Item 1.01 Entry into a Material Definitive Agreement.
Amendment of TCA Credit Agreement
As previously disclosed, effective December
7, 2015, Grow Solutions Holdings, Inc., a Nevada corporation (the “Company”) closed a Senior Secured Credit Facility
Agreement (the “Credit Agreement”) by and among the Company, as borrower, Grow Solutions, Inc., a Delaware corporation
and One Love Garden Supply, a Colorado limited liability company, as joint and several guarantors (such guarantors, collectively,
the “Subsidiaries”) and TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership, as lender (“TCA”).
Pursuant to the Credit Agreement, at closing TCA funded the Company $950,000 evidenced by that certain Convertible Promissory Note
issued by the Company in favor of TCA (the “Original Note”).
On February 14, 2017, the Company entered
into a First Amendment to Credit Agreement (the “Amended Agreement”) by and between the Borrowers and TCA. Pursuant
to the Amended Agreement, the Original Note was severed, split, divided and apportioned into two separate and distinct replacement
notes consisting of (i) First Replacement Note A, evidencing principal indebtedness of $325,000 which was executed and delivered
by the Company as the first purchase tranche paid by the Assignee (as defined below) to TCA, and (ii) First Replacement Note B
evidencing the reduced outstanding balance of principal indebtedness of $876,441.25 (collectively, First Replacement Note A and
First Replacement Note B, the “Replacement Notes”). The Replacement Notes replaced and superseded the Original Note
in its entirety by substituting one evidence of debt for another without extinguishing the indebtedness and obligations evidenced
under the Original Note.
Under the terms and conditions of Replacement
Note B, the Company has the right to prepay Replacement Note B evidencing the remaining outstanding balance of principal indebtedness
owed to TCA in full and for cash, at any time prior to the Maturity Date (as defined therein), with three (3) Business Days (as
defined therein) advance written notice to TCA.
Debt Purchase Agreement
On February 15, 2017 (the “Effective
Date”), the Company entered into a Debt Purchase Agreement (the “Debt Purchase Agreement”) by and among the Company,
TCA, and L2 Capital, LLC, a Kansas limited liability company (the “Assignee”). Pursuant to the Debt Purchase Agreement,
on the Effective Date, TCA sold and assigned to Assignee, TCA’s right, title and interest in and to the monetary obligations
evidenced under Replacement Note A thereby reducing the TCA outstanding principal indebtedness. Assignee shall subsequently purchase
from TCA the remaining debt evidenced by First Replacement Note B in purchase tranches. The indebtedness underlying the Replacement
Notes are evidenced by a newly issued 10% Senior Replacement Convertible Promissory Note.
Upon the purchase of all debt under
Replacement Note B the Company will have no further obligations to TCA.
Issuance of 10% Senior Replacement
Convertible Promissory Note
On February 15, 2017, the Company issued
a 10% Senior Replacement Convertible Promissory Note (the “L2 Note”) to the Assignee in the principal amount of $1,201,441.25.
The initial principal amount under the L2 Note is $325,000, representing the first tranche purchased by Assignee under First Replacement
Note A and such amounts shall increase in tranches upon the purchase of such tranches by the Assignee from TCA pursuant to the
Debt Purchase Agreement. The maturity date for each tranche shall be six months from that date of the purchase of that tranche
and the Company shall pay interest to the Assignee on the aggregate unconverted and then outstanding principal amount of the L2
Note at the rate of 10% per annum. The Company may prepay any portion of the principal amount under the L2 Note and any accrued
and unpaid interest in cash equal to the sum of the then outstanding principal amount under the L2 Note and interest multiplied
by 140%.
The L2 Note is convertible at any time,
in whole or in part, at the option of the holder into shares of common stock of the Company at a conversion price equal to 62.5%
of the lowest closing bid price of the common stock in the prior twenty (20) trading days, which is subject to adjustment for stock
dividends, stock splits, combinations or similar events.
Additionally,
the terms under the L2 Note include make-whole rights whereby upon liquidation by the Assignee of the shares converted under the
L2 Note, provided that the Assignee realizes a net amount from such liquidation equal to less than the conversion amount specified
in the relevant conversion notice (such net realized amount, the “Realized Amount”), the Company shall issue to the
Assignee additional shares of common stock of the Company equal to: (i) the conversion amount; minus (ii) the Realized Amount;
divided by (iii) the average volume weighted average price of the Company’s common stock during the five (5) business days
immediately prior to the date upon which the Assignee delivers notice to the Company that such additional shares are requested
by the Assignee (the “Make-Whole Shares”). Following the sale of the Make-Whole
S
hares
by the Assignee: (i) in the event that Assignee receives net proceeds from such sale which, when added to the Realized Amount from
the prior relevant conversion notice, is less than the conversion amount specified in the relevant conversion notice, Assignee
shall deliver an additional make-whole notice to the Company and the Company obligation to issue
M
ake-Whole
S
hares shall continue until the conversion amount has been fully satisfied; and (ii) in the event
that Assignee received net proceeds from the sale of Make-Whole
S
hares in excess of the conversion
amount specified in the relevant conversion notice, such excess amount shall be applied to satisfy any and all amounts owed hereunder
in excess of the conversion amount specified in the relevant conversion notice.