Fire & Flower To Raise $16M In Private Placement And Loan Agreement With Alimentation Couche-Tard

Fire & Flower Holdings Corp. FFLWF FAF has entered into an amendment agreement with respect to certain amendments to the series C common share purchase warrants of the company issued to an indirect wholly-owned subsidiary of Alimentation Couche-Tard Inc. ANCTF In connection with the amendment agreement, ACT and the company have entered into: a loan agreement in respect of an $11 million principal amount loan to the company and a subscription agreement to purchase common shares of the company for aggregate proceeds of approximately $5 million.

ACT is currently the holder of 17.8 million series C warrants.

Proposed Amendments

• The Series C Warrants shall be divided into two equal tranches: series C-1 warrants and series C-2 warrants;

• The series C-1 warrants shall be exercisable at a price equal to 85% of the 20-day VWAP of the common shares at any time between the date the amendments come into effect and June 30, 2023;

• The series C-2 warrants shall be exercisable at a price equal to the amended series C exercise price at any time between December 1, 2023 and August 31, 2024.;

• The number of series C-1 warrants shall be reduced by the number of common shares issued to ACT in the private placement; provided, however, that the aggregate number of series C-1 warrants and series C-2 warrants shall, upon the closing of the private placement, entitle ACT to acquire that number of common shares, which together with common shares then held and as-converted common shares underlying the debentures held by ACT and its affiliates, would represent at least 50.1% of the issued and outstanding common shares on a fully-diluted basis;

• any subsequent series C warrants to be issued to ACT pursuant to its participation right and top-up right shall have an exercise price equal to the greater of:

  • with respect to the participation right, the amended series C exercise price and the price per security issued in the offering giving rise to the participation right;

  • with respect to the top-up right, the amended series C exercise price and the market price of the common shares on the date ACT delivers its notice to exercise its top-up right;

• in the event the series C-1 warrants are not exercised in full on or prior to the series C-1 expiry date, all series C-2 warrants shall immediately be cancelled.

The investor rights agreement would also be amended to reflect the aforementioned amendments to the series C warrants.

The Loan

Pursuant to the terms of the loan agreement, ACT will loan $11 million principal amount to the company with an interest rate of 11.0% per annum and payable quarterly, provided that for the first six months of the term of the loan, the company may elect to increase the principal amount of the loan by the amount of accrued interest during such period in lieu of paying such accrued interest to ACT. The loan matures on December 31, 2023 and ACT will have first priority security on all of the assets of the company and its subsidiaries including all intellectually property subject only to permitted liens. Pursuant to the loan agreement, the company may prepay all or any portion of the loan without bonus or penalty upon five business days' notice.

Private Placement

Pursuant to the terms of the subscription agreement, ACT and the company have agreed to complete a private placement, whereby ACT will subscribe for 3 million common shares at a price of $1.64798 per common share, for aggregate proceeds of approximately $5 million. The company is entitled to terminate the subscription agreement and enter into an agreement with respect to an unsolicited superior proposal, in which case the loan shall become immediately due and payable.

Fire & Flower Board Recommendation

The board of directors of the company, based on a unanimous recommendation of a special committee comprised of independent directors and after consultation with its legal and financial advisors, has unanimously determined that the loan and the warrant and share transaction are in the best interests of Fire & Flower.

The company intends to seek the requisite shareholder approval at a special meeting of shareholders expected to be held in December 2022. It is a condition of both the amendments and the private placement that each transaction be approved by the minority shareholders prior to coming into effect. The loan agreement does not require minority shareholder approval.

Photo: Benzinga; Sources: courtesy of Kindel Media via Pexels

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