Toronto, Ontario–(Newsfile Corp. – July 13, 2023) – Trees Corporation (NEO: TREE) (the “Company” or “Trees“) is pleased to announce that the Company has entered into a business combination agreement dated July 12, 2023 (the “Business Combination Agreement“) with 420 Investments Ltd. (“420“), a private arm’s length company incorporated under the Business Corporations Act (Alberta), pursuant to which the Company and 420 will amalgamate, constituting a reverse takeover of the Company by 420 under the policies of Cboe Canada, the new business name of the NEO Exchange (“Cboe Canada“) (the “Transaction“). A copy of the Business Combination Agreement is available on Trees’ SEDAR profile at www.sedar.com.

The amalgamated company resulting from the completion of the Transaction (the “Resulting Issuer“) will be named “420 Investments Ltd.” or such other name as directed by 420 (the “Name Change“). Subject to the approval of Cboe Canada, the common shares of the Resulting Issuer (the “Resulting Issuer Shares“) will be listed on Cboe Canada under a new trading symbol to be determined by 420. Prior to the execution of the Business Combination Agreement, the directors, officers and certain significant shareholders of each of Trees and 420 entered into support agreements, pursuant to which such parties have agreed to vote in favour of the Transaction contemplated by the Business Combination Agreement at the meetings of the shareholders of Trees and 420, respectively.

“We are very excited to bring together FOUR20 and Trees,” commented Scott Morrow, Chief Executive Officer of 420. “The union of these two well established brands will give the combined company geographic diversity and create a new springboard for growth. The cannabis retail industry is ready for consolidation and this new company will be in a great position to capitalize on these opportunities.”

Freida Butcher, Chair of the Board of 420, also commented: “We are very proud of the performance of FOUR20 to not only survive the pandemic, but to have grown from 14 stores in 2020 to our current 40 stores. We are very pleased to have found another retailer in Trees with the same values and with stores that will expand our brand in Ontario and allow us to take our first steps into B.C. We are also very pleased to note that upon completion of the business combination, all significant long-term debt other than that tied up in litigation will have been either converted to equity or otherwise eliminated, leaving the company in a strong position to continue its path of strategic growth and service to its customers.”

Jeff Holmgren, President and CFO of Trees, added, “we are very pleased to have navigated towards a partner in FOUR20 where together we will be well positioned to leverage our exceptional retail team, national presence and strong balance sheet towards the creation of significant shareholder value for both Trees and FOUR20 shareholders alike.”

420 Investments Ltd.

420 is a Calgary, Alberta based private company engaged in the business of retailing adult-use Cannabis, with 40 operational retail locations across the Provinces of Alberta and Ontario.

420 approaches cannabis retail in a socially responsible manner, ensuring consumers are provided with the best products, information and customer service to guide a customer’s cannabis experience.

General Terms of the Transaction

Amalgamation

The Transaction will be effected by way of an amalgamation between Trees and 420, without court approval, under the Canada Business Corporations Act (“CBCA“). At the time of the closing of the Transaction (the “Closing“):

• each of the post-Consolidation (as defined below) common shares in the capital of Trees (each, a “Trees Share“) will be cancelled and, in consideration for such Trees Shares, each Trees shareholder (collectively, the “Trees Shareholders“) will receive one (1) Resulting Issuer Share and one (1) Series A Preferred Share (as defined below) for each one (1) Trees Share held;

• each of the Class A common shares in the capital of 420 (each, a “420 Share“) will be cancelled and, in consideration for such 420 Shares, each 420 shareholder (collectively, the “420 Shareholders“) will receive one (1) Resulting Issuer Share and one (1) Series B Preferred Share (as defined below) for each one (1) 420 Share held;

• all of the holders of share purchase warrants of 420 (each, a “420 Warrant“) shall receive, in exchange for their 420 Warrants, an equal number of Resulting Issuer Share purchase warrants (each, a “Replacement Warrant“), each on the same terms and conditions as such 420 Warrants;

• the holder(s) of agent options of 420 (each, an “Agent Option“) issued in connection with the Concurrent Financing (as defined below) shall receive, in exchange for the Agent Options, an equal number of Resulting Issuer Share agent options, each on the same terms and conditions as such Agent Options;

• each of the stock options of 420 (each, a “420 Option“) shall receive, in exchange for their 420 Options, an equal number of stock options of the Resulting Issuer (each, a “Replacement Option“), each on the same terms and conditions as such 420 Options; and

• subject to the Trees Warrant Conversion (as defined below), holders of Trees Share purchase warrants (“Trees Warrants“) shall receive, in exchange for their Trees Warrants, an equal number of Resulting Issuer Share purchase warrants, each on the same terms and conditions as such Trees Warrants, except to the extent their terms will be adjusted (in accordance with the terms of such Trees Warrants) to reflect the Consolidation, including the Resulting Issuer Shares and Series A Preferred Shares issuable thereunder and the exercise price of each Trees Warrant.

Concurrent Financing

420 expects to conduct a brokered private placement financing of subscription receipts (“Subscription Receipts“), led by one or more agents, to be completed prior to the Closing (the “Concurrent Financing“). Each Subscription Receipt is expected to automatically be exchanged for underlying securities of 420, including 420 Shares, immediately prior to Closing, subject to the satisfaction of certain conditions to be set forth in the subscription receipt agreement governing the Subscription Receipts. Further details with respect to the Concurrent Financing will be provided in a press release of Trees to be issued at a later date.

Consolidation

Prior to the Closing and subject to obtaining the required approval of the Trees Shareholders, the Trees Shares will be consolidated on such ratio as is required for Trees Shareholders to hold 20.65% and 420 Shareholders to hold 79.35% of the issued and outstanding Resulting Issuer Shares immediately following Closing (the “Consolidation“).

Change of Directors and Officers

Upon Closing and subject to prior acceptance by Cboe Canada, it is expected that the board of directors of the Resulting Issuer will consist of eight directors, of which up to seven directors will be nominated by 420 and one director will be nominated by Trees (the “Board Reconstitution“). In addition, each of the current officers of the Company is expected to resign and individuals designated by 420 will be appointed in their place (the “Management Reconstitution“).

Additional information regarding the nominee directors and officers of the Resulting Issuer will be set out in a management information circular of Trees to be prepared by the parties as well as in a follow-up news release once determined.

Preferred Shares

The articles of amalgamation of the Resulting Issuer will provide for the creation of series A preferred shares (“Series A Preferred Shares“) and series B preferred shares (“Series B Preferred Shares“) of the Resulting Issuer.

The share terms setting out the rights, privileges, restrictions and conditions of the Series A Preferred Shares and Series B Preferred Shares will provide that, in the event certain ongoing litigation which 420 is a party to is: (a) decided or settled in favour of the Resulting Issuer, as successor to 420, the Series A Preferred Shares will be cancelled for nil consideration and the Series B Preferred Shares will convert into the number of Resulting Issuer Shares equal to the quotient obtained by dividing the litigation proceeds received by the Resulting Issuer by the deemed price of the Resulting Issuer Shares in the Transaction; or (b) decided or settled against the Resulting Issuer, as successor to 420, the Series B Preferred Shares will be cancelled for nil consideration and the Series A Preferred Shares will convert into the number of Resulting Issuer Shares equal to the quotient obtained by dividing the litigation proceeds paid by the Resulting Issuer by the deemed price of the Resulting Issuer Shares in the Transaction.

Shareholder Approvals

The Company will seek the approval of the Trees Shareholders for the Transaction, the Board Reconstitution, the Name Change and the Consolidation, and 420 shall seek the approval of the 420 Shareholders for the Transaction and the continuation by 420 under the CBCA (the “Continuation“).

Trees Conversions and Settlements

Prior to Closing, Trees will complete the following conversions and settlements:

• the outstanding principal amount of convertible promissory notes of Trees, together with accrued but unpaid interest, which as of June 30, 2023, is expected to be approximately $1,022,532, will convert into Trees Shares at a price to be determined prior to Closing (the “Trees Promissory Note Conversion“);

• the outstanding amount of debt owed by Trees to a certain contractor of Trees pursuant to the terms of a contractor agreement dated January 18, 2023, which as of June 30, 2023, is expected to be approximately $25,000, will convert into Trees Shares at a price to be determined prior to Closing (the “Trees Contractor Debt Conversion“);

• the outstanding amount of debt owed by Trees to 2583262 Ontario Inc., which as of June 30, 2023, is expected to be approximately $44,385.37, will convert into Trees Shares at a price to be determined prior to Closing (together with the Trees Promissory Note Conversion and Trees Contractor Debt Conversion, the “Trees Debt Conversion“);

• the participation interest of 1000321689 Ontario Ltd., equal to 49% of profits earned and received by Trees in respect of certain of Trees’ retail locations, will be converted into Trees Shares at a price to be determined prior to Closing (the “Trees Participation Interest Conversion“);

• shareholder loans provided to Trees in the aggregate principal amount plus accrued interest as at March 31, 2023, of $1,808,107 will be settled by way of: (a) share conversion into Trees Shares, at a price to be determined prior to Closing; (b) cash payments; and (c) new promissory notes, in accordance with debt conversion agreements to be entered into prior to Closing (the “Trees Shareholder Loan Settlement“);

• 16,666,666 Trees Warrants will be exercised into 33,333,332 Trees Shares at an exercise price of $0.015 per Trees Share (“Trees Warrant Conversion“); and

• Trees will enter into option surrender and termination agreements with respect to options to purchase Trees Shares (“Trees Options“), unvested restricted share units of Trees (“Trees RSUs“) and unvested performance share units of Trees (“Trees PSUs“), in a form satisfactory to 420, acting reasonably, which Trees Surrender agreements will provide that each holder of Trees Options, Trees RSUs or Trees PSUs, as applicable, agrees, conditional upon Closing, to surrender to Trees its Trees Options, unvested Trees RSUs and/or unvested Trees PSUs.

Conditions to the Transaction

The Closing of the Transaction is subject to the satisfaction of various conditions precedent, including but not limited to:

• Cboe Canada will have conditionally approved the listing of the Resulting Issuer Shares, including the Resulting Issuer Shares issuable upon exercise of the Replacement Warrants and Replacement Options and underlying the Series A Preferred Shares and Series B Preferred Shares, and all conditions in connection therewith shall have been satisfied or waived;

• the Company and 420 having each obtained all necessary approvals, including of its board of directors and shareholders and of the regulatory authorities, as applicable and in accordance with applicable corporate legislation, for the Business Combination Agreement and the transactions contemplated thereby;

• the completion of the Concurrent Financing;

• each of the Board Reconstitution and the Management Reconstitution;

• no material adverse effect with respect to Trees or 420 shall have occurred; and

• the Trees Debt Conversion, Trees Participation Interest Conversion, Trees Shareholder Loan Settlement and Trees Warrant Conversion shall have been completed.

About Trees

Trees is a cannabis company at the intersection of community, content, and commerce. Listed on Cboe Canada, Trees offers a differentiated retail experience, that aims to educate, amplify and unlock emerging consumer segments and need states that allows Trees to uniquely engage the 360-cannabis consumer. The Company currently operates 14 Trees storefronts in Canada, including nine (9) stores in Ontario and five (5) stores operated in BC.

Additional Information

All information contained in this news release with respect to the Company and 420 was supplied, for inclusion herein, by each respective party and each party and its directors and officers have relied on the other party for any information concerning such other party.

Completion of the Transaction is subject to a number of conditions, including but not limited to, Cboe Canada acceptance and if applicable, disinterested shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or listing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

Cboe Canada has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this news release.

Contact Information

For further information on 420, contact:

420 Investments Ltd.

Scott Morrow
Chief Executive Officer
E: [email protected]

For further information on the Company, contact:

Trees Corporation

Jeffrey Holmgren
President and Chief Financial Officer
E: [email protected]

Disclaimer for Forward-Looking Information

This press release contains statements that constitute “forward-looking information” (“forward-looking information”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking information and are based on expectations, estimates and projections as at the date of this news release. Any statement that discusses predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information.

Forward-looking statements in this document include, among others, statements regarding the Transaction, approval of Cboe Canada for the Transaction, the listing of the Resulting Issuer Shares on Cboe Canada, the pro forma capitalization of the Resulting Issuer, the Concurrent Financing, the Consolidation, the Board Reconstitution, the Management Reconstitution, obtaining Trees Shareholder approval, obtaining 420 Shareholder approval, completion of the Continuation, satisfaction of conditions precedent to completion of the Transaction, and the completion of the Trees Debt Conversion, the Trees Participation Interest Conversion, the Trees Shareholder Loan Settlement and the Trees Warrant Conversion. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors and risks include, among others: the requisite corporate and shareholder approvals of the directors and shareholders may not be obtained, 420 may be unable to close the Concurrent Financing, Cboe Canada may not approve the Transaction, the parties may be unable to satisfy the conditions precedent in accordance with the terms of the Business Combination Agreement, compliance with extensive government regulation, domestic and foreign laws and regulations could adversely affect the Company’s business and results of operations, the stock markets have experienced volatility that often has been unrelated to the performance of companies and these fluctuations may adversely affect the price of the Company’s securities, regardless of its operating peers, adverse changes in the public perception of cannabis, and general business, economic, competitive, political and social uncertainties. Accordingly, readers should not place undue reliance on the forward-looking information contained in this press release.

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. The Company undertakes no obligation to update these forward-looking statements in the event that management’s beliefs, estimates or opinions, or other factors, should change.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

NOT FOR DISSEMINATION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/173364