NEW YORK, Feb. 07, 2020 (GLOBE NEWSWIRE) — Acreage Holdings, Inc. (“Acreage” or “Company”) (CSE: ACRG.U) (OTCQX: ACRGF) (FSE: 0VZ), one of the largest vertically integrated cannabis operators in the U.S., today announced it entered into agreements in respect of the following financing transactions (collectively, the “Financing Transactions”):
Benefits of the Financing Transactions:Kevin Murphy, Chairman and CEO of Acreage said, “In a time of limited capital availability for our industry, I am excited to announce these proposed transactions to strengthen our balance sheet, further enabling us to execute our plan to be a leading consumer cannabis company in the U.S.  In the course of these transactions, we have cemented a relationship with a well-capitalized institutional lender that has the capacity to provide additional credit facilities as necessary.”
ADDITIONAL TRANSACTION DETAILSCredit FacilityA subsidiary of Acreage (the “Borrower”) may draw down up to US$100,000,000 from the Institutional Lender under the Credit Facility in three tranches, with the first advance, of US$49,000,000, expected to be received in February 2020, subject to satisfaction of the closing conditions including closing of the Loan Transaction (“First Closing”).     Interest under the Credit Facility advances will be payable monthly as follows: (a) for the first year, 2.55% per annum on the first advance, 1.25% per annum on the second advance, and a rate to be negotiated for the third advance; and (b) for the second year, a rate to be negotiated. Advances made pursuant to the Credit Facility will be secured by a guarantee from the IP Borrower (as defined below) and security over the US$50,000,000 of the proceeds from the Loan Transaction (the “Cash Collateral”).  The Borrower may drawdown on the remaining US$51,000,000 of the Credit Facility if such additional advances are secured by cash collateral equal to the additional amounts borrowed plus US$1,000,000. The Institutional Lender will not have security in any of Acreage’s or its subsidiaries’ other property or assets.  The Credit Facility has a two-year term and matures, subject to acceleration in certain limited instances, on the date that is two years from First Closing.Acreage expects to use the advances for working capital and general corporate purposes.Loan TransactionIn order to fund the Cash Collateral, an Acreage subsidiary (the “IP Borrower”) will borrow US$50,000,000 in the aggregate (the “Borrowed Amount”) from IP Investment Company, LLC (the “Lender”).  Kevin Murphy, Acreage’s Chief Executive Officer, is lending US$21,0000,000 of the Borrowed Amount to the Lender in connection with the completion of the Lender’s loan to the IP Borrower.  Acreage has been advised that Mr. Murphy will not be a member, an officer nor a director of the Lender and that Mr. Murphy will be entitled to receive, assuming full repayment of the Borrowed Amount at maturity, US$23,100,000 along with up to 304,001 Interest Shares (as defined below).  The maturity date for borrowings under the Loan Transaction, subject to acceleration in certain instances, will be 366 days from the closing date of the Loan Transaction.Monthly interest under the Loan Transaction will be satisfied by the IP Borrower delivering to the ‎Lender ‎‎83,333 Acreage Class A subordinate voting shares (“Subordinate Voting Shares”) per ‎month, or 1,000,000 Subordinate Voting Shares in the aggregate ‎‎(the “Interest Shares”).  ‎Acreage is required to use commercially reasonable efforts to ensure that the ‎Interest Shares are ‎not subject to resale restrictions.The Lender will be granted a security interest in the non-U.S. intellectual property owned by Acreage and its affiliates (the “IP Security”).  If the IP Borrower has not repaid the principal amount outstanding at maturity along with an additional repayment amount, being an aggregate of US$55,000,000, the Lender shall have the right to enforce its IP Security and sell such collateral to a third party in satisfaction of the IP Borrower’s obligations to the Lender.  In the event that the sale of the IP Security does not take place, the Lender may require Acreage to issue up to 20,000,000 Subordinate Voting Shares, with all net proceeds of the offering payable to the Lender in satisfaction of the repayment amount owing to it.  If the Lender does not receive at least US$55,000,000 from the net proceeds of such offering and Acreage does not make a cash payment in respect of any shortfall, certain subsidiaries of Acreage will be required to dispose of assets (“Secured Assets”) in transactions to make up the difference between US$55,000,000 and the net proceeds from such offering‎. If, prior to the date that is four months from the closing of the Credit Facility, Acreage or its ‎affiliates has not (a) borrowed or otherwise raised debt or equity capital from any person of at least an additional US$65,000,000, or (b) repaid US$20,000,000 of the principal ‎amount of the Borrowed Amount by (i) paying US$22,000,000 to the Lender and concurrently ‎delivering to the Lender that number of Interest Shares equal to 48% of the Interest Shares that ‎have yet to be delivered to the Lender, the Lender shall have the right to accelerate the maturity ‎of US$20,000,000 of the principal amount of the Borrowed Amount.  If this acceleration occurs, ‎(a) certain Secured Assets will be transferred to the Lender in satisfaction of the maturing amount, and (b) a number of Interest Shares equal to ‎‎48% of the Interest Shares that have yet to be delivered to the Lender shall be immediately ‎delivered by the IP Borrower.  If the Secured Assets cannot be transferred for regulatory reasons, Acreage and/or its applicable subsidiaries will make arrangements to provide the economic benefits thereof to the Lender.The Lender shall have the right to put any Interest Shares ‎that it still owns upon maturity of the ‎Loan Transaction to the IP Borrower at a put price of US$4.50 per ‎Interest Share for a period of 10 ‎business days following the maturity date.  ‎Closing of the Loan Transaction is expected to occur in February, 2020 and is subject to execution of definitive transaction documents, required consent and approval, closing of the Private Placement, approval of the Canadian Securities Exchange (“CSE”) and customary closing conditions.The participation of Kevin Murphy in the Loan Transaction constitutes a “related party transaction” within the meaning of Multilateral Instrument 61‑101 ‑ Protection of Minority Security Holders in Special Transactions (“MI 61‑101”).  The Company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61‑101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61‑101 in respect of related party participation in the placement as neither the fair market value (as determined under MI 61-101) of the subject matter of, nor the fair market value of the consideration for, the transaction, insofar as it involved the related parties (being Mr. Murphy), exceeded 25% of the Company’s market capitalization (as determined under MI 61-101).  Further details will be included in a material change report to be filed by the Company.  The material change report will not be filed more than 21 days prior to closing of the Loan Transaction due to the timing of the announcement of the Loan Transaction and the anticipated closing thereof occurring in less than 21 days.Private PlacementAcreage also announced today the Private Placement of US$30,000,000 of special warrants (“Special Warrants”) at a price of US$4.93 (the “Issue Price”) per Special Warrant.  The Special Warrants shall be automatically exercised (without payment of any further consideration) into units of the Company (the “Units”) on the earliest to occur of: (i) the date that is three business days following the date on which the Company files a prospectus supplement (the “Qualification Prospectus Supplement”) to the Company’s base shelf prospectus dated August 8, 2019 (the “Base Shelf Prospectus”) with the applicable securities regulatory authorities in the Province of Ontario and each of the jurisdictions in Canada in which the Special Warrants are sold (collectively, the “Securities Commissions”) qualifying the distribution of the Units issuable upon exercise of the Special Warrants, and (ii) the date that is four months and one day after the Closing Date (as hereinafter defined) (the “Automatic Conversion Date”), subject to adjustment in certain events.Each Unit will consist of one Subordinate Voting Share and one Subordinate Voting Share purchase warrant of the Company (a “Warrant”).  Each Warrant will be exercisable to acquire one subordinate voting share of the Company (a “Warrant Share”) for a period of five years following the Closing Date (as hereinafter defined) of the Private Placement at an exercise price of US$5.80 per Warrant Share, subject to adjustment in certain events. At the closing of the Private Placement, the lead subscriber will be granted the Option to purchase, at the Issue Price per Special Warrant, up to US$20,000,000 of additional Special Warrants ‎or, if the Qualification Prospectus Supplement has been filed prior to the time of ‎exercise, Units, exercisable at the lead subscriber’s option at any time up until 8:00 a.m. ‎‎(Eastern time) on March 16, 2020. The Qualification Prospectus Supplement shall ‎also qualify the distribution of the Units issuable upon exercise of such additional ‎Special Warrants (if the Option is exercised prior to filing the Qualification ‎Prospectus Supplement) or issuable upon exercise of the Option (if the Option has ‎not been exercised prior to the filing of the Qualification Prospectus Supplement).‎The net proceeds from the Private Placement will be used for working capital and general corporate purposes.Canaccord Genuity Corp. is acting as bookrunner and lead agent (the “Agent”) on a fully marketed, “best efforts” private placement basis.The Special Warrants shall be offered and sold by private placement to “accredited investors” within the meaning of National Instrument 45-106 – Prospectus Exemptions and other exempt purchasers only in those provinces of Canada in which a receipt (or deemed receipt) has been issued for the Base Shelf Prospectus by the applicable securities regulatory authority.The Special Warrants and the Warrants will not be listed on any stock exchange. The Company intends to apply to list the Subordinate Voting Shares and the Warrant Shares on the CSE.The Special Warrants issued pursuant to the Private Placement will be subject to a statutory four month and one day hold period following the Closing Date subject to the earlier clearing of the Qualification Prospectus Supplement qualifying the distribution of the Units issuable upon exercise of the Special Warrants.Closing of the Private Placement is expected to occur on or about February 7, 2020 (the “Closing Date”). Closing of the Private Placement is subject to customary closing conditions, including, without limitation, receipt of all regulatory approvals.  This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States.  The Special Warrants being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or the securities laws of any state of the United States and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act) absent registration or an applicable exemption from the registration requirements.  This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any state of the United States in which such offer, solicitation or sale would be unlawful.ABOUT ACREAGE
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