Multinational Convenience Store Operator Couche-Tard Partners with Retailer Fire & Flower to Pursue Global Cannabis Market

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Fire & Flower Announces Strategic Investment by Alimentation Couche-Tard, A Global Retailer With Over 16,000 Stores In 26 Countries, Sets Sights On Global Cannabis Market and Conditional Approval to uplist to the Toronto Stock Exchange

Edmonton, Alberta (July 24, 2019) – Fire & Flower Holdings Corp. (“Fire & Flower” or the “Company”) (TSXV: FAF), today announced that it has entered into a subscription agreement (the “Subscription Agreement”) with respect to a strategic investment (the “Transaction”) by an indirect wholly-owned subsidiary of Alimentation Couche-Tard Inc. (“Couche-Tard”) (TSX: ATD.A ATD.B). The Company is also pleased to announce that it has received conditional approval to post its common shares (the “Common Shares”) for trading on the Toronto Stock Exchange (the “TSX”).

The Subscription Agreement allows for Couche-Tard to obtain a controlling interest in the Company with an aggregate investment of more than $380,000,000 of growth capital for Fire & Flower’s global expansion (the “Strategic Investment”).

Fire & Flower has demonstrated that it is capable of rapidly scaling its retail platform through a best-of-class store concept, a leading digital platform and a focus on the safe, responsible and lawful sale of cannabis. This investment will provide Fire & Flower with additional funds to support the further development of its proprietary Hifyre™ digital retail platform and expansion of its retail store network across Canada and internationally where legally permitted.

Highlights of the Transaction

• Couche-Tard will initially purchase $25,989,985.42 principal amount of convertible unsecured debentures (the “Debentures”) that are convertible into an aggregate of 24,289,706 Common Shares at a price of $1.07 per Common Share, representing a 9.9% ownership interest in Fire & Flower;

• Couche-Tard will concurrently receive three series’ of common share purchase warrants (the “Warrants”), which, if exercised in full, along with certain other investor rights, would subsequently increase Couche-Tard’s ownership interest to 50.1% on a fully-diluted basis (assuming the conversion in full of the Debentures) and provide more than $380,000,000 in growth capital to the Company;

• Fire & Flower will grant board nomination rights to Couche-Tard which escalate commensurate with the exercise of the Warrants and the increase in Couche-Tard’s ownership position; and

• Concurrent with the closing of the Transaction, the Company will uplist to the TSX.

This strategic investment by Couche-Tard, one of the world’s largest retailers, is transformative for Fire & Flower. The retail cannabis platform we developed marries a best-in-class in-store experience with our proprietary Hifyre™ digital infrastructure and this is a huge vote of confidence in the platform.

Trevor Fencott, Fire & Flower’s Chief Executive Officer

“The support of Couche-Tard’s world-class leadership team, coupled with their impressive international footprint which includes major markets such as the US, Mexico and Europe, provide us with outstanding opportunities for aggressive growth.”

Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis ‘pure-play’ retailers.

Brian Hannasch, President and CEO of Couche-Tard

This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector.

Benefits Of The Transaction

• Accelerates Fire & Flower’s pace of growth and expansion. Assuming full conversion of the Debentures and full exercise of the Warrants an aggregate investment of more than $380,000,000 is expected to allow the Company to significantly accelerate both the number of stores it is able to open as well as the number of markets it is potentially able to access.

• Leverages Couche-Tard’s vast international infrastructure and experience for global expansion opportunties. With 16,000 stores in 25 countries around the world, it is expected that the strategic investment and relationship with Couche-Tard will positively impact Fire & Flower’s international growth capabilities.

• Provides significant, new possible commercialization and innovation leadership opportunities for Fire & Flower’s proprietary Hifyre™ digital platform. Couche-Tard shares Fire & Flower’s committment to innovation and the parties intend to explore additional ways to grow and expand Hifyre’s™ capabilities and commercialization opportunities.

• Provides access to Couche-Tard’s leadership team. As a recognized leader in profitable, large-scale, global retail, increasing representation by Couche-Tard’s leadership team on the board of directors of Fire & Flower (the “Board”) is expected to provide significant benefits as the Company scales its operations.

• Delivers potential upside opportunities for Fire & Flower shareholders. The strategic investment, access to Couche-Tard’s leadership and retail infrastructure, combined with their complimentary international scale and experience are expected to better position Fire & Flower for growth and value creation with benefits to all of the Company’s stakeholders, including its shareholders, employees and partners.

Fire & Flower Board Recommendation

The Board, after consultation with its legal and financial advisors, has unanimously determined that the Transaction is in the best interest of Fire & Flower and is unanimously recommending that shareholders vote in favour of the Transaction. In making this determination, the Board considered a number of factors, including the receipt of a fairness opinion from each of Eight Capital and AltaCorp Capital Inc. that, based upon and subject to the assumptions, qualifications and limitations as set out in such fairness opinions, as of such date, the financial terms of the Transaction are fair, from a financial point of view, to the Company.

Key Transaction Terms

Issuance of Convertible Debentures

• Under the Subscription Agreement, Fire & Flower will issue to Couche-Tard $25,989,985.42 principal amount of Debentures. The Debentures will bear interest at a rate of 8.0% per annum, payable semi-annually.

• The principal amount of Debentures may be converted into 24,289,706 Common Shares at $1.07 per Common Share (subject to customary adjustments), adjustments), being the 5-day
volume weighted average price of the Common Shares upon entering into the
Subscription Agreement.

• The Debentures will mature on the later of (a) June 30, 2021; and (b) the date that is 90 days following the date certain existing debt of the Company is retired, converted or otherwise transferred (collectively, the “Maturity Date”).

• When Fire & Flower hits the milestone of having 45 licensed stores operational, the Maturity Date may be accelerated by Fire & Flower to as early as December 31, 2020.

• Under certain circumstances and conditions, if the Debentures are not converted prior to Maturity, Fire & Flower may elect to repay the principal amount, together with unpaid and accrued interest thereon, in whole or in part, through the issuance of Common Shares at a price equal to 95% of the 20-day volume weighted average price of the Common Shares on the Maturity Date.

Warrants

• On closing of the Transaction, Couche-Tard will receive (i) 30,634,322 series A common share purchase warrants (the “Series A Warrants”); (ii) 56,126,890 series B common share purchase warrants (the “Series B Warrants”); and (iii) 110,703,925 series C common share purchase warrants (the “Series C Warrants”). The initial exercise price per Common Share (the “Initial Exercise Price”) of the: (i) Series A Warrants is $1.40; (ii) Series B Warrants is $1.875; and (iii) Series C Warrants is the lesser of: (A) $6.00; and (B) the greater of (1) $2.00; and (2) the 20-day volume-weighted average price of the Common Shares on the last business day prior to the exercise of the Series C Warrants.

• The Series A Warrants will expire on the date which is ninety (90) days following the earlier of: (i) the Maturity Date; and (ii) the later of: (A) December 31, 2020; and (B) the date on which the Company accelerates the Debentures.

• The Series B Warrants will expire on the date that is one (1) year from the date all of the Series A Warrants have been exercised, provided that the Series B Warrants shall expire if the Series A Warrants expire unexercised.

• The Series C Warrants will expire on the earlier of: (i) one (1) year from the date all of the Series B Warrants have been exercised; and (ii) four (4) years from the closing of the Transaction, provided that the Series C Warrants shall expire if the Series A Warrants or the Series B Warrants expire unexercised.

• The Series A Warrants may not be exercised until the principal amount of Debentures has been converted in full. The Series B Warrants may not be exercised until the Series A Warrants have been exercised in full. The Series C Warrants may not be exercised until the Series B Warrants have been exercised in full.

• In addition, the Company will issue to Couche-Tard such additional number of Warrants (the “Additional Warrants”) to ensure that upon full exercise of the: (i) Series A Warrants, the holder thereof will hold 19.9% of the issued and outstanding Common Shares on a pro forma fully-diluted basis; (ii) Series B Warrants, the holder thereof will hold 33.4% of the issued and outstanding Common Shares on a pro forma fully-diluted basis; and (iii) Series C Warrants, the holder thereof will hold 50.1% of the issued and outstanding Common Shares on a pro forma fully-diluted basis. The above percentages assume full conversion of the Debentures. Notwithstanding the foregoing, the number of Additional Warrants to be issued shall be not greater than 1,000,000,000.

Investor Rights

Concurrent with the closing of the Transaction, the Company and Couche-Tard will enter into an investor rights agreement (the “Investor Rights Agreement”), pursuant to which Couche-Tard shall be entitled to designate one nominee (an “Investor Nominee”) for election to the Board. For so long as (i) the Debentures remain outstanding in full; (ii) Couche-Tard owns at least 9.9% of the issued and outstanding Common Shares; or (iii) Couche-Tard is entitled (including pursuant to the exercise of certain participation and top-up rights as further set out in the Investor Rights Agreement), to acquire Common Shares, which, together with the other Common Shares held by Couche-Tard, would represent at least 9.9% of the issued and outstanding Common Shares, Couche-Tard shall also be entitled to designate a number of Investor Nominees for election to the Board proportionate to its then Common Share ownership interest in the Company. In addition, the Investor Rights Agreement provides Couche-Tard with certain registration rights with respect to its Common Shares.

Closing Conditions

The Transaction is subject to customary closing conditions and applicable regulatory approvals, including the receipt of approval by the holders of Common Shares as required by the policies of the TSX. In addition, conditional upon completion of the Transaction and the satisfaction of certain customary conditions of uplisting, Fire & Flower will be graduating from the TSX Venture Exchange to the TSX.

Voting and Support Agreements

Concurrent with the entering into of the Subscription Agreement, certain directors, officers and shareholders of the Company have entered into voting and support agreements pursuant to which such parties have agreed to vote an aggregate of 23,069,271 Common Shares in favour of the Transaction, representing approximately 19.6% of the issued and outstanding Common Shares.

Advisors

GMP Securities LP is acting as financial advisor to Fire & Flower and Dentons Canada LLP is acting as its legal advisor. National Bank Financial Inc. is acting as exclusive financial advisor to Couche-Tard and Davies Ward Phillips & Vineberg LLP is acting as its legal advisor.

Additional Information

Copies of the Subscription Agreement and the agreements attached thereto as exhibits, including the form of Debenture certificate, the form of Warrant certificate and the form of Investor Rights Agreement, will be filed on the Company’s profile on SEDAR at www.sedar.com. The above descriptions of the terms and conditions of the Subscription Agreement and the agreements attached thereto as exhibits, are qualified in their entirety by the terms of the Subscription Agreement.

About Fire & Flower

Fire & Flower is a leading purpose-built, independent adult-use cannabis retailer poised to capture significant Canadian market share. The Company guides consumers through the complex world of cannabis through education-focused, best-in-class retailing while the Hifyre™ digital platform connects consumers with cannabis products. The Company’s leadership team combines extensive experience in the cannabis industry with strong capabilities in retail operations.

Fire & Flower Holdings Corp. owns all issued and outstanding shares in Fire & Flower Inc., a licensed cannabis retailer in the provinces of Alberta and Saskatchewan and is a consultant and licensor to Fire & Flower-branded retail locations in the province of Ontario.

About Alimentation Couche-Tard Inc.

Couche-Tard is the leader in the Canadian convenience store industry. In the United States, it is the largest independent convenience store operator in terms of the number of company-operated stores. In Europe, Couche-Tard is a leader in convenience store and road transportation fuel retail in the Scandinavian countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia and Lithuania), as well as in Ireland, and has an important presence in Poland.

As of April 28, 2019, Couche-Tard’s network comprised 9,866 convenience stores throughout North America, including 8,629 stores with road transportation fuel dispensing. Its North American network consists of 19 business units, including 15 in the United States covering 48 states and 4 in Canada covering all 10 provinces. Approximately 109,000 people are employed throughout its network and at its service offices in North America. In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to approximately 1,300 locations in the United States.

In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through ten business units. As of April 28, 2019, Couche-Tard’s network comprised 2,709 stores, the majority of which offer road transportation fuel and convenience products while the others are unmanned automated fuel stations which only offer road transportation fuel. Couche-Tard also offers other products, including stationary energy and aviation fuel. Including employees at branded franchise stores, approximately 24,000 people work in its retail network, terminals and service offices across Europe.

In addition, under licensing agreements, more than 2,150 stores are operated under the Circle K banner in 15 other countries and territories (Cambodia, China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam), which brings the worldwide total network to more than 16,000 stores.

For more information on Alimentation Couche-Tard Inc. or to consult its quarterly Consolidated Financial Statements and Management Discussion and Analysis, please visit: https://corpo.couche-tard.com.

For More Information Contact:

Investor Relations
Chris Bolivar, Vice President, Brand and Marketing
investorrelations@fireandflower.com
1-833-680-4948

Media Relations
Nathan Mison, Vice President, Government and Stakeholder Relations, nmison@fireandflower.com
780-784-8859

Original press release

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Published by NCV Newswire
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