CannTrust Seeking Court Approval Of Proposal Under Bankruptcy And Insolvency Act

CannTrust Holdings Inc. will be seeking court approval of the Division I Proposal made by the company pursuant to the Bankruptcy and Insolvency Act (Canada). The hearing is scheduled for 11:00 a.m. on November 28, 2022 or as soon after that time as the motion can be heard.

The original proposal was amended and restated on November 3, 2022 to clarify the share distribution mechanics, clarify that CTH may transfer the proceeds of a potential HST refund to Phoena Holdings Inc. (if such refund is received), as opposed to transferring the right to claim the refund itself and allow greater flexibility in respect of the timing of the dissolution of CTH with respect to resolution of tax planning matters.

The amended and restated proposal was unanimously approved at the meeting of creditors held on November 4, 2022.

CTH is proposing to make further clarifying amendments to the proposal In accordance with section 7.2 of the proposal, which allows amendments after the meeting of creditors with the consent of the proposal trustee and approval of the Ontario Superior Court of Justice. Among other things, the amendments would add further details of the basis upon which CTH's shares in Phoena will be distributed to CannTrust shareholders. The actual mechanics of the distribution of the Phoena shares will be set out and governed by the articles of reorganization which are to form part of the court approval order sought on November 28, 2022.

Shares Distribution

CTH intends to distribute the shares it holds in Phoena to its existing shareholders, on the basis of one common share of Phoena for every one common share its shareholders hold of the company.

The following shareholders of the company will not have a right to receive any Phoena shares:

• Shareholders who own less than 10,000 common shares of CTH.

• Persons whose common shares are held in any registered retirement savings plan, registered retirement income fund, registered pension plan, deferred profit sharing plan, tax-free savings account, home buyer's plan, lifelong learning plan, registered education savings plan, registered disability savings plan, pooled retirement savings plan, or any other form of registered savings vehicle for which the Phoena shares do not qualify as a permitted investment or a "qualified investment" within the meaning of the Income Tax Act (Canada), as applicable.

• Persons who are not (A) Canadian residents, (B) U.S. persons, provided that the company receives an opinion from qualified and independent U.S. securities counsel in form and substance satisfactory to the directors of the company that the distribution to U.S. persons will be exempt from the registration requirements under the United States Securities and Exchange Act of 1933; or (C) persons other than those described in (A) and (B) in any jurisdiction in respect of which an opinion has been obtained from qualified and independent securities counsel, in form and substance satisfactory to the directors of the company, confirming that the distribution will be exempt from any requirement to prepare, file or deliver any registration statement, prospectus, financial statement, offering memorandum or similar disclosure document in connection with the distribution.

The company is limiting the distribution of its Phoena Holdings shares to holders or owners of at least 10,000 CTH common shares so that the costs of distribution will not significantly exceed the value of the Phoena shares being distributed. When Phoena completed its private placement with Marshall Fields Holdings and other strategic investors in March 2022, they were issued common shares at a price of approximate $0.009 per share, implying that 10,000 shares had a value of $90.

Any person wishing to support or oppose the relief sought at the approval hearing may serve court materials on the service list setting out their basis for their support or opposition and/or attend the hearing and should contact the proposal trustee for further information.

After considering the court materials filed by the proposal trustee, CTH and any other person, and hearing the submissions of those present at the hearing, the court may approve the proposal and other relief sought by CTH. If approved by the court, CTH would then proceed to implement the proposal.

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