Item 1.01
Entry into a Material Definitive Agreement
Note Purchase Agreement; Convertible Note
On July 19, 2021, Clever Leaves
Holdings Inc. (the “Company”), entered into a Note Purchase Agreement with Catalina LP (the “Note Purchase Agreement”)
and issued a secured convertible note (the “Convertible Note”) to Catalina LP pursuant to the Note Purchase Agreement in the
principal amount of $25,000,000 in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
The Convertible Note matures
three years from the date of issuance and accrues interest from the date of issuance at the rate of five percent (5%) per annum. Interest
on the Convertible Note is payable on a quarterly basis, either in cash or by increasing the principal amount of the Convertible Note,
at the Company’s election. The Company may, in its sole discretion, prepay any portion of the outstanding principal and accrued
and unpaid interest on the Convertible Note at any time prior to the maturity date.
The principal and accrued
interest owing under the Convertible Note may be converted at any time by the holder into the Company’s common shares, without par
value (the “common shares”), at a per share price of $13.50. Up to $12,500,000 in aggregate principal under the Convertible
Note may be so converted within one year of issuance, subject to certain additional limitations.
Subject to certain limitations
set forth in the Convertible Note, each of the Company and the noteholder may redeem all or a portion of the outstanding principal and
accrued interest owing under the Convertible Note into common shares, at a per share price equal to the greater of (x) an 8% discount
to the closing price per share on the applicable redemption date or (y) $6.44 (the “Optional Redemption Rate”). Up to $12,500,000
in aggregate principal under the Convertible Note may be so redeemed within one year of issuance, subject to certain additional limitations.
If the closing price per share
of the Company’s common shares on the Nasdaq Capital Market is below $7.00 for 15 consecutive trading days, neither party will be
permitted to redeem any portion of the Convertible Note until the closing price per common share has been above $7.00 for 15 consecutive
trading days, and the holder of the Convertible Note may elect to receive cash repayment of principal and accrued interest on the Convertible
Note, in an amount not to exceed $3,500,000 in any 30 consecutive calendar day period, which amount shall be reduced to $2,000,000 when
the principal on the Convertible Note is less than $12,500,000.
The holder of the Convertible
Note will not be entitled to convert any portion of the Convertible Note if, after such conversion, such holder would have beneficial
ownership of, and direct or indirect control or direction over, more than 9.99% of the Company’s outstanding common shares.
The Convertible Note is subject
to certain events of default. The occurrence of these events of default would give rise to a five percent (5%) increase in the interest
rate to a total of ten percent (10%) per annum for as long as the event of default continues, and give the holder of the Convertible Note
the right to redeem the outstanding principal and accrued interest on the Convertible Note at the Optional Redemption Rate. Certain events
of default (including the failure of a registration statement to be declared by the SEC effective within 90 days of issuance in accordance
with the Registration Rights Agreement described below) also require the Company to repay all outstanding principal and accrued interest
on the Convertible Note. In addition, in certain circumstances, if the Company fails to timely deliver common shares as required upon
conversion or redemption of the Convertible Note, then the Company will be required to pay, on each day that such failure to deliver common
shares continues, an amount in cash equal to 0.75% of the product of (x) the number of common shares the Company failed to deliver multiplied
by (y) any closing trading price of the common shares on any day during the period when such shares were required to be delivered.
The obligations of the Company
under the Note Purchase Agreement and the Convertible Note are guaranteed by certain of the Company’s subsidiaries pursuant to the
Guarantee made by Clever Leaves International, Inc., 1255096 B.C. Ltd., NS US Holdings, Inc., Herbal Brands, Inc., Northern Swan International,
Inc., Northern Swan Management, Inc., Clever Leaves US Inc., Northern Swan Deutschland Holdings, Inc. and Northern Swan Portugal Holdings,
Inc., in favor of Catalina LP (the “Guarantee”), and are secured by pledge agreements made in favor of Catalina LP, each dated
as of July 19, 2021 (the “Pledge Agreements”), in respect of the shares of Clever Leaves International Inc. (“Clever
Leaves”), 1255096 B.C. Ltd., Northern Swan International, Inc., Clever Leaves US, Inc., and NS US Holdings, Inc.
On July 19, 2021, Catalina
LP, as senior creditor, and Rock Cliff Capital LLC, as the subordinated creditor, entered into a Subordination Agreement, which was acknowledged
and agreed to by the Company, NS US Holdings, Inc. and Herbal Brands, Inc. (the “Subordination Agreement”). Under the
Subordination Agreement, Rock Cliff Capital LLC subordinated its right to payment in respect of the indebtedness owed by the Company,
NS US Holdings, Inc. and Herbal Brands, Inc. to the indebtedness owed by, among others, the Company, NS US Holdings, Inc. and Herbal Brands,
Inc. to Catalina LP under the Convertible Note.
The Note Purchase Agreement
contains certain customary representations, warranties and covenants by and for the benefit of the parties. In connection with the issuance
of the Convertible Note, the Company will also pay Catalina LP an upfront fee in the amount of $250,000, as well as certain additional
fees and expenses.
Registration Rights Agreement
On July 19, 2021, in connection
with the Company’s entry into the Note Purchase Agreement and issuance of the Convertible Note, the Company entered into a Registration
Rights Agreement with Catalina LP (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the
Company agreed to file with the SEC within 30 calendar days a registration statement covering the resale of all common shares issued or
issuable with respect to the Convertible Note. The Company is required to use commercially reasonable efforts to have such registration
statement declared effective by the SEC within 90 calendar days after the Convertible Note issuance date and to keep such registration
statement continuously effective until the earlier of (x) 30 days after the maturity date of the Convertible Note or (y) the date on which
all common shares issued or issuable upon conversion of the Convertible Note are no longer restricted securities under Rule 144 under
the Securities Act.
Payoff and Release Agreement
On July 13, 2021, the Company,
Clever Leaves, a wholly owned subsidiary of the Company, GLAS Americas LLC, as collateral agent, GLAS USA LLC, as paying agent, and the
holders of the secured convertible notes of Clever Leaves due March 30, 2022 (the “2022 Convertible Notes”) entered into a
Payout and Release Agreement (the “Payout and Release Agreement”). Under the Payout and Release Agreement, the Company agreed,
upon the closing of a financing transaction by the Company with aggregate net proceeds of at least $10,000,000 on or before July 31, 2021,
to prepay the holders of 2022 Convertible Notes, in full satisfaction of the aggregate amounts outstanding under the 2022 Convertible
Notes, an amount equal to the sum of (1) ninety percent (90%) of the aggregate outstanding principal amount on the 2022 Convertible Notes;
(2) all accrued interest through the date of repayment and (3) certain legal fees.
The foregoing descriptions of the Note Purchase Agreement, the Convertible
Note, the Guarantee, the Pledge Agreements, the Registration Rights Agreement, the Payoff and Release Agreement and the Subordination
Agreement do not purport to describe all the terms and provisions thereof and are qualified in their entirety by reference to the full
text of those agreements, copies of which are included as exhibits to this current report on Form 8-K and incorporated herein by reference.