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Pauric Duffy and Peter Comerford Announce Conversion of Preferred Shares of the Flowr Corporation

TORONTO, Aug. 04, 2020 (GLOBE NEWSWIRE) -- Pauric Duffy ("PD") and Peter Comerford ("PC") announce today that certain Series 1 voting convertible redeemable preferred shares (the "Preferred Shares") in the capital of The Flowr Corporation ("Flowr" or the "Issuer") have been converted into Common Shares (as defined below). PD and PC previously acquired, through DFT Trading Limited ("Pauric Holdco") and Pleiades Trading Ltd. ("Peter Holdco"), respectively, indirect ownership of an aggregate of 32,632,545 Preferred Shares (the "Consideration Shares") as partial consideration for the sale of their respective interests in Holigen Holdings Limited ("Holigen"). The sale of Holigen to Flowr (the "Acquisition") was completed pursuant to a share purchase agreement dated June 24, 2019, as amended, between Flowr (as purchaser), Pauric Holdco and Peter Holdco (together, the "Vendors") (as vendors), and Pleiades Holdings Ltd. ("Peter Topco"), DFT Holdings Limited ("Pauric Topco"), PC and PD (as guarantors) (the "SPA"). In connection with the SPA, the Vendors entered into a share conversion agreement with Flowr (the "Conversion Agreement") that sets out the process for, and conditions to, conversion of the Consideration Shares into common shares of the Issuer ("Common Shares"). This press release is being issued pursuant to Canadian early warning requirements.

On August 4, 2020, pursuant to the terms of the Conversion Agreement, 15% of the Consideration Shares (the "Converted Shares") converted to Common Shares (the "Conversion") in connection with the deemed completion of the EDQM Milestone (as such term is defined in the Conversion Agreement).

The Converted Shares, being 4,894,882 Preferred Shares, immediately prior to the Conversion, represent approximately 46% of the issued and outstanding Preferred Shares on a non-diluted basis.

Together, immediately following the Conversion, PD and PC (including, for certainty their joint actors) will beneficially own, and have control and direction over 5,710,696 Preferred Shares, representing all of the issued and outstanding Preferred Shares.

No consideration will be paid or received in connection with the Conversion.

The conversion of the Converted Shares was for investment purposes. The Preferred Shares are subject to the terms of escrow agreements dated as of the date of closing of the Acquisition, in each case, among the applicable Vendor, Flowr and The Laurel Hill Advisory Group Company, as escrow agent, (the "Escrow Agreements"). In addition, in connection with the closing of the Acquisition, each Vendor has entered into a lock-up agreement with Flowr (collectively, the "Vendor Lock-Up Agreements"), the Vendors have entered into the Conversion Agreement and PD has entered into a governance agreement with Pauric Holdco and Flowr (the "Governance Agreement"). Subject to the terms of the SPA, the Escrow Agreements, the Vendor Lock-Up Agreements, the Conversion Agreement and the Governance Agreement, PD, PC and their respective joint actors may, from time to time and at any time, acquire, as applicable, additional Preferred Shares and/or Common Shares and/or other equity, debt or other securities or instruments of Flowr in the open market or otherwise, as applicable, and reserve the right to dispose of any or all of the Preferred Shares and/or Common Shares in the open market or otherwise at any time and from time to time, and to engage in similar transactions with respect to the Preferred Shares and/or Common Shares, the whole depending on market conditions, the business and prospects of Flowr and other relevant factors, including compliance with applicable securities laws and the terms of the relevant agreements described herein.

Pursuant to the SPA, Flowr appointed PD to the Flowr Board following the closing of the Acquisition.

Board Observer Right
Until the earlier of (i) the first business day on which PD beneficially owns Preferred Shares and Common Shares (the "Shares") representing less than 10% of the then issued and outstanding Common Shares on a partially diluted basis, and (ii) the first business day on which PD ceases to be a director of Flowr, PD has the right to appoint one non-voting observer to attend and observe meetings of the Flowr Board, subject to such observer first providing Flowr a confidentiality agreement in form and content satisfactory to Flowr, acting reasonably.

Consent Right

Until the earlier of the first business day on which (i) PD beneficially owns Shares representing less than 13% of the then issued and outstanding Common Shares on a partially diluted basis, and (ii) the conversion or redemption of all of the Preferred Shares held by PD and his affiliates, the completion of a Consent Transaction (as defined herein) by Flowr will require the prior written consent of PD (not to be unreasonably withheld). This consent right, however, will not restrict the board of directors of Flowr (the "Flowr Board") from exercising its fiduciary duties to the Issuer. "Consent Transaction" means either (A) a merger, amalgamation, arrangement, reorganization, or other business combination or similar transaction involving Flowr and/or any of its subsidiaries in which (i) the consent or approval of the Flowr Board and the holders of Common Shares is required to complete the transaction, (ii) less than 10% of the total consideration payable pursuant to the transaction is cash consideration, and (iii) the holders of Common Shares on a partially diluted basis immediately before the completion of the transaction would hold less than 50% of the common shares or other equity securities of Flowr's successor or of the continuing or surviving entity immediately following the completion of such transaction, assuming the conversion of all of the Preferred Shares and Class A preferred shares of The Flowr Canada Holdings ULC immediately prior to the completion of the transaction; or (B) (i) a share sale transaction that would result in a direct or indirect change of control of RPK Biopharma, Unipessoal Lda. ("RPK") or TCann Pty Ltd. ("TCann"); or (ii) the sale of all or substantially all of the assets of RPK or TCann (in the case of (i) and (ii), to a person that is not an affiliate of Flowr, but for avoidance of doubt does not include an internal reorganization the result of which would have Flowr continue to have ultimate control of such entities).


Until the first business day on which PD and his affiliates collectively beneficially own Shares (including other equity rights convertible into shares or equity interests of Flowr) representing less than 5% of the then issued and outstanding Common Shares (on a partially diluted basis), PD and his affiliates will not, directly or indirectly, without the prior written consent or waiver by Flowr: (i) acquire, or agree to acquire, or make any proposal to acquire, directly or indirectly, by means of purchase, merger, consolidation, take-over bid, exchange offer, tender offer, business combination, arrangement, amalgamation or in any other manner, whether in one transaction or a series of transactions, any securities or assets of Flowr or any of its subsidiaries, other than conversion of Preferred Shares into Common Shares through the process set out in the Conversion Agreement; or (ii) undertake certain additional actions that may affect control of or which are hostile to Flowr (including, among others as set out in the Governance Agreement, initiating any shareholder proposals or soliciting proxies, commencing any take-over bid or similar transaction; acting alone or in concert with others to control Flowr or any of its subsidiaries, assisting with the foregoing or announcing any intention with respect to the foregoing).


Subject to compliance with applicable laws, in the event that the holders of Preferred Shares are entitled to vote as a separate class on a shareholder proposal, PD has agreed to vote any Preferred Shares (and use commercially reasonable efforts to cause all of the Preferred Shares owned or beneficially owned by PD or any of his affiliates or over which PD or any of his affiliates has voting control or the power to direct voting control), to be voted in accordance with a recommendation of the Flowr Board.

Flowr's head office is located at 60 Adelaide Street East, Suite 1000, Toronto, Ontario, M5C 3E4. A copy of the early warning reports with respect to the foregoing will appear on Flowr's profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com. A copy of the early warning report with respect to PD may be obtained by contacting PD at +351 219 259 507. A copy of the early warning report with respect to PC may be obtained by contacting PC at +351 219 259 507.

Pauric Duffy
Lara Buildings,
Level 1 Guzeppi
Calleja Street
Iklin IKL 1264

Peter Comerford
Lara Buildings,
Level 1 Guzeppi
Calleja Street
Iklin IKL

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