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Green Growth Brands expects to close Moxie transaction within six months.

The Transaction is structured to include the formation of GGB LP, a new Ontario limited partnership of which GGB will be the general partner, with the operating companies of GGB being placed under the partnership. Payment of the Purchase Price will be satisfied through the issuance of common shares of GGB and exchangeable limited partnership units in GGB LP as follows: through the issuance of GGB Common Shares to the shareholders of MXY C and MXY D; through the issuance of either GGB Common Shares or Exchangeable LP Units to the unitholders of Moxie; and through the issuance of Exchangeable LP Units to the holders of the Pure Entities. The Exchangeable LP Units are exchangeable into GGB Common Shares on a one-for-one basis for no additional consideration; however, the Exchangeable LP Units may not be exchanged for GGB Common Shares for the first year following the closing of the Transaction. The total number of securities issuable as payment under the Transaction is equal to that number determined by dividing the Purchase Price by the 30-day volume-weighted average price of GGB Common Shares ending on the third trading day prior to the closing such that following the issuance of the GGB Common Shares and Exchangeable LP Units, the former Moxie members, the shareholders of MXY C and MXY D and the holders of the Pure Entities will hold between approximately 30% and 42% of the fully-diluted equity of GGB with the majority of such securities to be subject to lock up agreements for a period of 12 months from the completion of the Transaction with staggered releases. The Agreement may be terminated in certain circumstances including by mutual agreement of the parties; by either party for a significant breach by the other party that would cause the closing conditions not to be met; by either party if the Transaction has not been effected by June 30, 2020; by Moxie, if it does not receive a legal opinion from counsel regarding the United States federal income tax consequences of the exchange of certain units of Moxie for Exchangeable LP Units or, by GGB, if GGB enters into an agreement regarding an acquisition transaction. Subject to the terms and conditions set out in the Agreement, if either party terminates as a result of a significant breach by the other party, the breaching party will pay a termination fee of US$10M or if the Agreement is terminated by Moxie in the event of an Opinion Termination, it will pay GGB a termination fee of US$10 million. If the Agreement is terminated by GGB in the event of an Acquisition Termination, GGB will pay to Moxie a termination fee of US$17.5M. GGB will satisfy payment of its termination fee, in either case, in GGB Common Shares, and Moxie will satisfy payment of its termination fee, in either case, through forgiveness of the Loan and a cash payment. The closing of the Transaction is expected to occur within the following six months, but remains subject to the satisfaction of various closing conditions, including receipt of all necessary regulatory approval for the transfer of the cannabis-related licenses of Moxie by local and state authorities in each of the markets where Moxie's assets and licenses are held; approval from the Canadian Securities Exchange for the listing of GGB Common Shares issuable in connection with the Transaction; that all required securityholder approval for Moxie, MXY C and MXY D is received and certain pre-closing transactions have been effected; that the Lock-Up Agreements have been entered into; there has been no material adverse effect in respect of either Moxie or GGB; and, that all documents required in connection with the transfer of Moxie, MXY C and MXY D securities have been delivered to GGB. There can be no assurance that the Transaction will be consummated. On closing, the controlling members of Moxie will be entitled to nominate two directors of GGB and, in connection with the foregoing, the Company and certain shareholders of GGB, will enter into a nomination rights and voting agreement with respect to matters relating to the nomination and election of such nominees. Management of Moxie will continue to lead the company as part of GGB, with key management joining GGB. As part of the Transaction, Moxie has agreed to make available a loan of US$5M to GGB in order to fund certain pending acquisitions and the parties have agreed to enter into a distribution agreement. The Loan will bear interest at 6% and, if the Transaction is terminated, will be repaid within 12 months of termination. The Distribution Agreement provides that GGB will distribute Moxie CBD products through its kiosk and dispensary network for a period of up to thirty months.
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Publication:The Fly
Date:Jul 9, 2019
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