POCML 2 to acquire Bedrocan Canada as QT
2014-04-14 08:27 ET - News Release
Shares issued 6,000,000
PCC.P Close 2014-04-11 C$ 0.20
Mr. David D'Onofrio reports
POCML 2 INC. ENTERS INTO BINDING LETTER OF INTENT WITH BEDROCAN CANADA INC. TO COMPLETE QUALIFYING TRANSACTION
POCML 2 Inc. has entered into a binding letter of intent with Bedrocan Canada Inc. that outlines the general terms and conditions of a proposed transaction pursuant to which POCML 2 will acquire all of the issued and outstanding securities of Bedrocan in exchange for securities of POCML 2. The LOI was negotiated at arm's length and is effective as of April 13, 2014.
POCML 2 is a capital pool company listed on the TSX Venture Exchange. POCML 2 has not commenced commercial operations and has no assets other than cash. The transaction, if completed, will constitute POCML 2's qualifying transaction, as defined in TSX-V policies.
Bedrocan, based in Toronto, Ont., and governed by the laws of the Province of Ontario, is in the business of importing and supplying medical marijuana pursuant to the marijuana for medical purposes regulations. Bedrocan holds a licence to sell medical marijuana from Health Canada.
The transaction terms outlined in the LOI are binding on the parties, and the LOI is expected to be superseded by a definitive agreement to be signed between the parties. The transaction is subject to regulatory approval, including the approval of the TSX-V, and standard closing conditions, including the approval of the transaction by the directors of each of POCML 2 and Bedrocan and completion of due diligence investigations to the satisfaction of each of POCML 2 and Bedrocan, as well as the conditions described below. The legal structure for the transaction will be determined after the parties have considered all applicable tax, corporate and securities law, and accounting efficiencies.
Trading in the common shares of POCML 2 will be halted as a result of this announcement and will remain halted until the resumption of trading is approved by the TSX-V.
The proposed transaction
As of the date hereof, POCML 2 has six million POCML 2 shares outstanding and has issued options to acquire an aggregate of 760,000 POCML 2 shares at an exercise price of 15 cents per share, and Bedrocan has 51 million common shares and 11 million common share purchase warrants outstanding. In addition, Bedrocan intends to issue up to an aggregate of two million options and/or restricted share units prior to the completion of the transaction.
Pursuant to the transaction, the holders of the issued and outstanding Bedrocan shares will receive one POCML 2 postconsolidation share (as defined below) for each Bedrocan share held immediately prior to the transaction. The deemed exchange price for the POCML 2 postconsolidation shares to be issued in exchange for the Bedrocan shares shall be 40 cents per POCML 2 postconsolidation share, or such other price (not less than 40 cents per POCML 2 postconsolidation share) as permitted by applicable regulatory authorities, including the TSX-V.
In addition, POCML 2 will issue up to two million options and/or restricted share units and 11 million common share purchase warrants to acquire up to an aggregate of 13 million POCML 2 postconsolidation shares in consideration of the cancellation of the Bedrocan options, Bedrocan restricted share units and Bedrocan warrants, respectively. The POCML 2 replacement options, POCML 2 replacement restricted share units and POCML 2 replacement warrants shall be exercisable to acquire POCML 2 postconsolidation shares in lieu of Bedrocan shares based on the exchange ratio and will otherwise bear the same terms and conditions as the Bedrocan options, Bedrocan restricted share units and Bedrocan warrants so cancelled.
It is expected that following completion of the transaction but prior to giving effect to the private placement (as defined below), the current holders of POCML 2 shares will hold approximately 5.6 per cent of the outstanding POCML 2 postconsolidation shares, and the current holders of Bedrocan shares will hold approximately 94.4 per cent of the POCML 2 postconsolidation shares.
Prior to the completion of the transaction, POCML 2 shall call a meeting of its shareholders for the purpose of approving, among other matters:
1.A consolidation of the issued and outstanding POCML 2 shares on the basis of one new POCML 2 share for every two old POCML 2 shares issued and outstanding;
2.A change of name of POCML 2 to complement the business of the resulting issuer;
3.Election of individuals to the board of directors of POCML 2;
4.If required by the TSX-V, the approval of the transaction.
Upon closing of the transaction, the board of POCML 2 shall be reconstituted in a manner that complies with the requirements of the TSX-V and applicable securities laws. POCML 2 shall be entitled to one nominee on the reconstituted board with the balance of the directors to be nominees of Bedrocan, subject to the receipt of applicable regulatory approvals.
Other conditions to transaction
Completion of the transaction is subject to a number of conditions, including, but not limited to, TSX-V acceptance and, if applicable pursuant to TSX-V requirements, majority of the minority 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.
Other conditions to completion of the transaction include, but are not limited to:
•Negotiation and execution of a definitive agreement in respect of the transaction;
•Preparation and filing of a disclosure document outlining the definitive terms of the transaction in accordance with the rules of the TSX-V;
•Receipt of all requisite approvals from shareholders, regulatory authorities (including the TSX-V) and third parties (including lenders or financial institutions, licensors, and strategic partners involved in the manufacturing, distribution and sale of Bedrocan's products) relating to the transaction;
•No material adverse change prior to completion of the transaction;
•The representations and warranties being true and correct in all material respects as of the closing of the transaction;
•Receipt of legal opinions in relation to the transaction;
•There being no debts or amounts owing to by certain insiders and other non-arm's-length persons, other than for expenses incurred in the ordinary course;
•No legal proceeding, regulatory action, inquiry or investigation as at the closing of the transaction that may have a material adverse effect;
•No prohibition at law against the transaction;
•Compliance with the terms of the binding letter of intent;
•No material breach of the covenants contained in the transaction documents.
Concurrent financing
It is expected that prior to the completion of the transaction, Bedrocan will complete a private placement of securities on terms acceptable to POCML 2, acting reasonably. Immediately prior to the completion of the transaction, the offered securities, if convertible, will be automatically converted, for no additional consideration, into Bedrocan shares or units of Bedrocan consisting of Bedrocan shares and warrants, as the case may be (or such other securities of Bedrocan as may be agreed among Bedrocan, POCML 2 and the agent, if any). Upon closing of the transaction, all securities of Bedrocan issued in connection with the private placement will automatically be exchanged for postconsolidation securities of POCML 2 in accordance with the exchange ratio.
Further information
Further details about the proposed transaction and the resulting issuer will be provided in a comprehensive news release when the parties enter into a definitive agreement and in the disclosure document to be prepared and filed in respect of the transaction.
Investors are cautioned that, except as disclosed in the disclosure document 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 a capital pool company should be considered highly speculative.
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