent of all Members holding Voting Units;
(b) The entry of a judicial decree of dissolution pursuant to the Act; or
(c) Any other event giving rise to dissolution under the Act, unless the Members elect to continue the Company's existence pursuant to the Act.
For the avoidance of doubt, during the Interim Period, the Company may not be dissolved without the prior written consent of Holdings, which may be given or withheld in Holdings' sole discretion pursuant to the Protection Agreement.
Section 11.02 Winding Up.
Upon dissolution, the Company shall immediately commence winding up its affairs. The Board shall serve as the liquidating trustee (or shall appoint a liquidating trustee) and shall take all actions necessary to wind up the Company's affairs, including giving notice to creditors, collecting assets, paying liabilities, and distributing remaining assets as provided in Section 11.03.
Section 11.03 Distribution of Proceeds Upon Liquidation.
Upon the winding up of the Company, the assets of the Company shall be applied and distributed in the following order of priority:
(a) First, to creditors of the Company (including Members that are creditors, to the extent permitted by law) in satisfaction of all liabilities and obligations of the Company;
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(b) Second, to the establishment of any reserves that the liquidating trustee deems necessary for contingent or unliquidated liabilities; and
(c) Third, to the holders of Class A Units and Class B Units, pro rata in accordance with the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments for the taxable year of the Company during which the liquidation of the Company occurs. For the avoidance of doubt, holders of Exchangeable Units shall receive no distribution upon liquidation unless and until such Exchangeable Units have been converted into Class B Units pursuant to Section 3.04.
ARTICLE XII
TAX MATTERS
Section 12.01 Tax Classification.
The Company shall be treated as a partnership for U.S. federal income tax purposes (or such other classification as the Board may determine), and the parties intend that the Company shall not elect to be treated as a corporation for U.S. federal income tax purposes without the prior written consent of Holdings.
Section 12.02 Tax Representative.
The Board shall designate a "Tax Representative" (within the meaning of Section 6223 of the Internal Revenue Code) for the Company. The Tax Representative shall have all rights and obligations of a tax matters partner or partnership representative under applicable law. Holdings shall have the right to approve the identity of the Tax Representative, which approval shall not be unreasonably withheld.
Section 12.03 Allocations.
Except as otherwise required by the Internal Revenue Code or applicable Treasury Regulations, items of Company income, gain, loss, deduction, and credit shall be allocated among the Members in proportion to their respective Units, taking into account the non-participating nature of the Exchangeable Units for all economic purposes.
ARTICLE XIII
PROTECTION AGREEMENT; RELATIONSHIP TO OTHER AGREEMENTS
Section 13.01 Protection Agreement.
The Company and the Members acknowledge that the Company is a party to the Protection Agreement and that the covenants and obligations set forth therein are incorporated herein by reference. To the extent of any conflict or inconsistency between this Agreement and the Protection Agreement, the Protection Agreement shall control. Any action by the Company, any Manager, or any Officer that is not permitted by or would breach the Protection Agreement is void and of no force or effect, and the Company shall have no authority to take any such action. Each Member represents that it has received and reviewed the Protection Agreement and is in agreement with its terms. Each Member agrees not to take any action that could cause the Protection Agreement to be breached by the Company.
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Section 13.02 Unit Purchase Agreement.
The Company acknowledges that it is a party to the Unit Purchase Agreement and that the terms thereof govern the call right and put right with respect to the Class A Units, among other matters. The Company shall perform its obligations under the Unit Purchase Agreement in accordance with its terms.
Section 13.03 Consulting Services Agreement.
The Company and the Members acknowledge that the Company has entered into or anticipates entering into a Consulting Services Agreement (the "CSA") with a subsidiary of Parent, pursuant to which such subsidiary shall provide certain management, consulting, advisory, and administrative services to the Company. The CSA shall be on arm's-length terms, with fees structured as cost reimbursement plus a margin, subject to a cap, and shall be terminable by either party on not fewer than ninety (90) days' prior written notice. The terms of the CSA shall not confer upon Parent or Holdings any right to direct or control the business, operations, or activities of the Company for purposes of Section 6.06 or for any GAAP consolidation analysis. Each Member represents that it has received and reviewed the CSA and is in agreement with its terms. Each Member agrees not to take any action that could cause the CSA to be breached by the Company.
ARTICLE XIV
MISCELLANEOUS
Section 14.01 Amendments.
This Agreement may be amended only by a written instrument signed by (i) Members holding a majority of the outstanding Voting Units, (ii) Holdings (in its capacity as holder of Exchangeable Units, to the extent such amendment would adversely affect the rights of Holdings as holder of Exchangeable Units or potential future holder of Class B Units or would otherwise require Holdings' consent pursuant to Section 7.03 or the Protection Agreement), and (iii) as required by Section 6.04. Notwithstanding the foregoing, no amendment shall be effective that would: (a) impair the conversion rights of Holdings with respect to the Exchangeable Units; (b) reduce or eliminate the Monthly Distribution Cap protections; or (c) modify Article XIII, in each case without the prior written consent of Holdings.
Section 14.02 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflicts of law, except to the extent that the Act mandates the application of any other law.
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Section 14.03 Dispute Resolution.
Any dispute, claim, or controversy arising out of or relating to this Agreement, including the breach, termination, enforcement, interpretation, or validity thereof, shall be resolved by binding arbitration in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, before a single arbitrator with experience in California business law. Judgment upon the award may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, each party shall be entitled to seek injunctive relief or specific performance in any court of competent jurisdiction without waiving the right to arbitrate the underlying dispute, and without the necessity of proving damages or posting any bond.
Section 14.04 Specific Performance.
The parties acknowledge that the rights and obligations hereunder are unique and that monetary damages may be an inadequate remedy for any breach. Each party shall therefore be entitled to seek specific performance and injunctive relief in addition to any other remedy available at law or in equity.
Section 14.05 Entire Agreement.
This Agreement, together with the Unit Purchase Agreement, the Protection Agreement, and the CSA, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, and discussions, whether oral or written, between the parties relating to the subject matter hereof, including the Prior Agreement.
Section 14.06 Severability.
If any provision of this Agreement is held to be invalid, illegal, or unenforceable in any jurisdiction, such provision shall be ineffective only to the extent of such invalidity, illegality, or unenforceability without affecting the remaining provisions hereof, and the parties shall negotiate in good faith to replace such provision with a valid provision that, as nearly as possible, achieves the same economic effect.
Section 14.07 Counterparts; Electronic Signatures.
This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Electronic signatures shall be deemed valid and binding to the same extent as original signatures.
Section 14.08 Notices.
All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be deemed delivered: (a) upon personal delivery; (b) the next Business Day after delivery to a nationally recognized overnight courier with tracking confirmation; or (c) upon confirmed email transmission, in each case addressed to the parties at the addresses set forth on Exhibit A, or such other address as a party may designate by written notice.
Section 14.09 Waiver.
No waiver of any provision of this Agreement shall be effective unless in writing. No failure or delay by any party in exercising any right hereunder shall operate as a waiver thereof.
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Section 14.10 No Third-Party Beneficiaries.
Except as expressly set forth herein, nothing in this Agreement is intended to confer upon any Person other than the parties hereto any rights, benefits, or remedies of any nature.
Section 14.11 Further Assurances.
Each party shall execute and deliver such additional documents, instruments, and agreements, and shall take such further actions, as may be reasonably necessary or appropriate to carry out the purposes and intent of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Second Amended and Restated Limited Liability Company Agreement as of the date first written above.
INVESTOR:
NSJB INVESTMENTS LLC, a California limited liability company
| By: | /s/ Jared Beilke | |
| Name: Jared Beilke | ||
| Title: CEO | ||
HOLDINGS:
GHB USUB, LLC, a Delaware limited liability company
| By: | /s/ Kyle Kazan | |
| Name: Kyle Kazan | ||
| Title: Manager | ||
COMPANY:
GLASS HOUSE RETAIL, LLC, a California limited liability company
| By: | /s/ Kyle Kazan | |
| Name: Kyle Kazan | ||
| Title: Manager | ||
Signature Page to Glass House Retail Second A&R Operating Agreement
EXHIBIT A
UNIT REGISTER AND MEMBER INFORMATION
As of the Effective Date
| Member | Class of Units | Number of Units | Address for Notices |
| NSJB Investments LLC | Class A Units | 100 | 5855 Topanga Cyn. Blvd, Suite 300 Woodland Hills, CA 91367 |
| GHB Usub, LLC | Exchangeable Units | 900 | 3645 Long Beach Boulevard, Long Beach, California 90807 |
| TOTAL | 1,000 |
EXHIBIT B
INITIAL OFFICERS
| Title | Name |
| Chief Executive Officer | Jennifer Barry |
Exhibit 99.3
CLASS A UNIT PURCHASE AGREEMENT
by and among
GLASS HOUSE RETAIL, LLC,
a California limited liability company
— and —
NSJB INVESTMENTS LLC,
a California limited liability company
— and —
GLASS HOUSE BRANDS INC.,
a British Columbia corporation
Dated as of June 12, 2026
CLASS A UNIT PURCHASE AGREEMENT
This Class A Unit Purchase Agreement (this "Agreement") is entered into as of June 12, 2026 (the "Effective Date"), by and among Glass House Retail, LLC, a California limited liability company (the "Company"), NSJB Investments LLC, a California limited liability company (the "Investor"), and Glass House Brands Inc., a British Columbia corporation ("Parent").
RECITALS
WHEREAS, Parent, through its indirect wholly-owned subsidiary GHB Usub, LLC ("Holdings"), currently holds one hundred percent (100%) of the membership interests of the Company, which in turn holds the adult-use and medical cannabis retail business of Parent in the State of California;
WHEREAS, Parent desires to deconsolidate the financial results of the Company from Parent's consolidated financial statements for U.S. GAAP purposes (the "Deconsolidation Transaction") in order to segregate the Company's cannabis retail operations from Parent's cultivation and other operations and to apply to list Parent's shares on the New York Stock Exchange (the "NYSE");
WHEREAS, to effect the Deconsolidation Transaction, the parties intend that: (i) the Company shall amend and restate its operating agreement to establish a three-class unit structure consisting of Class A Units, Class B Units (issuable upon conversion of Exchangeable Units), and Exchangeable Units; (ii) the Investor shall acquire one hundred (100) Class A Units of the Company, representing all of the outstanding voting and a ten percent (10%) economic interest, in exchange for the Investment Amount (as defined below); and (iii) Holdings shall retain nine hundred (900) Exchangeable Units representing a ninety percent (90%) economic interest (non-voting until conversion); and
WHEREAS, concurrently herewith, the parties are entering into (i) that certain Second Amended and Restated Limited Liability Company Agreement of the Company (the "LLC Agreement"), and (ii) that certain Protection Agreement by and among Parent, Holdings, and the Company (the "Protection Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the LLC Agreement. The following terms have the meanings set forth below:
"Affiliate" has the meaning set forth in the LLC Agreement.
"Business Day" means any day other than a Saturday, Sunday, or federal holiday in the United States.
"Call Right" has the meaning set forth in Section 3.01.
"Class A Units" has the meaning set forth in the LLC Agreement.
"Closing" has the meaning set forth in Section 2.03.
"Closing Date" has the meaning set forth in Section 2.03.
"DCC" means the California Department of Cannabis Control, or any successor agency.
"Encumbrance" means any lien, pledge, mortgage, deed of trust, security interest, charge, claim, encumbrance, or restriction of any kind.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the fair market value of the Class A Units as determined by a nationally recognized independent appraisal firm selected by mutual agreement of the Company and the Investor (or, if the parties cannot agree within ten (10) Business Days, by a firm selected by the American Arbitration Association), whose determination shall be final and binding on the parties, or determined by mutual agreement of the parties, each acting reasonably. All costs of such appraisal shall be borne equally by the Company and the Investor.
"Holdings" means GHB Usub, LLC, a Delaware limited liability company.
"Investment Amount" has the meaning set forth in Section 2.01.
"LLC Agreement" has the meaning set forth in the recitals.
"Permitted Transfer" has the meaning set forth in the LLC Agreement.
"Protection Agreement" has the meaning set forth in the recitals.
"Put Right" has the meaning set forth in Section 3.02.
"Repurchase/Put Price" means the Fair Market Value of the Class A Units at the time of exercise of the Call Right or Put Right, as applicable, with no discount for minority interest or lack of marketability.
"Triggering Event Date" has the meaning set forth in the LLC Agreement.
ARTICLE II
PURCHASE AND SALE OF CLASS A UNITS
Section 2.01 Purchase and Sale.
Subject to the terms and conditions of this Agreement, at the Closing, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, one hundred (100) Class A Units (the "Purchased Units") for an aggregate purchase price of $2,500,000 (the "Investment Amount"), which the parties agree represents the fair market value of a ten percent (10%) interest in the Company as of the Closing Date. The Investor shall issue a promissory note (the “Purchase Note”) to the Company, dated as of the Closing Date and in the form agreed to between the Company and the Investor, in the original principal amount of the Investment Amount.
Section 2.02 Regulatory Conditions.
The obligations of the parties to consummate the Closing are conditioned upon, among other things, the receipt of all required approvals from the DCC and each applicable local licensing authority with jurisdiction over any Cannabis License held by the Company or any Subsidiary (collectively, the "Regulatory Approvals"). The parties shall cooperate in good faith and use commercially reasonable efforts to obtain all Regulatory Approvals as promptly as practicable. The Investor shall, at its sole cost and expense, (i) submit to all required background investigations, (ii) provide all required financial disclosures, and (iii) comply with all applicable Cannabis Laws in connection with the Investor's acquisition of the Class A Units.
Section 2.03 Closing.
The closing of the purchase and sale of the Purchased Units (the "Closing") shall take place on the date (the "Closing Date") that is no later than three (3) Business Days following the satisfaction or waiver of all conditions set forth in Article VII of this Agreement (other than conditions that by their nature are to be satisfied at the Closing), or such other date as the parties may mutually agree. At the Closing:
(a) the Investor shall issue to the Company the Purchase Note;
(b) the Company shall update its Unit register to reflect the issuance of the Purchased Units to the Investor;
(c) the parties shall execute and deliver the LLC Agreement, the Protection Agreement, and the Consulting Services Agreement;
(d) the Investor shall deliver to the Company evidence of all Regulatory Approvals obtained as of the Closing Date;
| (e) | the Investor shall deliver to the Company a completed and executed accredited investor questionnaire; and |
(f) the Company and Parent shall each deliver such certificates, resolutions, and other documents as are customary for a transaction of this type.
ARTICLE III
CALL RIGHT; PUT RIGHT
Section 3.01 Call Right.
(a) Grant. Following the Triggering Event Date, the Company (or, at the Company's election, Holdings or its designee) shall have the right, but not the obligation, to purchase all (and not less than all) of the Class A Units held by the Investor at the Repurchase/Put Price (the "Call Right") by delivering written notice to the Investor (a "Call Notice").
(b) Closing. The closing of a Call Right exercise shall occur no later than thirty (30) days following delivery of the Call Notice (or such longer period as may be necessary to obtain required Regulatory Approvals, as determined in the Company’s sole discretion). At such closing, the Company (or its designee) shall pay the Repurchase/Put Price to the Investor in cash by wire transfer, or, if Investor does not provide wire transfer instructions, by check to the address of the Investor on file with the Company. The Company shall offset any amounts owed under the Purchase Note, including all accrued interest, when paying the Repurchase/Put Price. At such closing, the Class A Units shall Transfer to the Company (or its designee), free and clear of all Encumbrances, automatically and with no further action needed by Investor. Investor shall provide to the Company any documents or materials reasonably requested by the Company as part of the exercise of the Call Right.
(c) Regulatory Approvals. Any exercise of the Call Right is subject to receipt of all required Regulatory Approvals. The Company shall use commercially reasonable efforts to obtain such approvals as promptly as practicable following delivery of a Call Notice.
Section 3.02 Put Right.
(a) Grant. Following the Triggering Event Date, the Investor shall have the right, but not the obligation, to require the Company (or, at Parent's election, Holdings or its designee) to purchase all (and not less than all) of the Class A Units held by the Investor at the Repurchase/Put Price (the "Put Right") by delivering written notice to the Company and Parent (a "Put Notice").
(b) Closing. The closing of a Put Right exercise shall occur no later than thirty (30) days following delivery of the Put Notice (or such longer period as may be necessary to obtain required Regulatory Approvals). At such closing, the Company (or its designee) shall pay the Repurchase/Put Price to the Investor in cash by wire transfer, and the Investor shall Transfer all Class A Units to the Company (or its designee) free and clear of all Encumbrances.
(c) Regulatory Approvals. Any exercise of the Put Right is subject to receipt of all required Regulatory Approvals. The Company and Holdings shall cooperate and use commercially reasonable efforts to obtain such approvals as promptly as practicable.
Section 3.03 Repurchase/Put Note.
Notwithstanding the payment provisions in Section 3.01 or Section 3.02 above, the Company or its designee shall have the option to pay for any exercise of a Call Right or Put Right by issuing to the Investor a promissory note in the initial principal amount of the Repurchase/Put Price (the “Repurchase/Put Note”). The Repurchase/Put Note shall be payable over a five (5) year period and shall bear interest at the same rate as set forth in the Purchase Note, and shall otherwise have terms substantially similar as the Purchase Note or as otherwise agreed to by the parties, acting reasonably.
ARTICLE IV
BOARD NOMINATION RIGHTS
Section 4.01 Board Nomination.
For so long as the Investor holds more than fifty percent (50%) of the outstanding Class A Units, the Investor shall be entitled to designate two (2) Managers to the Board pursuant to and in accordance with the LLC Agreement. The Investor's initial Manager designees are Jared Beilke and Nicholas Sarris. The Investor may remove and replace its designated Managers at any time by written notice to the Company. Upon any decrease in the Investor's ownership of Class A Units to fifty percent (50%) or less, the Investor's right to designate two (2) Managers shall automatically be reduced to one (1) Manager.
Section 4.02 Cooperation.
Parent and the Company shall take all actions necessary or appropriate to give effect to the Investor's board nomination rights set forth herein, including causing Holdings to vote its Voting Units in favor of the Investor's designees and promptly updating the Company's Unit register and organizational records.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties of the Company and Parent.
Each of the Company and Parent hereby represents and warrants to the Investor, as of the Closing Date, as follows:
(a) Organization. The Company is duly organized and validly existing under the laws of the State of California. Parent is duly organized and validly existing under the laws of British Columbia. Each has all requisite power and authority to execute, deliver, and perform its obligations under this Agreement.
(b) Authorization. The execution, delivery, and performance of this Agreement by the Company and Parent have been duly authorized by all necessary action. This Agreement constitutes the legal, valid, and binding obligation of the Company and Parent, enforceable against each in accordance with its terms, subject to applicable bankruptcy, insolvency, and equitable principles.
(c) Valid Issuance. The Purchased Units, when issued and delivered at the Closing in accordance with this Agreement, will be duly authorized, validly issued, fully paid, and non-assessable, free and clear of all Encumbrances (other than restrictions set forth in the LLC Agreement).
(d) No Conflicts. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not violate any law, regulation, order, or material contract applicable to the Company or Parent.
(e) Cannabis Licenses. As of the Closing Date, the Company and its Subsidiaries hold all Cannabis Licenses necessary to conduct the Company's business as currently conducted, and all such licenses are in full force and effect.
(f) Capitalization. As of the Closing Date, immediately following the Closing, the Company's outstanding Units shall consist of (i) one hundred (100) Class A Units held by the Investor and (ii) nine hundred (900) Exchangeable Units held by Holdings, and no other Units shall be outstanding.
(g) No Litigation. There is no pending or, to the knowledge of the Company, threatened action, suit, or proceeding that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company or its ability to consummate the transactions contemplated hereby.
Section 5.02 Representations and Warranties of the Investor.
The Investor hereby represents and warrants to the Company and Parent, as of the Closing Date, as follows:
(a) Organization. The Investor is duly organized and validly existing under the laws of its jurisdiction of formation. The Investor has all requisite power and authority to execute, deliver, and perform its obligations under this Agreement.
(b) Authorization. The execution, delivery, and performance of this Agreement by the Investor have been duly authorized by all necessary action. This Agreement constitutes the legal, valid, and binding obligation of the Investor, enforceable against it in accordance with its terms.
(c) Investment Intent. The Investor is acquiring the Purchased Units for its own account, for investment purposes only, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of applicable securities laws. The Investor is an "accredited investor" as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.
(d) Cannabis Regulatory Eligibility. The Investor and each of its principals is eligible to hold an ownership interest in a California cannabis licensee and is not subject to any disqualification under applicable Cannabis Laws. The Investor shall promptly notify the Company if any fact arises that would affect such eligibility. The Investor will not be, as of Closing, an Affected Member.
(e) No Conflicts. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not violate any law, regulation, order, or material contract applicable to the Investor.
(f) Sufficient Funds. The Investor has, or will have at Closing, sufficient funds to pay the Investment Amount.
ARTICLE VI
COVENANTS
Section 6.01 Regulatory Cooperation.
Each party shall cooperate fully with all applicable Cannabis Regulatory Bodies in connection with any required regulatory review, background investigation, or approval process related to the transactions contemplated by this Agreement. The Investor shall promptly provide all required disclosures, submit to all required background investigations, and take all other actions necessary to obtain and maintain the Regulatory Approvals. Each party shall promptly notify the others of any communication received from any Cannabis Regulatory Body, or any other regulatory body, in connection with the transactions contemplated herein.
Section 6.02 Conduct Prior to Closing.
During the period from the date of this Agreement until the Closing Date, the Company shall (i) conduct its business in the ordinary course consistent with past practice, (ii) use commercially reasonable efforts to maintain its Cannabis Licenses in full force and effect, (iii) promptly notify Parent and the Investor of any material adverse development relating to the Company's business, and (iv) not take any action that would be prohibited under the Protection Agreement following the Closing.
Section 6.03 Public Announcements.
No party shall make any public announcement or disclosure regarding this Agreement or the transactions contemplated herein without the prior written consent of the other parties, except as required by applicable law or stock exchange requirements (including CBOE Canada and applicable Canadian securities laws). In the event disclosure is required by law, the disclosing party shall provide as much advance notice as practicable and shall consult with the other parties regarding the content of such disclosure.
Section 6.04 Further Assurances.
Each party shall execute and deliver such additional documents and instruments, and shall take such further actions, as may be reasonably necessary or appropriate to carry out the purposes and intent of this Agreement and to consummate the Deconsolidation Transaction.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.01 Conditions to Each Party's Obligations.
The obligations of each party to consummate the Closing are subject to the satisfaction (or waiver in writing by such party) of the following conditions:
(a) No law, order, injunction, or other legal impediment shall be in effect that prohibits or makes illegal the consummation of the transactions contemplated hereby.
(b) All required Regulatory Approvals from the DCC and all applicable local licensing authorities shall have been obtained and shall be in full force and effect.
(c) The lender under the Company's and Parent's senior secured credit facility shall have provided its consent to, or confirmation of non-triggering of, the Change of Control provisions and other applicable covenants in connection with the Deconsolidation Transaction.
Section 7.02 Additional Conditions to Company's and Parent's Obligations.
The obligations of the Company and Parent to consummate the Closing are additionally subject to:
(a) The representations and warranties of the Investor set forth in Section 5.02 being true and correct in all material respects as of the Closing Date.
(b) The Investor having performed in all material respects all of its obligations required to be performed under this Agreement on or prior to the Closing Date.
Section 7.03 Additional Conditions to Investor's Obligations.
The obligations of the Investor to consummate the Closing are additionally subject to:
(a) The representations and warranties of the Company and Parent set forth in Section 5.01 being true and correct in all material respects as of the Closing Date.
(b) The Company and Parent having performed in all material respects all of their obligations required to be performed under this Agreement on or prior to the Closing Date.
(c) No Material Adverse Effect having occurred with respect to the Company or its business since the date of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Governing Law; Dispute Resolution.
This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. Any dispute, claim, or controversy arising out of or relating to this Agreement, including the breach, termination, enforcement, interpretation, or validity thereof, shall be resolved by binding arbitration in Los Angeles, California , in accordance with the Commercial Arbitration Rules of the American Arbitration Association, before a single arbitrator with experience in California business law. Judgment upon the award may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, each party shall be entitled to seek injunctive relief or specific performance in any court of competent jurisdiction without waiving the right to arbitrate the underlying dispute, and without the necessity of proving damages or posting any bond.
Section 8.02 Entire Agreement.
This Agreement, together with the LLC Agreement, the Protection Agreement, and the Consulting Services Agreement, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior negotiations and understandings relating thereto.
Section 8.03 Amendments; Waivers.
This Agreement may be amended only by a written instrument signed by all parties. No waiver shall be effective unless in writing and signed by the waiving party.
Section 8.04 Counterparts; Electronic Signatures.
This Agreement may be executed in counterparts, each of which shall constitute an original. Electronic signatures shall be valid and binding to the same extent as original signatures.
Section 8.05 Notices.
All notices shall be in writing and delivered in accordance with the notice provisions of the LLC Agreement.
Section 8.06 Severability.
If any provision of this Agreement is held invalid or unenforceable, such provision shall be modified to the minimum extent necessary to make it valid and enforceable, and the remaining provisions shall continue in full force and effect.
Section 8.07 No Third-Party Beneficiaries.
Except as expressly provided herein, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Class A Unit Purchase Agreement as of the date first written above.
COMPANY:
GLASS HOUSE RETAIL, LLC,
a California limited liability company
| By: | /s/ Kyle Kazan | |
| Name: Kyle Kazan | ||
| Title: Manager | ||
PARENT:
GLASS HOUSE BRANDS INC.,
a British Columbia corporation
| By: | /s/ Kyle Kazan | |
| Name: Kyle Kazan | ||
| Title: Chief Executive Officer | ||
INVESTOR:
NSJB INVESTMENTS LLC,
a California limited liability company
| By: | /s/ Jared Beilke | |
| Name: Jared Beilke | ||
| Title: Chief Executive Officer | ||
Exhibit 99.4
PROTECTION AGREEMENT
by and among
GLASS HOUSE BRANDS INC.,
a British Columbia corporation
— and —
GHB USUB, LLC,
a Delaware limited liability company
— and —
GLASS HOUSE RETAIL, LLC,
a California limited liability company
Dated as of June 12, 2026
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PROTECTION AGREEMENT
This Protection Agreement (this "Agreement") is entered into as of June 12, 2026 (the "Effective Date"), by and among Glass House Brands Inc., a British Columbia corporation ("Parent"), GHB Usub, LLC, a Delaware limited liability company and indirect wholly-owned subsidiary of Parent ("Holdings"), and Glass House Retail, LLC, a California limited liability company (the "Company").
RECITALS
WHEREAS, Holdings holds nine hundred (900) Exchangeable Units of the Company (the "Exchangeable Units"), representing a ninety percent (90%) economic interest in the Company that is non-voting and non-participating until converted to Class B Units following the Triggering Event Date, pursuant to the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of the date hereof (the "LLC Agreement");
WHEREAS, NSJB Investments LLC (the "Investor") holds one hundred (100) Class A Units of the Company, representing a ten percent (10%) voting and economic interest, pursuant to the LLC Agreement and that certain Class A Unit Purchase Agreement, dated as of the date hereof (the "Unit Purchase Agreement");
WHEREAS, Parent and Holdings desire to preserve the value of the Exchangeable Units during the period from the Effective Date until conversion of all Exchangeable Units into Class B Units (the "Interim Period"), and the Company desires to provide covenants to Parent and Holdings to that effect; and
WHEREAS, the parties acknowledge that this Agreement is intended solely to preserve the value of Holdings' Exchangeable Units and does not, and shall not be construed to, confer upon Parent or Holdings the right to direct or control the business, operations, or activities of the Company during the Interim Period;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.
Capitalized terms used but not defined herein have the meanings ascribed to them in the LLC Agreement or the Unit Purchase Agreement. The following additional terms have the meanings set forth below:
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"Affiliate" means, with respect to the Person to which it refers, (i) a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such Person, (ii) any officer, director, manager, member or shareholder of such Person, (iii) any parent, sibling, descendant or spouse of such Person or of any of the Persons referred to in clauses (i) and (ii), and (iv) any corporation, limited liability company, general or limited partnership, trust, association or other business or investment entity that directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with any of the foregoing individuals. For purposes of this definition, the term "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise;
"Business Day" means any day other than a Saturday, Sunday, or federal holiday in the United States.
"Cannabis License" has the meaning set forth in the LLC Agreement.
"Conversion Date" has the meaning set forth in the LLC Agreement.
"Conversion Event" has the meaning set forth in the LLC Agreement.
"DCC" means the California Department of Cannabis Control, or any successor agency.
"Elevated Cap" has the meaning set forth in Section 3.02(b).
"Exchangeable Units" has the meaning set forth in the recitals.
"Final Order Date" means the date on which the U.S. Department of Justice issues a final order reclassifying marijuana for adult non-medical (recreational) use to Schedule III of the Controlled Substances Act.
"Holdings" has the meaning set forth in the preamble.
"Interim Period" has the meaning set forth in the recitals.
"LLC Agreement" has the meaning set forth in the recitals.
"Material Contract" means any contract, agreement, or commitment to which the Company or any Subsidiary is a party involving aggregate consideration or value in excess of $500,000 per year.
"Monthly Distribution Cap" has the meaning set forth in Section 3.02.
"Parent" has the meaning set forth in the preamble.
"Permitted Liens" means any (i) purchase-money security interest or capital lease incurred in connection with the purchase or leasing of capital equipment, (ii) lien securing indebtedness permitted under this Agreement, and (iii) lien consented to in writing by Holdings.
"Pre-Order Cap" has the meaning set forth in Section 3.02(a).
"Repurchase Right" has the meaning set forth in Section 2.01(d).
"Standard Cap" has the meaning set forth in Section 3.02(c).
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"Tax" or "Taxes" means any federal, state, local and foreign net income, alternative or add-on minimum, estimated, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital profits, lease, service, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, abandoned property or escheat, environmental or windfall profit tax, customs duty or other tax, governmental fee or other like assessment or charge (and any liability incurred or borne by virtue of the application of Treasury Regulation Section 1.1502-6 (or any similar or corresponding provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise), together with all interest, penalties, additions to tax and additional amounts with respect thereto, whether disputed or not;
"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof;
"Triggering Event Date" has the meaning set forth in the LLC Agreement.
"Unit Purchase Agreement" has the meaning set forth in the recitals.
ARTICLE II
NEGATIVE COVENANTS OF THE COMPANY
Section 2.01 Restricted Actions During Interim Period.
During the Interim Period, the Company shall not, and shall cause each Subsidiary not to, take any of the following actions without the prior written consent of Holdings, which consent may be granted or withheld in Holdings' sole and absolute discretion:
(a) Amend, restate, supplement, or otherwise modify the LLC Agreement, the Articles of Organization of the Company, or the organizational documents of any Subsidiary in any manner that would adversely affect the rights of Holdings as holder of the Exchangeable Units, as a potential future holder of Class B Units, or the rights of Holdings hereunder;
(b) Declare or pay any Distribution to holders of Class A Units in excess of the Monthly Distribution Cap applicable under Section 3.02; or declare, pay, or set aside any Distribution of any kind to holders of Exchangeable Units prior to the Conversion Date;
(c) Issue, sell, or grant any Units, equity securities, options, warrants, profits interests, or other rights to acquire equity securities of the Company or any Subsidiary to any Person other than Holdings, except that the Company may issue additional Class A Units to the Investor in connection with the adjustment mechanism set forth in Section 3.05 of the LLC Agreement, provided that any such additional Units shall be subject to a Repurchase Right (as defined below);
(d) Incur, assume, guarantee, or otherwise become liable for any indebtedness for borrowed money or any capitalized lease obligation in excess of $500,000 in aggregate outstanding principal amount at any time;
(e) Merge or consolidate with, or sell, transfer, or otherwise dispose of all or substantially all of the assets of the Company or any Subsidiary to, any third party;
(f) Adopt a plan of liquidation or dissolution with respect to the Company or any Subsidiary;
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(g) Enter into any contract, agreement, or arrangement (including any amendment to an existing Material Contract) that restricts, impairs, or conditions Holdings' ability to convert the Exchangeable Units into Class B Units pursuant to the LLC Agreement, or that would otherwise prevent, delay, or impede the consummation of any Conversion Event or restrict or otherwise adversely affect the exercise of the Call Right;
(h) Take any action that would (i) cause the Company to no longer be treated as a partnership (or disregarded entity) for U.S. federal income tax purposes, (ii) cause a termination of the Company for U.S. federal income tax purposes, or (iii) result in the Company being required to register as an investment company under the Investment Company Act of 1940;
(i) Create or permit to exist any Encumbrance on any of the Class A Units, the Exchangeable Units or the Class B Units issuable upon conversion thereof;
(j) Enter into any related-party transaction with the Investor or any Affiliate of the Investor (other than distributions pursuant to the LLC Agreement) involving consideration in excess of $100,000 without the prior written approval of Holdings;
(k) Adopt, amend, or terminate any equity incentive plan, phantom equity plan, or similar arrangement for employees, managers, or officers of the Company;
(l) Commence any voluntary bankruptcy, insolvency, restructuring, or similar proceeding with respect to the Company or any Subsidiary;
(m) Relocate or expand the Company's cannabis retail operations to any jurisdiction outside the State of California;
(n) Reclassify any Units or other equity securities of the Company or any Subsidiary;
(o) Redeem, repurchase, or otherwise acquire, or offer to redeem, repurchase, or otherwise acquire, any Units or other equity securities of the Company or any Subsidiary;
(p) Create any new Subsidiary, other than a Subsidiary that is wholly-owned by the Company or another wholly-owned Subsidiary of the Company, or cause any wholly-owned Subsidiary of the Company to become non-wholly-owned;
(q) Amend the terms of any Units or other equity securities of the Company or any Subsidiary;
(r) Enter into any contract that provides for a payment to any current, former, or future employee, manager, or officer of the Company or any Subsidiary in the event that (i) Holdings converts the Exchangeable Units into Class B Units, or (ii) Parent or an Affiliate of Parent acquires the Company;
(s) Make any loan to any officer, manager, director, employee, or consultant of the Company or any Subsidiary;
(t) Enter into any contract or other arrangement that limits or restricts in any material respect the Company, any Subsidiary, or any successor thereto, or that would, following the Interim Period, limit or restrict in any material respect Parent, Holdings, or any of their respective Affiliates, from competing in any manner;
(u) Pledge or otherwise encumber, or authorize the pledge or other encumbrance of, any Units or other equity securities of the Company or any Subsidiary, or any options, warrants, or other rights to acquire equity securities of the Company or any Subsidiary, other than Permitted Liens;
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(v) Knowingly take any action, or fail to take any action, that would result in the loss, expiration, or surrender of, or the loss of any material benefit under, or could reasonably be expected to cause any Governmental Authority to institute proceedings for the suspension, revocation, or limitation of rights under, any Cannabis License or other material permit, license, or authorization necessary to conduct the Company's business as currently conducted, or fail to prosecute any pending applications to any Governmental Authority for any such material permit, license, or authorization;
(w) Take any action, or refrain from taking any action, or permit any action to be taken or not taken, that could reasonably be expected to prevent, materially delay, or otherwise impede the ability of Holdings to convert the Exchangeable Units into Class B Units; or
(x) Increase the salary, bonus, or other compensation payable to any Officer, Manager, or key employee of the Company or any Subsidiary, or grant any severance or termination pay to any such Person, other than increases in the ordinary course of business consistent with past practice;
| (y) | Conduct the business of the Company or any Subsidiary in any manner that violates any applicable Law, rule, or regulation in any material respect, or take any action that would constitute a criminal offense or give rise to material civil liability; |
(z) Take any action, or fail to take any action, that would reasonably be expected to result in Parent or any of its securities being delisted from, or failing to satisfy the continued listing requirements of, the New York Stock Exchange or any other national securities exchange on which Parent's securities are listed; and
(aa) Agree or commit to do any of the foregoing.
Any action taken by the Company, any Manager, or any Officer in violation of this Section 2.01 without the required consent of Holdings shall be void ab initio and of no force or effect, and the Company expressly has no authority to take any such action.
Section 2.02 [RESERVED].
Section 2.03 Affirmative Covenants of the Company.
During the Interim Period, the Company shall:
(a) Conduct its business in the ordinary course consistent with past practice and in compliance with all applicable Cannabis Laws;
(b) Use commercially reasonable efforts to maintain all Cannabis Licenses in good standing and in full force and effect;
(c) Use commercially reasonable efforts to maintain the value of the Company's business and assets and not take any action designed to impair the value of the Exchangeable Units;
(d) Maintain books and records in accordance with U.S. GAAP, applied consistently;
(e) Maintain the minimum liquidity required by any applicable senior secured credit facility or similar debt obligation to which the Company is a party;
(f) Comply with the reporting obligations set forth in Article IV;
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(g) Do or cause to be done all things necessary to preserve and maintain the existence of the Company and each Subsidiary;
(h) Take all actions necessary or desirable to maintain the Company's and each Subsidiary's good standing and qualification to conduct business in the State of California and any other jurisdiction in which it is so qualified, including filing all applicable annual reports, paying all applicable franchise or similar Taxes, and maintaining all applicable franchises, permits, and qualifications;
(i) Prepare and file when due all Tax Returns required to be filed by the Company and each Subsidiary (except for any Tax Return for which an extension has been granted, in which case such Tax Return shall be filed on or prior to the extended deadline), and pay, or cause to be paid, all Taxes (including estimated Taxes) due on such Tax Returns or that are otherwise required to be paid;
(j) Take all reasonable steps and actions within its power and control to obtain and maintain all third-party or other consents, waivers, permits, exemptions, orders, approvals, agreements, amendments, or confirmations that are required in order to (i) maintain the Company's and each Subsidiary's Material Contracts in full force and effect during the Interim Period, and (ii) permit Holdings to convert the Exchangeable Units into Class B Units;
(k) Take all reasonable steps and actions within its power and control to obtain and maintain all third-party or other consents, waivers, permits, exemptions, orders, approvals, agreements, amendments, or confirmations that are required in order to maintain the Company's and each Subsidiary's Material Contracts in full force and effect following the conversion of the Exchangeable Units into Class B Units by Holdings;
(l) Oppose, lift, or rescind any injunction, restraining order, or other order, decree, or ruling seeking to restrain, enjoin, or otherwise prohibit, delay, or adversely affect the ability of Holdings to convert the Exchangeable Units into Class B Units;
(m) Defend, or cause to be defended, any proceedings to which it is a party or brought against it or its managers or officers seeking to restrain, enjoin, or otherwise prohibit, delay, or adversely affect the ability of Holdings to convert the Exchangeable Units into Class B Units;
(n) Maintain, or cause to be maintained, public liability and casualty insurance in such form, coverages, and amounts as are consistent with industry practices; and
(o) Cooperate with Holdings in connection with all filings, notifications, and applications with Governmental Authorities required or advisable to enable Holdings to convert the Exchangeable Units into Class B Units, and take all actions reasonably requested by Holdings in connection therewith.
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ARTICLE III
DISTRIBUTION CAPS
Section 3.01 Purpose of Distribution Caps.
The Distribution cap set forth in this Article III are intended to preserve the economic value of Holdings' Exchangeable Units during the Interim Period by limiting the amount of cash that may be distributed to holders of Class A Units prior to the conversion of Exchangeable Units into Class B Units.
Section 3.02 Monthly Distribution Cap.
Distributions to holders of Class A Units shall not exceed $25,000 (the "Monthly Distribution Cap"); provided, in each case, that no Distribution shall be made if, after giving effect thereto, the Company would not have sufficient cash to operate in the ordinary course.
Any Distribution amount not paid in any calendar month shall not accumulate or carry over to subsequent months unless the Board expressly determines otherwise, subject in all cases to the Monthly Distribution Cap.
Section 3.03 Distributions to Holdings.
For the avoidance of doubt, no Distribution of any kind shall be made to Holdings as holder of Exchangeable Units during the Interim Period unless and until the Exchangeable Units are converted into Class B Units pursuant to the LLC Agreement, at which time Holdings shall be entitled to participate in Distributions on the same basis as all other holders of Voting Units.
ARTICLE IV
REPORTING AND ACCESS RIGHTS
Section 4.01 Financial Reporting.
During the Interim Period, the Company shall deliver to Holdings:
(a) Monthly unaudited financial statements (balance sheet, income statement, and statement of cash flows) within fifteen (15) calendar days following the end of each calendar month, certified by the Company's chief financial officer (or equivalent) as being prepared in good faith in accordance with U.S. GAAP;
(b) Annual audited financial statements within ninety (90) days following the end of each Fiscal Year, prepared by a nationally recognized independent accounting firm; and
(c) A quarterly compliance certificate, signed by the Company's chief financial officer or chief executive officer, certifying compliance with the covenants set forth in this Agreement.
Section 4.02 Material Contract Notice.
The Company shall provide Holdings with not less than five (5) Business Days' prior written notice before entering into, amending, or terminating any Material Contract. Such notice shall include a reasonably detailed description of the proposed Material Contract and its material terms.
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Section 4.03 Regulatory Notice.
The Company shall promptly (and in any event within two (2) Business Days) notify Holdings in writing upon: (i) the receipt of any written notice, inquiry, inspection report, or citation from any Cannabis Regulatory Body; (ii) any threatened or pending revocation, suspension, non-renewal, or modification of any Cannabis License; (iii) any material change in the Company's regulatory status or relationship with any Cannabis Regulatory Body; (iv) the commencement or threat of any investigation, proceeding, or action by any Governmental Authority affecting the Company; (v) any event that would constitute a breach of any representation, warranty, or covenant of the Company under this Agreement; (vi) any notice or communication from any Person alleging that the consent of such Person is required for Holdings to convert the Exchangeable Units into Class B Units; (vii) any notice or communication from any Person to the effect that such Person is terminating or otherwise materially adversely modifying its relationship with the Company or any Subsidiary; or (viii) any material change in insurance coverages within thirty (30) days of binding or cancellation.
Section 4.04 Books and Records; Inspection.
Holdings and its authorized representatives shall have the right, upon reasonable prior written notice (and not more than four (4) times per calendar year absent a continuing breach or Event of Default under this Agreement), to (i) inspect the books, records, and facilities of the Company and its Subsidiaries during normal business hours, at Holdings' expense, for any purpose reasonably related to Holdings' rights under this Agreement; and (ii) have access to the Company's and its Subsidiaries' (A) premises, (B) property and assets (including all books and records, whether retained internally or otherwise, including Tax and financial documentation), (C) Material Contracts, and (D) senior personnel, so long as such access does not unduly interfere with the ordinary course of business of the Company. Holdings shall conduct any such inspection in a manner that does not unreasonably disrupt the business operations of the Company.
Section 4.05 Investigations.
During the Interim Period, in order to ensure compliance with the terms of this Agreement and the transactions contemplated hereby, the Company shall provide, and cause each Subsidiary to provide, reasonable access upon reasonable notice during normal business hours to the Company's and each Subsidiary's executive management so that Holdings may conduct reasonable investigations relating to the information provided by the Company pursuant to this Agreement as well as to the internal controls and operations of the Company and its Subsidiaries.
Section 4.06 Material Updates.
The Company shall use commercially reasonable efforts to provide Holdings with all material developments related to the Company and relevant information related to material decisions required to be made or actions required to be taken with respect to the operation of its business. The Company shall use commercially reasonable efforts, in the negotiation of agreements entered into after the date of this Agreement, to permit disclosure of information regarding such agreements to Holdings on a confidential basis.
Section 4.07 Public Announcements.
The Company shall not issue any press release or make any other public statement or disclosure concerning the Company or in connection with this Agreement or the transactions contemplated hereby without the prior written approval of Holdings, except to the extent that the Company is required to make any public disclosure with respect to the Company or the subject matter of this Agreement by applicable law; provided that in the event the Company is required to make disclosure by applicable law, the Company shall use its commercially reasonable efforts to give Holdings prior written notice (and if such prior notice is not possible, to give notice immediately following the making of any such disclosure) and a reasonable opportunity to review or comment on the disclosure.
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Section 4.08 Government Filings.
The Company shall not make any filing with any Governmental Authority in connection with this Agreement or the transactions contemplated hereby without the prior written consent of Holdings. As soon as reasonably practicable after a request from Holdings, the Company shall use commercially reasonable efforts to (i) make all notifications, filings, applications, and submissions with Governmental Authorities required or advisable and reasonably requested by Holdings, (ii) obtain all required permits, licenses, and authorizations, (iii) cooperate with Holdings in connection with all permits, licenses, and authorizations sought by Holdings, and (iv) maintain such permits, licenses, and authorizations, in each case, so as to enable Holdings to convert the Exchangeable Units into Class B Units.
Section 4.09 Notice of Breach.
The Company shall promptly notify Holdings in writing upon becoming aware of any breach or default by the Company or any Subsidiary of any covenant, obligation, or other provision of this Agreement, including any breach or anticipated breach of the covenants set forth in Article II or Article III. Such notice shall describe in reasonable detail the nature of the breach or default, the circumstances giving rise thereto, and the steps the Company is taking or proposes to take to cure such breach or default.
ARTICLE V
NO CONTROL; INDEPENDENCE OF COMPANY
Section 5.01 No Control.
Notwithstanding any provision of this Agreement, the LLC Agreement, or the Unit Purchase Agreement, during the Interim Period:
(a) Neither Parent nor Holdings shall have, nor shall be deemed to have, control of or the right to direct the business, operations, or activities of the Company or any Subsidiary. The covenants and consent rights granted to Holdings under this Agreement are intended solely to preserve the value of the Exchangeable Units and do not constitute, and shall not be construed or characterized as, control of the Company or any Subsidiary by Parent or Holdings;
(b) The Company shall operate as a stand-alone entity with management independent from Parent and Holdings, and the Company's Managers and Officers shall discharge their duties in the interests of the Company as a whole and not solely in the interests of Parent or Holdings;
(c) The parties acknowledge and agree that the no-control provisions of this Article V are essential to achieving and maintaining the deconsolidation of the Company from Parent's consolidated financial statements under U.S. GAAP (specifically, ASC 810), and each party agrees to take all actions, and to refrain from taking any actions, necessary or appropriate to preserve such deconsolidation; and
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(d) To the extent any provision of this Agreement could be construed as conferring upon Parent or Holdings any right to direct the business, operations, or activities of the Company, such provision shall be interpreted narrowly and solely as a negative covenant or consent right for the benefit of Holdings in its capacity as an economic interest holder, and not as a right to exercise positive control.
Section 5.02 Consulting Services Agreement.
The parties acknowledge that the Company and a subsidiary of Parent are entering into a Consulting Services Agreement (the "CSA") pursuant to which such subsidiary will provide certain management, consulting, and administrative services to the Company. The parties agree that the CSA has been negotiated on arm's-length terms and that the services to be provided thereunder do not confer upon Parent or Holdings any right to direct or control the Company for purposes of Section 5.01 or for any U.S. GAAP consolidation analysis. The CSA may be terminated by either party thereto on not fewer than ninety (90) days' prior written notice without such termination constituting a breach of this Agreement.
ARTICLE VI
ENFORCEMENT; REMEDIES
Section 6.01 Specific Performance.
Each party acknowledges that the Exchangeable Units are unique and that monetary damages would be an inadequate remedy for any breach of this Agreement. Accordingly, each of Parent and Holdings shall be entitled to seek specific performance and injunctive relief to enforce the covenants and obligations of the Company hereunder, without the necessity of proving actual damages, establishing the inadequacy of monetary damages, or posting any bond or other security. This Section 6.01 shall not limit any other right or remedy available to Parent or Holdings at law or in equity.
Section 6.02 Remedies Cumulative.
The rights and remedies of the parties under this Agreement are cumulative and not exclusive of any other rights or remedies provided by law or in equity. The exercise of any right or remedy hereunder shall not preclude the exercise of any other right or remedy.
Section 6.03 Events of Breach.
A material breach of this Agreement by the Company shall include (without limitation): (i) any action taken in violation of Section 2.01 without the required consent of Holdings; (ii) failure to deliver financial reports within the time periods specified in Section 4.01; (iii) failure to provide notices required under Section 4.02, Section 4.03 or Section 4.09; (iv) any Distribution made in excess of the Monthly Distribution Cap; or (v) any action taken by the Company that impairs or restricts the conversion rights of Holdings with respect to the Exchangeable Units.
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ARTICLE VII
TERM AND TERMINATION
Section 7.01 Term.
This Agreement shall be effective as of the Effective Date and shall continue in full force and effect until the earliest to occur of: (i) the completion of a Conversion Event and the issuance of all Class B Units to Holdings pursuant to the LLC Agreement; (ii) the repurchase by the Company (or its designee) of all Class A Units from the Investor pursuant to the Call Right; or (iii) the mutual written consent of all parties hereto to terminate this Agreement.
Section 7.02 Survival.
Sections 5.01, 6.01, 6.02, and all of Article VIII shall survive the termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Governing Law; Dispute Resolution.
This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. Any dispute, claim, or controversy arising out of or relating to this Agreement, including the breach, termination, enforcement, interpretation, or validity thereof, shall be resolved by binding arbitration in Los Angeles, California , in accordance with the Commercial Arbitration Rules of the American Arbitration Association, before a single arbitrator with experience in California business law. Judgment upon the award may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, each party shall be entitled to seek injunctive relief or specific performance in any court of competent jurisdiction without waiving the right to arbitrate the underlying dispute, and without the necessity of proving damages or posting any bond.
Section 8.02 Entire Agreement.
This Agreement, together with the LLC Agreement, the Unit Purchase Agreement, and the Consulting Services Agreement, constitutes the entire agreement among the parties with respect to the subject matter hereof.
Section 8.03 Amendments; Waivers.
This Agreement may be amended only by a written instrument signed by all parties. No amendment shall be effective that would reduce the scope of the negative covenants in Section 2.01, eliminate or reduce the Monthly Distribution Cap, or modify Article V, without the prior written consent of Holdings. No waiver shall be effective unless in writing.
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Section 8.04 Notices.
All notices shall be in writing and delivered in accordance with the notice provisions of the LLC Agreement.
Section 8.05 Counterparts; Electronic Signatures.
This Agreement may be executed in counterparts, each of which shall constitute an original. Electronic signatures shall be valid and binding.
Section 8.06 Severability.
If any provision of this Agreement is held invalid or unenforceable, such provision shall be modified to the minimum extent necessary to make it valid and enforceable, and the remaining provisions shall continue in full force and effect.
Section 8.07 Assignment.
Neither Holdings nor Parent may assign its rights or obligations under this Agreement without the prior written consent of the Company and the Investor, except that Holdings may assign its rights hereunder to any wholly-owned Subsidiary of Parent that holds Exchangeable Units as a Permitted Transfer under the LLC Agreement, provided that Holdings shall remain primarily liable for its obligations hereunder. Any purported assignment in violation of this Section 8.07 shall be null and void.
Section 8.08 No Third-Party Beneficiaries.
Except as expressly provided herein, this Agreement is for the sole benefit of the parties hereto.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Protection Agreement as of the date first written above.
PARENT:
GLASS HOUSE BRANDS INC.,
a British Columbia corporation
| By: | /s/ Kyle Kazan | |
| Name: Kyle Kazan | ||
| Title: Chief Executive Officer | ||
HOLDINGS:
GHB USUB, LLC,
a Delaware limited liability company
| By: | /s/ Kyle Kazan | |
| Name: Kyle Kazan | ||
| Title: Manager | ||
COMPANY:
GLASS HOUSE RETAIL, LLC,
a California limited liability company
| By: | /s/ Jared Beilke | |
| Name: Jared Beilke | ||
| Title: Chief Executive Officer | ||
Signature Page to Protection Agreement
Exhibit 99.5
Glass House Brands Inc.
(UNAUDITED) PRO FORMA FINANCIAL STATEMENTS
On June 12, 2026, Glass House Brands Inc. (the “Company”) and its indirect wholly-owned subsidiary, GHB Usub, LLC (“Holdings”), entered into several agreements to facilitate the deconsolidation of the financial results of its former indirectly wholly-owned subsidiary, Glass House Retail, LLC (“Glass House Retail”), from the Company’s financial results in accordance with U.S. generally accepted accounting principles (the “Deconsolidation Transaction”) and segregate the Company’s dual-use cannabis business from its medical cannabis business in order to apply to list the Company’s subordinate voting shares on the New York Stock Exchange (the “NYSE”). As further described below, as a result of the implementation of the Deconsolidation Transaction, Company Subsidiary holds non-voting and non-participating units (the “Non-Voting Units”) in the capital of Glass House Retail, which now holds the Company’s former dual-use cannabis business, other than businesses the transfer of which is subject to regulatory approval, which businesses will, automatically and without any action on the part of the Company or any other party, transfer to Glass House Retail upon the receipt of regulatory approval. The Non-Voting Units do not carry voting rights or rights to receive dividends, do not provide the Company with the ability to direct the business, operations or activities of Glass House Retail, or provide other rights upon dissolution of Glass House Retail, and are only convertible into Class B units of Glass House Retail (the “Common Units”) following the date that the NYSE permits the listing of companies that consolidate the financial statements of companies that cultivate, distribute or possess marijuana (as defined in 21 U.S.C 802) for non-medical uses in the United States (the “Stock Exchange Permissibility Date”).
The following unaudited pro forma condensed consolidated financial statements (the “pro forma financial statements”) are based on the historical consolidated financial statements of the Company, as adjusted to give effect to the Deconsolidation Transaction which closed on June 12, 2026. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2026 (the “pro forma balance sheet”) gives effect to the Deconsolidation Transaction as if it had occurred on March 31, 2026. The unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2026 and for the year ended December 31, 2025 (the “pro forma statements of operations”) give effect to the Deconsolidation Transaction as if it had occurred on January 1, 2025.
GLASS HOUSE BRANDS INC.
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
As of March 31, 2026
(Amounts Expressed in United States Dollars in Thousands)
| As Reported | Disposition Adjustments (a) | Pro Forma Adjustments | Pro Forma Glass House Brands Inc. | |||||||||||||||
| ASSETS | ||||||||||||||||||
| Current Assets: | ||||||||||||||||||
| Cash | $ | 24,427 | $ | (6,671 | ) | $ | — | $ | 17,756 | |||||||||
| Accounts Receivable, Net | 6,441 | (11 | ) | — | 6,430 | |||||||||||||
| Income Taxes Receivable | 766 | — | — | 766 | ||||||||||||||
| Prepaid Expenses and Other Current Assets | 11,181 | (724 | ) | — | 10,457 | |||||||||||||
| Inventory | 31,537 | (1,865 | ) | — | 29,672 | |||||||||||||
| Total Current Assets | 74,352 | (9,271 | ) | — | 65,081 | |||||||||||||
| Operating Lease Right-of-Use Assets, Net | 4,131 | (3,111 | ) | — | 1,020 | |||||||||||||
| Finance Lease Right-of-Use Assets, Net | 1,830 | (795 | ) | — | 1,035 | |||||||||||||
| Investment in Glass House Retail | — | — | 19,800 | (b) | 19,800 | |||||||||||||
| Property, Plant and Equipment, Net | 229,479 | (5,962 | ) | — | 223,517 | |||||||||||||
| Intangible Assets, Net | 11,626 | (10,677 | ) | — | 949 | |||||||||||||
| Restricted Cash, Net of Current Portion | 3,500 | — | — | 3,500 | ||||||||||||||
| Other Assets | 435 | (119 | ) | — | 316 | |||||||||||||
| TOTAL ASSETS | $ | 325,353 | $ | (29,935 | ) | $ | 19,800 | $ | 315,218 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||
| Accounts Payable and Accrued Liabilities | $ | 38,067 | $ | (5,157 | ) | $ | 1,280 | (c) | $ | 34,190 | ||||||||
| Current Portion of Operating Lease Liabilities | 1,303 | (994 | ) | — | 309 | |||||||||||||
| Current Portion of Finance Lease Liabilities | 799 | (427 | ) | — | 372 | |||||||||||||
| Current Portion of Notes Payable | 38 | — | — | 38 | ||||||||||||||
| Total Current Liabilities | 40,207 | (6,578 | ) | 1,280 | 34,909 | |||||||||||||
| Operating Lease Liabilities, Net of Current Portion | 2,933 | (2,208 | ) | — | 725 | |||||||||||||
| Finance Lease Liabilities, Net of Current Portion | 909 | (518 | ) | — | 391 | |||||||||||||
| Other Non-Current Liabilities | 36,037 | (15,712 | ) | — | 20,325 | |||||||||||||
| Notes Payable, Net of Current Portion | 67,819 | — | — | 67,819 | ||||||||||||||
| TOTAL LIABILITIES | 147,905 | (25,016 | ) | 1,280 | 124,169 | |||||||||||||
| MEZZANINE EQUITY: | ||||||||||||||||||
| GH Group, Inc. Preferred Series D Shares | 15,000 | — | — | 15,000 | ||||||||||||||
| GH Group, Inc. Convertible Preferred Series E Shares | 77,500 | — | — | 77,500 | ||||||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||||||||||
| Multiple Voting Shares | — | — | — | — | ||||||||||||||
| Subordinate Voting Shares | — | — | — | — | ||||||||||||||
| Exchangeable Shares | — | — | — | — | ||||||||||||||
| Additional Paid-In Capital | 314,075 | (56,473 | ) | — | 257,602 | |||||||||||||
| Accumulated Deficit | (237,207 | ) | 51,554 | 18,520 | (b), (c) | (167,133 | ) | |||||||||||
| Total Shareholders’ Equity Attributable to the Company | 76,868 | (4,919 | ) | 18,520 | 90,469 | |||||||||||||
| Non-Controlling Interest | 8,080 | — | — | 8,080 | ||||||||||||||
| TOTAL MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | 177,448 | (4,919 | ) | 18,520 | 191,049 | |||||||||||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | $ | 325,353 | $ | (29,935 | ) | $ | 19,800 | $ | 315,218 | |||||||||
See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
GLASS HOUSE BRANDS INC.
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
For the Three Months Ended March 31, 2026
(Amounts Expressed in United States Dollars in Thousands)
| As Reported | Disposition Adjustments (d) | Pro Forma Adjustments | Pro Forma Glass House Brands Inc. | |||||||||||||||
| Revenues, Net | $ | 40,515 | $ | (11,905 | ) | $ | — | $ | 28,610 | |||||||||
| Cost of Goods Sold (Exclusive of Depreciation and Amortization Shown Separately Below) | 30,499 | (5,940 | ) | — | 24,559 | |||||||||||||
| Gross Profit | 10,016 | (5,965 | ) | — | 4,051 | |||||||||||||
| Operating Expenses: | — | — | ||||||||||||||||
| General and Administrative | 16,950 | (4,754 | ) | — | 12,196 | |||||||||||||
| Sales and Marketing | 529 | (434 | ) | — | 95 | |||||||||||||
| Professional Fees | 2,865 | — | — | 2,865 | ||||||||||||||
| Depreciation and Amortization | 4,022 | (496 | ) | — | 3,526 | |||||||||||||
| Total Operating Expenses | 24,366 | (5,684 | ) | — | 18,682 | |||||||||||||
| Loss from Operations | (14,350 | ) | (281 | ) | — | (14,631 | ) | |||||||||||
| Other (Income) Expense: | ||||||||||||||||||
| Interest Expense | 1,295 | (26 | ) | — | 1,269 | |||||||||||||
| Gain on Change in Fair Value of Derivative Asset and Liability | (409 | ) | — | — | (409 | ) | ||||||||||||
| Net Loss Attributable to Glass House Retail | — | — | 772 | (e) | 772 | |||||||||||||
| Other (Income) Expense, Net | (1,288 | ) | 77 | — | (1,211 | ) | ||||||||||||
| Total Other Income, Net | (402 | ) | 51 | 772 | 421 | |||||||||||||
| Loss From Operations Before Provision for Income Taxes | (13,948 | ) | (332 | ) | (772 | ) | (15,052 | ) | ||||||||||
| Provision for Income Taxes | 3,058 | (1,190 | ) | — | 1,868 | |||||||||||||
| Net Loss | (17,006 | ) | 858 | (772 | ) | (16,920 | ) | |||||||||||
| Net Income to Non-Controlling Interest | 126 | — | — | 126 | ||||||||||||||
| Net Loss Attributable to the Company | $ | (17,132 | ) | $ | 858 | $ | (772 | ) | $ | (17,046 | ) | |||||||
See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
GLASS HOUSE BRANDS INC.
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
For the Year Ended December 31, 2025
(Amounts Expressed in United States Dollars in Thousands)
| As Reported | Disposition Adjustments (d) | Pro Forma Adjustments | Pro Forma Glass House Brands Inc. | |||||||||||||||
| Revenues, Net | $ | 181,984 | $ | (48,243 | ) | $ | — | $ | 133,741 | |||||||||
| Cost of Goods Sold (Exclusive of Depreciation and Amortization Shown Separately Below) | 105,024 | (24,942 | ) | — | 80,082 | |||||||||||||
| Gross Profit | 76,960 | (23,301 | ) | — | 53,659 | |||||||||||||
| Operating Expenses: | — | — | ||||||||||||||||
| General and Administrative | 64,098 | (18,182 | ) | — | 45,916 | |||||||||||||
| Sales and Marketing | 2,669 | (1,812 | ) | — | 857 | |||||||||||||
| Professional Fees | 9,062 | (35 | ) | — | 9,027 | |||||||||||||
| Depreciation and Amortization | 15,764 | (2,111 | ) | — | 13,653 | |||||||||||||
| Impairment Expense for Intangible Assets | 1,900 | (1,900 | ) | — | — | |||||||||||||
| Total Operating Expenses | 93,493 | (24,040 | ) | — | 69,453 | |||||||||||||
| Loss from Operations | (16,533 | ) | 739 | — | (15,794 | ) | ||||||||||||
| Other (Income) Expense: | ||||||||||||||||||
| Interest Expense | 7,058 | (127 | ) | — | 6,931 | |||||||||||||
| Interest Income | (288 | ) | — | — | (288 | ) | ||||||||||||
| Gain on Equity Method Investments | (84 | ) | — | — | (84 | ) | ||||||||||||
| Loss on Change in Fair Value of Derivative Asset and Liability | 2,070 | — | — | 2,070 | ||||||||||||||
| Loss on Extinguishment of Debt | 292 | — | — | 292 | ||||||||||||||
| Loss on Deconsolidation Transaction | — | — | 11,415 | (f) | 11,415 | |||||||||||||
| Net Loss Attributable to Glass House Retail | — | — | 3,821 | (e) | 3,821 | |||||||||||||
| Other Income, Net | (8,563 | ) | 2,544 | — | (6,019 | ) | ||||||||||||
| Total Other (Income) Expense, Net | 485 | 2,417 | 15,236 | 18,138 | ||||||||||||||
| Loss From Operations Before Provision for Income Taxes | (17,018 | ) | (1,678 | ) | (15,236 | ) | (33,932 | ) | ||||||||||
| Provision for Income Taxes | 11,934 | (5,924 | ) | — | 6,010 | |||||||||||||
| Net Loss | (28,952 | ) | 4,246 | (15,236 | ) | (39,942 | ) | |||||||||||
| Net Income to Non-Controlling Interest | 707 | — | — | 707 | ||||||||||||||
| Net Loss Attributable to the Company | $ | (29,659 | ) | $ | 4,246 | $ | (15,236 | ) | $ | (40,649 | ) | |||||||
See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements are based on the Company’s historical consolidated financial statements as adjusted to give effect to the Deconsolidation Transaction accounting adjustments in accordance with U.S. generally accepted accounting principles (“GAAP”) to reflect the disposition of Glass House Retail and related transactions described in this Form 6-K.
The pro forma condensed consolidated financial statements do not necessarily reflect what the Company’s financial condition or results of operations would have been had the Deconsolidation Transaction occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial position and results of operations may differ significantly from the amounts reflected herein due to a variety of factors.
2. Transaction Accounting Adjustments
The transaction accounting adjustments included in the unaudited pro forma condensed consolidated financial statements reflect the application of U.S. GAAP to the Deconsolidation Transaction as if it had occurred on the dates indicated. These adjustments are based on preliminary estimates and assumptions that management believes are reasonable under the circumstances and are subject to change.
The transaction accounting adjustments are as follows:
| (a) | Reflects the derecognition of the assets and liabilities of Glass House Retail that were previously included in the Company’s historical consolidated financial statements as a result of the loss of control upon completion of the Deconsolidation Transaction. |
| (b) | Reflects the recognition of the Company’s retained investment in Glass House Retail at its estimated fair value as of the deconsolidation date. |
| (c) | Reflects estimated transaction costs incurred in connection with the Deconsolidation Transaction that are directly attributable to the transaction and are expected to be recognized in the Company’s financial statements. |
| (d) | Reflects the removal of revenues, expenses and the net loss attributable to Glass House Retail that were historically included in the Company’s consolidated statements of operations. |
| (e) | Reflects the Company’s estimated share of net loss of Glass House Retail for the periods presented, as if the Deconsolidation Transaction had occurred on January 1, 2025. The Company’s share is based on the historical results of Glass House Retail and the Company’s expected ownership interest following the Deconsolidation Transaction. |
| (f) | Reflects the estimated loss on deconsolidation recognized upon completion of the Deconsolidation Transaction. The loss represents the difference between (i) the carrying value of Glass House Retail’s net assets at the date control was lost and (ii) the sum of the fair value of the retained investment and was calculated as follows: |
| Fair value of investment in Glass House Retail | $ | 19,800 | ||
| Less: Carrying value of net assets disposed | 29,935 | |||
| Less: Direct transaction costs | 1,280 | |||
| Pre-tax loss on sale | (11,415 | ) | ||
| Estimated tax benefit | — | |||
| Estimated after-tax loss on sale | $ | (11,415 | ) |
For purposes of the unaudited pro forma condensed consolidated balance sheet, the estimated loss recognized in accumulated deficit is based on the net carrying value of Glass House Retail as of March 31, 2026 rather than as of the closing date of the transaction. As a result, the estimated loss reflected herein may differ materially from the actual loss on the sale of Glass House Retail as of the closing date because of the difference in the carrying value of the assets and liabilities at the closing date.
Exhibit 99.6
Glass House Brands Announces its Deconsolidation of its Dual-Use Business and its Application for Uplisting of Shares to NYSE
LONG BEACH, Calif. and TORONTO, June 17, 2026 -- Glass House Brands Inc. (“Glass House” or the “Company”) (CBOE CA: GLAS.A.U) (OTCQX: GLASF) today announced that it has applied to list its subordinate voting shares on the New York Stock Exchange (“NYSE”).
In support of its listing application, the Company and its indirect wholly owned subsidiary, GHB Usub, LLC (“Company Subsidiary”), entered into several agreements to facilitate the deconsolidation of its former indirect wholly owned subsidiary, Glass House Retail, LLC (“GHR”), from the Company segregating the Company’s dual-use cannabis business from its medical cannabis business (the “Deconsolidation Transaction”).
As a result of the Deconsolidation Transaction, Company Subsidiary holds non-voting and non-participating units (the “Non-Voting Units”) in the capital of GHR, which now holds the Company’s former dual-use cannabis business, other than businesses the transfer of which is subject to regulatory approval, which businesses will, automatically and without any action on the part of the Company or any other party, transfer to GHR upon the receipt of regulatory approval.
The voting units of GHR are held by a third-party investor and the Non-Voting Units can only be converted into voting units of GHR following the date that the NYSE permits the listing of companies that consolidate the financial statements of companies that cultivate, distribute or process marijuana (as defined in 21 U.S.C 802) for non-medical uses in the United States.
Further information about the Deconsolidation Transaction may be found on SEDAR+ (www.sedarplus.ca) under the Company’s issuer profile.
About Glass House Brands
Glass House is one of the fastest-growing, vertically integrated cannabis companies in the U.S., with a dedicated focus on the California market and building leading, lasting brands to serve consumers across all segments. Whether it be through its portfolio of brands, which includes Glass House Farms, PLUS Products, Allswell and Mama Sue Wellness, Glass House is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all. For more information and company updates, visit www.glasshousebrands.com/ and https://ir.glasshousebrands.com/contact/email-alerts/.
Forward Looking Statements
This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking statements”). Forward-looking statements reflect current expectations or beliefs regarding future events or Glass House’s future performance or financial results. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward- looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates”, “targets” or “believes”, or variations of, or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. All forward-looking statements, including those herein, are qualified by this cautionary statement. Although Glass House believes that the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the statements. Accordingly, readers should not place undue reliance on forward-looking statements. There are certain factors that could cause actual results to differ materially from those in the forward-looking information, including those risks disclosed in the Glass House’s Annual Information Form available on SEDAR+ at www.sedarplus.ca and in Glass House’s Form 40-F available on EDGAR at www.sec.gov. For more information on Glass House, investors are encouraged to review Glass House’s public filings on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. The forward-looking statements and financial outlooks contained in this news release speak only as of the date of this news release or as of the date or dates specified in such statements. Glass House disclaims any intention or obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise, other than as required by law.
For further information, please contact:
Glass House Brands Inc.
Jon DeCourcey, Vice President of Investor Relations
T: (781) 724 6869
E: ir@glasshousebrands.com
Investor Relations Contact:
KCSA Strategic Communications
Phil Carlson
T: 212-896-1233
E: GlassHouseIR@kcsa.com