TORONTO, Aug. 20, 2019 (GLOBE NEWSWIRE) -- Pauric Duffy (“PD”) and Peter Comerford (“PC”) announce today that they have acquired (the “Acquisition”) indirect ownership of an aggregate of 32,632,545 Series 1 voting convertible redeemable preferred shares (collectively, the “Consideration Shares” or the “Preferred Shares”) of The Flowr Corporation (“Flowr”) as partial consideration for the sale of their respective interests in Holigen Holdings Limited (the “Holigen Sale”). The Holigen Sale was completed pursuant to a share purchase agreement dated June 24, 2019, as amended, between Flowr (as purchaser) and DFT Trading Limited (“Pauric Holdco”) and Pleiades Trading Ltd. (“Peter Holdco” and together with Pauric Holdco, the “Vendors”) (as vendors), and Pleiades Holdings Ltd., DFT Holdings Limited, PD and PC (as guarantors) (the “SPA”). This press release is being issued pursuant to Canadian early warning requirements.
Pursuant to the terms of the Consideration Shares: (i) 10% of the Consideration Shares (the “Initial Milestone Shares”) will automatically convert into common shares of Flowr (“Common Shares”) immediately after issuance on the closing the Acquisition (the “Closing”); and (ii) 40% of the Consideration Shares will automatically convert into Common Shares six months from the Closing, in each case on a 1:1 basis, subject to customary adjustments. The remaining 50% Consideration Shares will convert into Common Shares when and if Holigen achieves certain milestones related to: (i) achieving certain planting targets in Australia and Portugal, as to 35% of the Consideration Shares (the “Planting Milestone Shares” and together with the Initial Milestone Shares, the “Milestone Shares”); and (ii) the lodging of product applications, as to 15% of the Consideration Shares (the “Regulatory Milestone Shares”). Under no circumstance will the Regulatory Milestone Shares convert into Common Shares earlier than 12 months after the Closing.
The Consideration Shares were issued from treasury of Flowr at a deemed price of $7.15 per share, being the volume weighted average price of the Common Shares as traded on the facilities of the TSX Venture Exchange for the five trading days immediately preceding the date of the SPA, for aggregate consideration of approximately $233,322,696.75.
Immediately prior to the closing of the Acquisition (the “Closing”): (i) PC did not have beneficial ownership of, or control or direction over, any securities of Flowr; and (ii) Rosaleen McQuaid (“RM”), the spouse of PD, had beneficial ownership of, or control or direction of, 177,760 Common Shares and 88,880 Common Share purchase warrants of Flowr (each Common Share purchase warrant, a “Warrant”), representing approximately 0.18% of the issued and outstanding Common Shares on a non-diluted basis and approximately 0.26% of the issued and outstanding Common Shares on a partially diluted basis, assuming the exercise of the Warrants. The Common Shares and Warrants were acquired directly by Greyrock Trading Ltd., a company which is 99.9% owned by RM, under Flowr’s public offering which closed on August 8, 2019 (the “Offering”).
Immediately following the Closing, PD (including, for certainty, his joint actors) had beneficial ownership of, and control and direction over, 26,161,511.33 Consideration Shares, representing approximately 80.17% of the issued and outstanding Preferred Shares on a non-diluted basis. In addition, PD (including, for certainty, his joint actors) had beneficial ownership of, and control and direction over, 177,760 Common Shares and 88,880 Warrants. Assuming the conversion of all of the Milestone Shares into Common Shares, and taking into account the securities of Flowr acquired by PD’s joint actors in the Offering, PD (and his joint actors) would beneficially own, and have control and direction over: (i) 14,388,831.23 Preferred Shares, representing 80.17% of the issued and outstanding Preferred Shares; and (ii) 12,039,320 Common Shares, representing approximately 10.45% of the issued and outstanding Common Shares, on a partially diluted basis.
Immediately following the Closing, PC had beneficial ownership of, and control and direction over, 6,471,033.67 Consideration Shares, representing approximately 19.83% of the issued and outstanding Preferred Shares on a non-diluted basis. Assuming the conversion of all of the Milestone Shares into Common Shares, PC would beneficially own, and have control and direction over: (i) 3,559,068.52 Preferred Shares, representing 19.83% of the issued and outstanding Preferred Shares; and (ii) 2,911,965 Common Shares, representing approximately 2.53% of the issued and outstanding Common Shares, on a partially diluted basis.
Together, immediately following the Closing, PC and PD (including, for certainty, their joint actors) have beneficial ownership of, and control or direction over, 32,632,545 Preferred Shares, representing 100% of the issued and outstanding Preferred Shares. In addition, assuming the conversion of all of the Milestone Shares into Common Shares, and taking into account the securities of Flowr acquired by PD’s joint actors in the Offering, PC and PD would beneficially own, and have control and direction over, 14,951,285 Common Shares, representing approximately 13% of the issued and outstanding Common Shares on a partially diluted basis.
The Consideration Shares were acquired for investment purposes. The Preferred Shares are subject to the terms of escrow agreements dated as of the date of Closing, in each case, among the applicable Vendor, Flowr and The Laurel Hill Advisory Group Company, as escrow agent, (the “Escrow Agreements”). In addition, in connection with the Closing, each Vendor has entered into a lock-up agreement with Flowr (collectively, the “Vendor Lock-Up Agreements”), the Vendors have entered into a share conversion agreement with Flowr (the “Conversion Agreement”) and PD has entered into a governance agreement with Pauric Holdco and Flowr (the “Governance Agreement”). Subject to the terms of the SPA, the Escrow Agreements, the Vendor Lock-Up Agreements, the Conversion Agreement and the Governance Agreement, PD, PC and their respective joint actors may, from time to time and at any time, acquire, as applicable, additional Preferred Shares and/or Common Shares and/or other equity, debt or other securities or instruments of Flowr in the open market or otherwise, as applicable, and reserve the right to dispose of any or all of the Preferred Shares and/or Common Shares in the open market or otherwise at any time and from time to time, and to engage in similar transactions with respect to the Preferred Shares and/or Common Shares, the whole depending on market conditions, the business and prospects of Flowr and other relevant factors, including compliance with applicable securities laws and the terms of the relevant agreements described herein.
Pursuant to the SPA, Flowr has agreed to appoint PD to its board of directors (the “Flowr Board”) at Closing.
Board Observer Right
Until the earlier of (i) the first business day on which PD beneficially owns Preferred Shares and Common Shares (the “Shares”) representing less than 10% of the then issued and outstanding Common Shares on a partially diluted basis, and (ii) the first business day on which PD ceases to be a director of Flowr, PD has the right to appoint one non-voting observer (who shall, initially, be PC) to attend and observe meetings of the Flowr Board, subject to such observer first providing Flowr a confidentiality agreement in form and content satisfactory to Flowr, acting reasonably.
Consent Right
Until the earlier of the first business day on which (i) PD beneficially owns Shares representing less than 13% of the then issued and outstanding Common Shares on a partially diluted basis, and (ii) the conversion or redemption of all of the Preferred Shares held by PD and his affiliates, the completion of a Consent Transaction (as defined herein) by Flowr will require the prior written consent of PD (not to be unreasonably withheld). This consent right, however, will not restrict the Flowr Board from exercising its fiduciary duties to Flowr. “Consent Transaction” means either (A) a merger, amalgamation, arrangement, reorganization, or other business combination or similar transaction involving Flowr and/or any of its subsidiaries in which (i) the consent or approval of the Flowr Board and the holders of Common Shares is required to complete the transaction, (ii) less than 10% of the total consideration payable pursuant to the transaction is cash consideration, and (iii) the holders of Common Shares on a partially diluted basis immediately before the completion of the transaction would hold less than 50% of the common shares or other equity securities of Flowr’s successor or of the continuing or surviving entity immediately following the completion of such transaction, assuming the conversion of all of the Preferred Shares and Class A preferred shares of The Flowr Canada Holdings ULC immediately prior to the completion of the transaction; or (B) (i) a share sale transaction that would result in a direct or indirect change of control of RPK Biopharma, Unipessoal Lda. (“RPK”) or TCann Pty Ltd. (“TCann”); or (ii) the sale of all or substantially all of the assets of RPK or TCann (in the case of (i) and (ii), to a person that is not an affiliate of Flowr, but for avoidance of doubt does not include an internal reorganization the result of which would have Flowr continue to have ultimate control of such entities).
Standstill
Until the first business day on which PD and his affiliates collectively beneficially own Shares (including other equity rights convertible into shares or equity interests of Flowr) representing less than 5% of the then issued and outstanding Common Shares (on a partially diluted basis), PD and his affiliates will not, directly or indirectly, without the prior written consent or waiver by Flowr: (i) acquire, or agree to acquire, or make any proposal to acquire, directly or indirectly, by means of purchase, merger, consolidation, take-over bid, exchange offer, tender offer, business combination, arrangement, amalgamation or in any other manner, whether in one transaction or a series of transactions, any securities or assets of Flowr or any of its subsidiaries, other than conversion of Preferred Shares into Common Shares through the process set out in the Conversion Agreement; or (ii) undertake certain additional actions that may affect control of or which are hostile to Flowr (including, among others as set out in the Governance Agreement, initiating any shareholder proposals or soliciting proxies, commencing any take-over bid or similar transaction; acting alone or in concert with others to control Flowr or any of its subsidiaries, assisting with the foregoing or announcing any intention with respect to the foregoing).
Voting
Subject to compliance with applicable laws, in the event that the holders of Preferred Shares are entitled to vote as a separate class on a shareholder proposal, PD has agreed to vote any Preferred Shares (and use commercially reasonable efforts to cause all of the Preferred Shares owned or beneficially owned by PD or any of his affiliates or over which PD or any of his affiliates has voting control or the power to direct voting control), to be voted in accordance with a recommendation of the Flowr Board.
Flowr’s head office is located at 461 King Street West, Floor 2, Toronto, Ontario M5V 1K4. A copy of the early warning reports with respect to the foregoing will appear on Flowr’s profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com. A copy of the early warning report with respect to PD may be obtained by contacting PD at +351 219 259 507. A copy of the early warning report with respect to PC may be obtained by contacting PC at +351 219 259 507.
Pauric Duffy
Lara Buildings, Level 1
Guzeppi Calleja Street
Iklin IKL 1264
Malta
Peter Comerford
Lara Buildings, Level 1
Guzeppi Calleja Street
Iklin IKL 1264
Malta