Town to retain 5% share in Harvest as medical cannabis company restructures

by Geoff Fox & Kate Shunney

Hancock town officials have signed off on the details of a corporate restructuring for Harvest of Maryland, the medical cannabis grower and processor with a location on Hancock’s South Street.

Harvest owns three Maryland medical cannabis licenses for cultivation, processing and a dispensary. The processor license is held by Harvest of Maryland Production LLC (HMP) and is used to operate the cannabis manufacturing facility in Hancock. That facility employs around 30 people locally.

The Town of Hancock owns 5% of the company, which is being sold to Trulieve Cannabis Corporation.

Under the agreement, signed by town officials on September 30, Hancock’s interest in the company will be protected through formation of a new entity that will carry the CEO’s ownership.

Harvest is in the process of being acquired by Trulieve at a value of more than $2 billion.

In July 2021, Harvest and Trulieve submitted a request to the MMCC to transfer Harvest’s 95% interests in the three Maryland licenses to Trulieve.

That request was initially denied by the MMCC on the basis the processing facility has been operational for less than three years, with the third year anniversary occurring April 25, 2022.

That hurdle was overcome by both companies to allow the acquisition a corporate restructuring of HMP.

This would distribute 5% of the ownership interest in HMP directly to the Town of Hancock, which holds its 5% interest through a holding company, and create a new corporate entity, “Newco” to hold Harvest’s 95% interest in the license until April 25, 2022.

Steve White, the current CEO of Harvest, would hold 100%. ownership interests of Newco.

Under the amended and restated operating agreement of Harvest of Maryland Production LLC, the agreement amend, restates and supersedes the original agreement in its entirety.

The members of the agreement – Hancock and White — intend that Harvest shall be “operated in a manner consistent with its treatment as a partnership for federal and state income tax purposes.”

The principal office of Harvest for purposes of the act, is located at 35 South Street in Hancock, or such other place as may from time to time be determined by the Managing Member, Harvest.

The principal office of Harvest outside the state of Maryland is located at 1155 West Rio Salado Parkway, Suite 201, Tempe, Arizona.

The Town of Hancock’s share in harvest won’t be “subject to dilution” under the restructuring and the agreement says that the town’s interests won’t be reduced below 5% for any reason.

The new agreement also outlines that no member can own, manage, operate, control, engage in, or otherwise participate in the ownership, management, operation or control of, any other person engaged, directly or indirectly, in the growing, cultivating, manufacturing, packaging, distributing or processing of medical or recreational cannabis in the state of Maryland except through Harvest.

Under the agreement, the town also said it would continue to lease storage space to Harvest’s new company at the Public Works building on Main Street.

The lease runs from June 1, 2021, until May 31, 2022, with a rent of $250 a month or $3,000 for the year.

Harvest is leasing a 25×75 ground level portion of the building located at 317-319 East Main Street.

The lease automatically renews for an additional period of month to month per renewal terms unless either party gives written notice no later than 30 days prior to the end of the term or renewal term.

Mayor Tim Smith and Harvest of Maryland’s Facilities Manager David Smith signed the lease.

Copies of all notices from Harvest to the Town of Hancock will also be sent to the town attorney, Ed Kuczynski, the document said.