tm2213692-10_defm14a - none - 119.0785318s
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐   Preliminary Proxy Statement
☐   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒   Definitive Proxy Statement
☐   Definitive Additional Materials
☐   Soliciting Material under §240.14a-12
Columbia Care Inc.
(Name of Registrant as Specified In Its Charter)
  
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
☐   No fee required
☒   Fe e paid previously with preliminary materials
☐   Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

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No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about, or passed upon the fairness or merits of, the transaction described in this document, the securities offered pursuant to such transaction or the adequacy of the information contained in this document and it is an offense to claim otherwise.
[MISSING IMAGE: lg_columbiacare-4c.jpg]
NOTICE OF MEETING
AND
MANAGEMENT INFORMATION CIRCULAR
FOR THE
SPECIAL MEETING OF SHAREHOLDERS OF
COLUMBIA CARE INC.
TO BE HELD ON
July 8, 2022
Dated as of June 6, 2022
The members of the Board of Directors of Columbia Care Inc.
UNANIMOUSLY recommend that Columbia Care Shareholders vote FOR the Arrangement Resolution
These materials are important and require your immediate attention. They require Shareholders of Columbia Care Inc. to make an important decision. If you are in doubt as to how to make such decision, please contact your financial, legal or other professional advisor. If you have any questions or require more information with regard to the transactions described herein or procedures for voting, please contact the Company’s proxy solicitation agent, Morrow Sodali, at 1-888-999-2785 toll free in North America, or call collect outside North America at 1-289-695-3075 or by email at assistance@morrowsodali.com.

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June 6, 2022
Dear Shareholder:
You are invited to attend a special meeting (the “Meeting”) of shareholders (the “Columbia Care Shareholders”) of Columbia Care Inc. (the “Company” or “Columbia Care”) to vote on a proposed business combination of Columbia Care and Cresco Labs Inc. (“Cresco”). This is an exciting opportunity for Columbia Care Shareholders in this dynamic and growing industry and we encourage all Columbia Care Shareholders to participate in the vote. The Meeting will be held at 10:00 a.m. (Toronto time), on July 8, 2022 virtually via live audio webcast online at https://web.lumiagm.com/200807187.
The proposed business combination with Cresco involves the acquisition by Cresco of all of the issued and outstanding common shares and proportionate voting shares of the Company (collectively, the “Columbia Care Shares”) by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia) in accordance with the terms of an arrangement agreement dated March 23, 2022 (the “Arrangement Agreement”) between Columbia Care and Cresco.
Following completion of the Arrangement, the combined company will be well placed to compete in the cannabis industry as one of the largest vertically-integrated multi-state cannabis operators in the United States, a leading North American cannabis company by footprint, and one of the largest cannabis brand distributors in the industry.
The notice of meeting and management information circular that follow contain details about the proposed Arrangement, including the background that led to the Company’s board of directors recommending the Arrangement to Columbia Care Shareholders and their reasons for doing so. Some of the main benefits to you as a Columbia Care Shareholder include:

receiving a premium of approximately 16.0% based on the closing prices of the Columbia Care common shares and the subordinate voting shares in the capital of Cresco (the “Cresco Shares”), each on the Canadian Securities Exchange as of March 22, 2022, the last trading day prior to the announcement of the entering into of the Arrangement Agreement;

keeping your exposure to Columbia Care while gaining exposure to Cresco’s multi-state facilities, distribution channels and networks;

owning a stock that leverages the best of Columbia Care and Cresco and the exciting growth potential and synergies of rolling out a proven model to an increasing geographic footprint. The combined company is expected to have a strong pro forma cash position to support profitable growth initiatives;

Columbia Care’s board unanimously recommends that you vote FOR the Arrangement. The board reached its conclusion after receiving legal and financial advice, including fairness opinions from its financial advisors that the consideration to be received in the Arrangement is fair to Columbia Care Shareholders, from a financial point of view, a recommendation of the Columbia Care Special Committee (as defined in the accompanying management information circular) and careful consideration of, among other things, the current and expected future financial position of Columbia Care, the terms of the Arrangement Agreement and the plan of arrangement, as well as various benefits and risks presented by the Arrangement; and

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certain Columbia Care Shareholders, including directors and senior officers of Columbia Care, have entered into voting support agreements and lock up agreements with Cresco, which, as of the record date for the Meeting, represents approximately 17.84% of the voting rights attached to all Columbia Care Shares.
In order for the Arrangement to be effective, the Arrangement must be approved by at least two-thirds (6623%) of the votes cast by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting. In addition, the Arrangement must be approved by at least a simple majority of the votes cast by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting, excluding the votes of the persons whose votes may not be included under the minority approval requirements for a business combination under Multilateral Instrument 61-101 — Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Arrangement is also subject to certain other conditions, including the approval of the Supreme Court of British Columbia and certain regulatory approvals in the United States.
If the Arrangement becomes effective, Columbia Care Shareholders will receive 0.5579 of a Cresco Share for each Columbia Care common share held and 55.79 Cresco Shares for each Columbia Care proportionate voting share held, subject to potential adjustment as described herein.
The accompanying notice of meeting of shareholders and management information circular describes the Arrangement and includes certain additional information to assist you in considering how to vote on the special resolution approving the Arrangement. This information is important and you are urged to read this information carefully and, if you require assistance, to consult your financial, legal, tax and other professional advisors.
Your vote is important regardless of the number of Columbia Care Shares you own and you are urged to submit your proxy well in advance of the voting deadline in order to have your voice heard. Even if you are a registered Columbia Care Shareholder and plan to attend the Meeting, we encourage you to take the time now to follow the instructions on the enclosed form of proxy so that your Columbia Care Shares can be voted at the Meeting in accordance with your instructions. We encourage you to use the internet voting option to ensure your vote is received prior to the voting deadline. Alternatively, you can complete, sign, date and return the enclosed form by mail. If you hold your Columbia Care Shares through a broker, trustee, financial institution or other intermediary, you are a non-registered Columbia Care Shareholder and you will receive instructions from such intermediary, or on the intermediary’s behalf, as to how to vote your Columbia Care Shares. We encourage non-registered Columbia Care Shareholders to carefully follow such instructions so that your Columbia Care Shares can be voted at the Meeting.
If you are a registered holder of Columbia Care Shares, we also encourage you to complete, sign, date and return the enclosed letter of transmittal along with the share certificate(s) representing your Columbia Care Shares so that, if the proposed Arrangement is approved, the consideration for your Columbia Care Shares can be sent to you at the correct address as soon as possible following the implementation of the Arrangement and in order for you to make the election described herein to be an Electing Columbia Care Shareholder (as defined in the accompanying management information circular), if you are eligible and wish to do so, so that your Columbia Care Shares will be transferred directly to Cresco pursuant to the Arrangement, see “Certain Canadian Federal Income Tax Considerations for Shareholders — Holders Resident in Canada — Resident Holders of Columbia Care Common Shares Participating in the Arrangement”. Only registered Columbia Care Shareholders will receive a letter of transmittal. Non-registered Columbia Care Shareholders will receive instructions from their intermediaries as to how to receive the consideration for their Columbia Care Shares following the implementation of the Arrangement and in order for you to provide instructions as to whether you wish to make the election described herein to be an Electing Columbia Care Shareholder, if you are eligible, so that your Columbia Care Shares will be transferred directly to Cresco pursuant to the Arrangement, see “Certain Canadian Federal Income Tax Considerations for Shareholders — Holders Resident in Canada — Resident Holders of Columbia Care Common Shares Participating in the Arrangement”.
If you have any questions or require assistance with voting your proxy, please contact the Company’s proxy solicitation agent, Morrow Sodali, at 1-888-999-2785 toll free in North America, or call collect outside North America at 1-289-695-3075 or by email at assistance@morrowsodali.com.

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Subject to obtaining court approval, receipt of any regulatory approvals and the satisfaction or waiver of all other conditions to closing, including the approval of Columbia Care Shareholders, it is expected that the Arrangement will be completed in the fourth quarter of 2022.
Sincerely,
On behalf of the Board of Directors of the Company,
(signed) “Nicholas Vita”
Nicholas Vita
Director and Chief Executive Officer
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE ARRANGEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE ARRANGEMENT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION DISCLOSED IN THE ACCOMPANYING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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COLUMBIA CARE INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the special meeting (the “Meeting”) of the holders (the “Columbia Care Common Shareholders”) of common shares (“Columbia Care Common Shares”) and holders (the “Columbia Care PV Shareholders” and, together with the Columbia Care Common Shareholders, the “Columbia Care Shareholders”) of proportionate voting shares (“Columbia Care PV Shares” and, together with the Columbia Care Common Shares, the “Columbia Care Shares”) of Columbia Care Inc. (the “Company” or “Columbia Care”) will be held at 10:00 a.m. (Toronto time), on July 8, 2022 virtually via live audio webcast online at https://web.lumiagm.com/200807187 for the following purposes:
(a)
to consider pursuant to an amended interim order of the Supreme Court of British Columbia dated June 6, 2022 (the “Interim Order”) and, if thought advisable, to pass, with or without variation, a special resolution (the “Arrangement Resolution”), the full text of which is set forth in Appendix B to the accompanying management information circular (the “Circular”), to approve a plan of arrangement (the “Arrangement”) under Division 5 of Part 9 of the Business Corporations Act (British Columbia) (“BCBCA”); and
(b)
to transact such other business as may properly be brought before the Meeting or any adjournment thereof.
Particulars of the foregoing matters are set forth in the Circular. The Board of Directors of the Company has fixed the close of business on May 10, 2022 as the record date (the “Record Date”) for the determination of the Columbia Care Shareholders entitled to receive notice of, and to vote at, the Meeting. Only Columbia Care Shareholders whose names have been entered in the register of Columbia Care Shareholders as of the Record Date will be entitled to receive notice of, and to vote at, the Meeting.
Columbia Care Shareholders are entitled to vote at the Meeting or by proxy, as described in the Circular under the heading “General Proxy Information”. Only registered Columbia Care Shareholders, or the persons appointed as their proxies, are entitled to attend and vote at the Meeting. For information with respect to Columbia Care Shareholders who own their Columbia Care Shares through an intermediary, see “General Proxy Information — Non-Registered Columbia Care Shareholders” in the accompanying Circular.
Whether or not you are able to attend the Meeting, you are encouraged to provide voting instructions on the enclosed form of proxy as soon as possible. The Company’s transfer agent, Odyssey Trust Company, must receive your proxy no later than July 6, 2022 at 10:00 a.m. (Toronto time), or, if the Meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and holidays in the Province of Ontario) before any adjourned or postponed Meeting. You must send your proxy to the Company’s transfer agent by either using the envelope provided or by mailing the proxy to Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8. You may also vote through the internet by going to https://login.odysseytrust.com/pxlogin and click on VOTE and enter the 12 digit control number found on the form of proxy. If you wish to vote on the internet, you must do so no later than July 6, 2022 at 10:00 a.m. (Toronto time). In addition, you may personally deliver your completed, dated and signed form of proxy to Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8 no later than July 6, 2022 at 10:00 a.m. (Toronto time).
If you are a non-registered Columbia Care Shareholder (for example, if you hold Columbia Care Shares in an account with an intermediary), you should follow the voting procedures described in the form of proxy or voting instruction form provided by your intermediary or call your intermediary for information as to how you can vote your Columbia Care Shares. Note that the deadlines set by your intermediary for submitting your form of proxy or voting instruction form may be earlier than the dates described above, and non-registered Columbia Care Shareholders wishing to vote on the internet must do so no later than July 6, 2022 at 10:00 a.m. (Toronto time).
Late proxies may be accepted or rejected by the Chairman of the Meeting at his or her sole discretion. The Chairman is under no obligation to accept or reject any particular late proxy. The time limit for deposit of proxies may be waived or extended by the Chairman of the Meeting at his or her discretion, without notice.

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Registered Columbia Care Shareholders as at the Record Date have the right to dissent with respect to the Arrangement Resolution and, if the Arrangement Resolution becomes effective, to be paid the fair value of their Columbia Care Shares in accordance with the provisions of Sections 237 to 247 of the BCBCA, as modified by the Interim Order and the plan of arrangement. A Columbia Care Shareholder’s right to dissent is more particularly described in the Circular under the heading “Dissenting Shareholders’ Rights” and the text of Sections 237 to 247 of the BCBCA is set forth in Appendix F to the Circular and a copy of the Interim Order is attached to the Circular as Appendix D.
Please refer to the Circular for a description of the right to dissent in respect of the Arrangement Resolution.
Failure to strictly comply with the requirements set forth in Sections 237 to 247 of the BCBCA (as modified by the Interim Order and the plan of arrangement (as applicable)) with respect to the Arrangement may result in the loss of any right to dissent. Persons who are beneficial owners of Columbia Care Shares as at the Record Date registered in the name of a broker, custodian, nominee or other intermediary who wish to dissent should be aware that only the registered holders of Columbia Care Shares as at the Record Date are entitled to dissent. Accordingly, a beneficial owner of Columbia Care Shares as at the Record Date desiring to exercise the right to dissent must make arrangements for the registered holder of such Columbia Care Shares to dissent on behalf of the holder or, alternatively, they may make arrangements for the Columbia Care Shares beneficially owned by such holder to be registered in such holder’s name prior to the time the written objection to the Arrangement Resolution is required to be received by the Company.
DATED at Toronto, Ontario this 6th day of June, 2022.
BY ORDER OF THE BOARD
(signed) “Nicholas Vita”
Nicholas Vita
Director and Chief Executive Officer

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SUMMARY 13
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APPROVAL 119
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Appendices
A-1
B-1
C-1
D-1
E-1
F-1
G-1
H-1
I-1
J-1
K-1
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COLUMBIA CARE INC.
MANAGEMENT INFORMATION CIRCULAR
This management information circular (the “Circular”) and accompanying form of proxy are furnished in connection with the solicitation of proxies by the management of Columbia Care Inc. (“Columbia Care” or the “Company”) for use at the special meeting (the “Meeting”) of holders (the “Columbia Care Common Shareholders”) of common shares (“Columbia Care Common Shares”) and holders (the “Columbia Care PV Shareholders” and, together with the Columbia Care Common Shareholders, the “Columbia Care Shareholders”) of proportionate voting shares (“Columbia Care PV Shares” and, together with the Columbia Care Common Shares, the “Columbia Care Shares”) of Columbia Care to be held at 10:00 a.m. (Toronto time), on July 8, 2022 virtually via live audio webcast online at https://web.lumiagm.com/200807187, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying notice of special meeting (the “Notice of Meeting”).
All summaries of, and references to, the Plan of Arrangement, the Arrangement Resolution, the Arrangement Agreement, the ATB Fairness Opinion and the Canaccord Genuity Fairness Opinion in this Circular are qualified in their entirety by reference to the complete text of these documents, each of which is either included as an appendix to this Circular or filed (or will be filed) under the Company’s profile on SEDAR at www.sedar.com and the SEC website (“EDGAR”) at www.sec.gov. Columbia Care Shareholders are urged to carefully read the full text of these documents.
GENERAL MATTERS
Defined Terms
In this Circular, unless otherwise indicated or the context otherwise requires, terms defined in Appendix A shall have the meanings attributed thereto. Words importing the singular include the plural and vice versa and words importing gender include all genders.
Information Contained in this Circular
This Circular is dated June 6, 2022 and is first being mailed to Columbia Care Shareholders on or about June 16, 2022. The information contained in this Circular, unless otherwise indicated, is given as of May 24, 2022.
No person has been authorized by the Company to give any information (including any representations) in connection with the matters to be considered at the Meeting other than the information contained in this Circular. This Circular does not constitute an offer to buy, or a solicitation of an offer to acquire, any securities, or a solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or is unlawful. Information contained in this Circular should not be construed as legal, tax or financial advice, and Columbia Care Shareholders should consult their own professional advisors concerning the consequences of the Arrangement in their own circumstances.
This Circular and the transactions contemplated by the Arrangement Agreement and the Plan of Arrangement have not been approved or disapproved by any securities regulatory authority nor has any securities regulatory authority passed upon the fairness or merits of such transactions or upon the accuracy or adequacy of the information contained in this Circular. Any representation to the contrary is unlawful.
Information Contained in this Circular Regarding Cresco
Certain information included in this Circular pertaining to Cresco, including, but not limited to, information pertaining to Cresco in Appendix J, has been furnished by Cresco, or is derived from Cresco’s publicly available documents. With respect to this information, the Columbia Care Board has relied exclusively upon Cresco, without independent verification by the Company. Although the Company does not have any knowledge that would indicate that such information is untrue or incomplete, neither the Company nor any of its directors or officers assumes any responsibility for the accuracy or completeness of such information, or for the failure by Cresco to disclose events or information that may affect the completeness or accuracy of such information.
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For further information regarding Cresco, please refer to Cresco’s filings with the securities regulatory authorities which may be obtained under Cresco’s profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov. See also Appendix J.
Financial Information
Unless otherwise indicated, all financial information referred to in this Circular was prepared in accordance with U.S. GAAP.
Currency
Unless otherwise indicated, all references to “$” or “dollars” set forth in this Circular are to United States dollars.
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FREQUENTLY ASKED QUESTIONS
The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting (the “Meeting”) of the holders (the “Columbia Care Common Shareholders”) of common shares (“Columbia Care Common Shares”) and the holders (the “Columbia Care PV Shareholders” and, together with the Columbia Care Common Shareholders, the “Columbia Care Shareholders”) of proportionate voting shares (“Columbia Care PV Shares” and, together with the Columbia Care Common Shares, the “Columbia Care Shares) of Columbia Care. The following questions and answers may not include all the information that is important to Columbia Care Shareholders. We urge Columbia Care Shareholders to carefully read the entire management information circular of Columbia Care (the “Circular”), including the appendices and the other documents referred to herein.
Q: What proposals will be voted on at the Meeting?
A: At the Meeting, Columbia Care Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, a special resolution (the “Arrangement Resolution”), the full text of which is set forth in Appendix B to this Circular, to approve the Arrangement under Division 5 of Part 9 of the Business Corporations Act (British Columbia) (“BCBCA”) whereby, among other things, Cresco Labs Inc. (“Cresco”) will acquire all of the issued and outstanding Columbia Care Shares as more particularly described in this Circular.
Q: How does the Columbia Care Board recommend I vote on this proposal?
A: The board of directors of Columbia Care (the “Columbia Care Board”) unanimously recommends that you vote FOR the Arrangement. The Columbia Care Board reached its conclusion after receiving legal and financial advice, including fairness opinions from its financial advisors that the consideration to be received in the Arrangement is fair to Columbia Care Shareholders, from a financial point of view; a recommendation of the special committee of the Columbia Care Board comprised of independent directors (the “Columbia Care Special Committee”) and careful consideration of, among other things, the current and expected future financial position of Columbia Care, the terms of the Arrangement Agreement and the plan of arrangement, as well as various benefits and risks presented by the Arrangement.
In making its recommendation, the Columbia Care Board and the Columbia Care Special Committee considered a number of factors which are described in this Circular under the headings “The Arrangement — Background to the Arrangement”,The Arrangement — Description of the Arrangement”, “The Arrangement — Reasons for the Arrangement”, “The Arrangement — ATB Fairness Opinionand “The Arrangement — Canaccord Genuity Fairness Opinion”.
Q: Has a fairness opinion been provided on the Arrangement?
A: Yes, the Columbia Care Board and the Columbia Care Special Committee received fairness opinions from Canaccord Genuity Corp. (the “Canaccord Genuity Fairness Opinion”) and ATB Capital Markets Inc. (the “ATB Fairness Opinion”), respectively, stating that as of the date of such opinions and based upon and subject to the assumptions made, limitations considered and qualifications set forth therein, the Consideration to be received under the Arrangement by Columbia Care Shareholders is fair, from a financial point of view, to the Columbia Care Shareholders. The ATB Fairness Opinion can be found in Appendix G to this Circular and the Canaccord Genuity Fairness Opinion can be found in Appendix H to this Circular.
See “The Arrangement — ATB Fairness Opinion” and “The Arrangement — Canaccord Genuity Fairness Opinion”.
Q: Have any existing Columbia Care Shareholders already agreed to vote in favor of these proposals or lock-up their Columbia Care Shares?
A: Yes, certain Columbia Care Shareholders, including directors and senior officers of Columbia Care holding approximately 17.84% of the voting rights attached to the Columbia Care Shares as of the Record Date, have entered into Voting Support Agreements and Lock-Up Agreements.
See “Summary — Voting Support Agreements” and “Summary — Lock-up Agreements”.
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Q: When and where is the Meeting?
A: The Meeting will be held at 10:00 a.m. (Toronto time), on July 8, 2022 virtually via live audio webcast online at https://web.lumiagm.com/200807187. Online check-in will begin at 9:00 a.m. Toronto time, and we encourage you to allow ample time for the online check-in procedures. To participate in the Meeting, Registered Columbia Care Shareholders will need their unique control number located on the form or proxy or voting instruction form, as applicable, and a password; Duly appointed proxy holders will need the Username provided to them by Odyssey Trust Company (“Odyssey”) and a password. The Password to attend the live audio webcast of the Meeting for both groups is columbia2022 (which is case sensitive). Online access to the Meeting will open approximately 60 minutes prior to the start of the Meeting.
Q: Who can attend and vote at the Meeting?
A: Only registered Columbia Care Shareholders as of the close of business on May 10, 2022, the record date of the Meeting (“Record Date”), and duly appointed proxyholders, are entitled to virtually attend, participate and vote at the Meeting or any postponement or adjournment thereof. Guests are welcome to attend and view the webcast, but will be unable to participate or vote at the Meeting.
Q: How do I attend and participate in the Meeting?
A: Columbia Care is holding the Meeting in a virtual only format, which will be conducted via live audio webcast. Columbia Care Shareholders will not be able to attend the Meeting in person. In order to attend, participate or vote at the Meeting (including for voting and asking questions at the Meeting), Columbia Care Shareholders must have a valid Username. To join as a guest please visit the Meeting online at https://web.lumiagm.com/200807187 and select “Join as a Guest” when prompted.
Registered Columbia Care Shareholders and duly appointed proxyholders will be able to attend, participate and vote at the Meeting online at https://web.lumiagm.com/200807187. Such persons may then enter the Meeting by clicking “I have a login” and entering a Username and Password before the start of the Meeting.
Registered Columbia Care Shareholders
The control number located on the form of proxy is the Username. The Password to the Meeting is “columbia2022” ​(case sensitive). If, as a Registered Columbia Care Shareholder, you are using your control number to login to the Meeting and you have previously voted, you do not need to vote again when the polls open. By voting at the meeting, you will revoke your previous voting instructions received prior to the voting deadline.
Duly appointed proxyholders
Odyssey will provide the proxyholder with a Username by e-mail after the voting deadline has passed. The Password to the Meeting is “columbia2022” ​(case sensitive). Only Registered Columbia Care Shareholders and duly appointed proxyholders will be entitled to attend, participate and vote at the Meeting. Non-Registered Columbia Care Shareholders who have not duly appointed themselves as proxyholder will be able to attend the meeting as a guest but not be able to participate or vote at the Meeting. Columbia Care Shareholders who wish to appoint a Third-Party Proxyholder to represent them at the Meeting, including Non-Registered Columbia Care Shareholders who wish to appoint themselves as proxyholder to attend, participate or vote at the Meeting, MUST submit their duly completed proxy or voting instruction form AND register the proxyholder. See “Appointment of a Third Party as a Proxy”.
If you attend the Meeting online, it is important that you are connected to the internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting. You should allow ample time to check into the Meeting online and complete the related procedure.
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Q: What if I need technical assistance?
A: If you encounter any difficulties accessing the Meeting during the Meeting time, please call the technical support number that will be posted on the Meeting log-in page. The operator of the Meeting website will check the functioning of the Meeting website on the day of the Meeting for any problems. The Meeting website also has a “Help” button in the top right corner of the screen in the event that the website is not functioning properly during the Meeting. Please be sure to check in by 9:00 a.m. Toronto time on July 8, 2022, the date of the Meeting, so that any technical difficulties may be addressed before the live audio webcast begins.
Q: Why is Columbia Care proposing the Arrangement Resolution Proposal?
A: In evaluating the Arrangement and the Arrangement Agreement, and in making their recommendations, the Columbia Care Board and the Columbia Care Special Committee gave careful consideration to the current and expected future financial position of Columbia Care and all terms of the Arrangement Agreement and the Plan of Arrangement. The Columbia Care Board and the Columbia Care Special Committee considered a number of factors including, among others, the following:

Meaningful Participation by Shareholders in the Future Growth of the Combined Company.    Under the Arrangement, Columbia Care Shareholders will receive, in consideration for their Columbia Care Shares, Cresco subordinate voting shares (“Cresco Shares”). As a result, Columbia Care Shareholders will have an opportunity to own approximately 35% of the enlarged Cresco on a pro forma basis. The combination of Columbia Care with Cresco is an opportunity to own shares in a larger licensed cannabis operator with (i) superior market access based on establishments in the largest and fastest-growing markets across the United States, (ii) market and category share leadership based on the strongest brands in cannabis and leading retail productivity, and (iii) balanced economics, through an industry-proven channel mix, diversified state exposure and stronger financials.

No Other Expression of Interest.   Since first announcing a potential business combination transaction with Cresco on March 23, 2022, Columbia Care has not received any inquiries or proposals that are, or could reasonably be expected to lead to, an Acquisition Proposal (as defined in the Arrangement Agreement).

Key Shareholder Support.   The Columbia Care Shareholders who, collectively, as of the Record Date, beneficially own or exercise control or direction over, directly or indirectly, approximately 17.84% of the voting rights attached to the Columbia Care Shares, have entered into the Voting Support Agreements under which they have agreed to vote FOR the Arrangement Resolution.

Receipt of the Canaccord Genuity Fairness Opinion and the ATB Fairness Opinion.   The Columbia Care Board and the Columbia Care Special Committee have received the Canaccord Genuity Fairness Opinion and the ATB Fairness Opinion, respectively, stating that, as of the date of such opinions and based upon and subject to the assumptions made, limitations considered and qualifications set forth therein, the Consideration to be received under the Arrangement by Columbia Care Shareholders is fair, from a financial point of view, to Columbia Care Shareholders.

Strong Management Ability and Skills.   Cresco has an experienced management team with a proven track record of generating shareholder value in the context of the evolving cannabis regulatory regimes in the United States and elsewhere, as well as substantial knowledge of all stages of cannabis production and sales.

Evaluation and Analysis.   The Columbia Care Special Committee was formed in October 2021 to review, consider and evaluate a strategic opportunity which arose from an unsolicited proposal from a third party, as well as any other strategic alternatives that might be available to Columbia Care. The Columbia Care Special Committee considered and evaluated an unsolicited third party proposal in the fall of 2021 and a subsequent unsolicited third party proposal late in 2021. As a result, the Columbia Care Special Committee and the Columbia Care Board have, for an extended period of time, been involved in reviewing strategic alternatives that could enhance shareholder value. With respect to the Arrangement, the Columbia Care Board has given lengthy consideration to the business, operations, assets, financial condition, operating results and prospects for the combined company as well as current industry, economic and market conditions and related risks. The Columbia Care Board considered the current and anticipated future
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opportunities and risks associated with the business, operations, assets, financial performance and condition of Columbia Care, both in giving effect to the Arrangement and in considering Columbia Care continuing as a stand-alone company.
See “The Arrangement — Reasons for the Arrangement”.
Q: How many votes do I have?
A: Each Columbia Care Common Share will entitle the holder of record thereof to one vote at the Meeting and each Columbia Care PV Share will entitle the holder of record thereof to 100 votes at the Meeting.
Q: What constitutes a quorum?
A: A quorum for the transaction of business at the Meeting is present if Columbia Care Shareholders who, together, hold not fewer than 25% of the votes attaching to the outstanding Columbia Care Shares entitled to vote at the Meeting are present or represented by proxy. In the event that a quorum is not present at the time fixed for holding the Meeting, the Meeting shall stand adjourned to such date and to such time and place as may be determined by the Columbia Care Shareholders present at the Meeting.
Q: What vote is required to approve the proposals presented at the Meeting?
A: The votes required to approve the Arrangement Resolution are as follows: (i) at least two thirds (6623%) of the votes cast on the Arrangement Resolution by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting; and (ii) at least a simple majority of the votes cast on the Arrangement Resolution by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting, excluding the votes of the persons whose votes may not be included under the minority approval requirements for a business combination under MI 61-101.
See “The Arrangement — Required Shareholder Approval”.
Q: How do I vote my Columbia Care Shares?
A: You should carefully read and consider the information contained in this Circular. Registered Columbia Care Shareholders may vote on matters presented at the Meeting in any of the following ways:

Virtually.   You may exercise your right to vote by completing a ballot online during the Meeting. For Registered Columbia Care Shareholders, the control number located on the form of proxy is the username and the password to the Meeting is “columbia2022” ​(case sensitive). For duly appointed proxyholders, Odyssey will provide the proxyholder with a username by e-mail after the voting deadline has passed and the password to the Meeting is “columbia2022” ​(case sensitive).

Via the Internet.   You may vote through the internet by going to https://login.odysseytrust.com/pxlogin, clicking on VOTE PROXY and entering in the 12-digit control number found on the form of proxy.

By Mail.   You may exercise your right to vote by dating, signing and returning the accompanying form of proxy to Odyssey. To be valid, completed proxy forms must be dated, completed, signed and deposited with Odyssey by mail to: Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8.

By Personal Delivery.   You may exercise your right to vote by personally delivering your completed, dated and signed form of proxy to Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8.
A Columbia Care Shareholder’s proxy or voting instructions must be received by 10:00 a.m. Toronto time on July 6, 2022, or if the Meeting is postponed or adjourned, two Business Days preceding the date of any adjournment or postponement. The Chairman of the Meeting shall have the discretion to waive or extend the proxy deadline without notice. See “General Proxy Information — Voting of Proxies”.
Columbia Care Shareholders who wish to appoint a Third Party Proxyholder to attend, participate or vote at the Meeting as their proxy and vote their Columbia Care Shares must follow the steps below:
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Step 1- Submit your proxy or voting instruction form — To appoint a Third Party Proxyholder, insert such person’s name in the blank space provided in the form of proxy or voting instruction form (if permitted) and follow the instructions for submitting such form of proxy or voting instruction form. This must be completed prior to registering such proxyholder, which is an additional step to be completed once you have submitted your form of proxy or voting instruction form. If you are a Non-Registered Columbia Care Shareholder located in the United States, you must also provide Odyssey with a duly completed legal proxy if you wish to attend, participate or vote at the Meeting or, if permitted, appoint a third party as your proxyholder. See below under this section for additional details.

Step 2- Register your proxyholder — To register a proxyholder, shareholders MUST send an email to appointee@odysseytrust.com by 10:00 a.m. (Toronto time) on July 6, 2022 and provide Odyssey with the required proxyholder contact information, amount of Columbia Care Shares appointed, name in which the Columbia Care Shares are registered if they are a Registered Columbia Care Shareholder, or name of broker where the shares are held if a Non-Registered Columbia Care Shareholder, so that Odyssey may provide the proxyholder with a Username via email. Without a Username, proxyholders will not be able to attend, participate or vote at the Meeting.
If you are a Non-Registered Columbia Care Shareholder, please follow the instructions on the voting instruction form provided by your Intermediary to ensure that your vote is counted at the Meeting. If you are a Non-Registered Columbia Care Shareholder and wish to attend, participate or vote at the Meeting, you have to insert your own name in the space provided on the voting instruction form sent to you by your Intermediary, follow all of the applicable instructions provided by your Intermediary AND register yourself as your proxyholder, as described above.
If you are a Columbia Care Shareholder and have any questions or require more information with regard to the procedures for voting, please contact the proxy solicitation agent for Columbia Care, Morrow Sodali, at 1-888-999-2785 toll free in North America, or call collect outside North America at 1-289-695-3075 or by email at assistance@morrowsodali.com.
See “General Proxy Information — Voting at the Meeting”.
Q: Should I send in my proxy now?
A: Yes. You are encouraged to vote well in advance of the proxy cut-off at 10:00 a.m. (Toronto time) on July 6, 2022 or in case of any adjournment or postponement of the Meeting, at least 48 hours (excluding Saturdays, Sundays and holidays in the Province of British Columbia) prior to the time of the adjourned or postponed Meeting.
Q: Should I send in my Letter of Transmittal and Columbia Care Share certificates now?
A: If you are a Registered Columbia Care Shareholder, we also encourage you to complete, sign, date and return the enclosed letter of transmittal along with the share certificate(s) or Direct Registration System advice(s) (“DRS Advices”) representing your Columbia Care Shares so that, if the proposed Arrangement is approved, the consideration for your Columbia Care Shares can be sent to you at the correct address as soon as possible following the implementation of the Arrangement and in order for you to make the election described herein to be an Electing Columbia Care Shareholder, if you are eligible and wish to do so, so that your Columbia Care Shares will be transferred directly to Cresco pursuant to the Arrangement.
See “Procedures for the Surrender of Share Certificates and Payment of Consideration — Letter of Transmittal” and “Certain Canadian Federal Income Tax Considerations for Shareholders — Holders Resident in Canada — Resident Holders of Columbia Care Common Shares Participating in the Arrangement”.
Q: If my Columbia Care Shares are held by an Intermediary, will they vote my Columbia Care Shares for me?
A: An Intermediary will vote the Columbia Care Shares held by you only if you provide instructions to such Intermediary on how to vote or which election to make. If you fail to give proper instructions, those Columbia Care Shares will not be voted on your behalf. If you are a Non-Registered Columbia Care Shareholder and wish to attend, participate or vote at the Meeting, you have to insert your own name in the space provided on
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the voting instruction form sent to you by your Intermediary, follow all of the applicable instructions provided by your Intermediary AND register yourself as your proxyholder, as described in this Circular. By doing so, you are instructing your Intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your Intermediary.
See “General Proxy Information — Non-Registered Columbia Care Shareholders”, “General Proxy information — Voting at the Meeting — Appointment of a Third Party as Proxy”, and "How to Attend and Participate in the Meeting".
Q: Can I revoke my vote after I have voted by proxy?
A: Yes. A Registered Columbia Care Shareholder who has given a proxy may revoke the proxy at any time prior to use by depositing an instrument in writing, including another completed form of proxy, executed by such Registered Columbia Care Shareholder or by his or her attorney authorized in writing or by electronic signature, or, if the Registered Columbia Care Shareholder is a corporation, by an authorized officer or attorney thereof, or by transmitting by telephone or electronic means, a revocation signed, subject to the BCBCA, by electronic signature: (i) to the registered office of Columbia Care, located at 666 Burrard St., #1700, Vancouver, BC V6C 2X8, at any time prior to 5:00 p.m. (Toronto time); or (ii) to Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8, on the last Business Day preceding the day of the Meeting (or any adjournment or postponement thereof).
See “General Proxy Information — Revocation of Proxies”.
Q: When will I receive the Cresco Subordinate Voting Shares in exchange for my Columbia Care Shares under the Arrangement?
A: You will receive the certificate(s) or DRS Advice(s) representing the Cresco Shares due to you under the Arrangement, less any amounts withheld pursuant to the Plan of Arrangement, as soon as practicable after the Arrangement becomes effective and your Letter of Transmittal, Columbia Care Share certificate(s) or DRS Advice(s), and all other required documents are properly completed and received by the Depositary.
Q: What happens if I send in my Columbia Care Share certificate(s) or DRS Advice(s) and the Arrangement Resolution is not approved or the Arrangement is not completed?
A: If the Arrangement Resolution is not approved or if the Arrangement is not otherwise completed, your Columbia Care Share certificate(s) or DRS Advice(s) will be returned as soon as practicable to you by the Depositary.
Q: What will I receive for my Columbia Care Shares under the Arrangement?
A: Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, Columbia Care Shareholders will receive 0.5579 of a Cresco Share, subject to adjustment as described below, for each Columbia Care Share (on an as converted to Columbia Care Common Share basis) outstanding immediately prior to the Effective Time (such ratio, subject to adjustment as described in this Circular, the “Exchange Ratio”), with the Columbia Care PV Shares treated on an as-converted basis to Columbia Care Common Shares pursuant to their respective terms. The Exchange Ratio is subject to adjustment in the event that Columbia Care is required to issue Columbia Care Shares in satisfaction of an earn-out payment for a prior acquisition, with the potential adjustment in proportion to the additional dilution from such potential issuance relative to Columbia Care’s current fully diluted in-the-money outstanding Columbia Care Shares (see: question below entitled “How will the Exchange Ratio Adjustment Factor impact the Exchange Ratio?”).
You will no longer own any Columbia Care Shares and will instead own Cresco Shares. As an example, if you owned 1,000 Columbia Care Common Shares on a fully-converted basis on the closing day of the Arrangement, after closing, provided that the Exchange Ratio has not been downwardly adjusted by the Adjustment Factor, you will own 557 Cresco Shares. If you owned 1,000 Columbia Care PV Shares on the closing day of the Arrangement, you will own 55,790 Cresco Shares, after closing.
At the Effective Time, (i) all Columbia Care equity awards granted under Columbia Care’s equity incentive plan or otherwise that are outstanding immediately prior to the Effective Time will be exchanged for
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replacement equity awards such that, upon exercise (with respect to Columbia Care Options) or vesting (with respect to Columbia Care PSUs and Columbia Care RSUs), as applicable, the holder of such award will be entitled to receive Cresco Shares, with the number of shares underlying such award and, in the case of Columbia Care Options, the exercise price of such award, adjusted based on the Exchange Ratio; (ii) each of the Columbia Care Warrants that are outstanding immediately prior to the Effective Time will be exercisable, in accordance with the terms of such Columbia Care Warrants, for the number of Cresco Shares that the holder of such Columbia Care Warrants would have been entitled to receive as a result of the transactions contemplated by the Arrangement if, immediately prior to the Effective Date, such holder had been the registered holder of the number of Columbia Care Common Shares to which such holder would have been entitled if such holder had exercised such holder’s Columbia Care Warrants immediately prior to the Effective Time; and (iii) each of the Columbia Care Convertible Notes that are outstanding immediately prior to the Effective Time will be convertible, in accordance with the terms of such Columbia Care Convertible Notes, into the number of Cresco Shares that the holder of such Columbia Care Convertible Notes would have been entitled to receive as a result of the transactions contemplated by the Arrangement if, immediately prior to the Effective Date, such holder had been the registered holder of the number of Columbia Care Common Shares to which such holder would have been entitled if such holder had converted such holder’s Columbia Care Convertible Notes immediately prior to the Effective Time.
Q: Why am I receiving 0.5579 of a Cresco Share for each of my Columbia Care Shares on an as-converted basis?
A: The agreed Exchange Ratio is 0.5579, subject to downward adjustment in the event that Columbia Care is required to issue shares in satisfaction of certain earn-out payments under the gLeaf Agreement. The Exchange Ratio was based on certain values negotiated by Columbia Care and Cresco and represents a premium of approximately 16.0% based on the closing prices of the Columbia Care Shares and the Cresco Shares, each on the Canadian Securities Exchange as of March 22, 2022, the last trading day prior to the announcement of the entering into of the Arrangement Agreement. As mentioned, Columbia Care Shareholders will have an opportunity to own approximately 35% of the enlarged Cresco on a pro forma basis.
Q: How will the Exchange Ratio Adjustment Factor impact the Exchange Ratio?
A: If Columbia Care Shares are issued under the gLeaf Agreement, the Exchange Ratio would be adjusted by multiplying such ratio by a fraction, the numerator of which is 418,821,453 and the denominator of which is equal to the sum of:

418,821,453; and

the number of Columbia Care Common Shares (if any) that Columbia Care becomes obligated to issue under the provisions of the gLeaf Agreement in respect of the period from July 1, 2021 through June 30, 2022, up to a maximum number of Columbia Care Shares having a value of $58 million (calculated using the volume-weighted average price of the Columbia Care Shares for the 10 days prior to the release of Columbia Care’s interim financial statements for the period ended June 30, 2022 or the dissemination of the press release in respect thereof);
Q: Will I receive fractional Cresco Shares?
A: In no event shall any former Columbia Care Shareholder be entitled to a fractional Cresco Share. Where the aggregate number of Cresco Shares to be issued to a former Columbia Care Shareholder under the Arrangement would result in a fraction of a Cresco Share being issuable, the number of Cresco Shares to be received by such former Columbia Care Shareholder shall be rounded down to the nearest whole Cresco Share and, in lieu of the issuance of a fractional Cresco Share, Cresco will pay to each such holder a cheque representing a cash payment (rounded down to the nearest cent) based on a price per Cresco Share equal to CAD$7.4296.
Q: What approvals are required for the Arrangement to be implemented?
A: The completion of the Arrangement requires the approval from the Columbia Care Shareholders, receipt of the Final Order from the Court, and receipt of the Key Regulatory Approvals. See “The Arrangement
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Agreement — Key Regulatory Approvals” and “The Arrangement — Court Approval of the Arrangement and Completion of the Arrangement”.
Q: Are Columbia Care Shareholders entitled to Dissent Rights?
A: Yes. Registered Columbia Care Shareholders as at the Record Date may exercise Dissent Rights from the Arrangement Resolution pursuant to and in the manner set forth under Sections 237 to 247 of the BCBCA, as modified by the Plan of Arrangement, the Interim Order and any other order of the Court. Anyone who is a Non-Registered Columbia Care Shareholder as at the Record Date and who wishes to dissent should be aware that only Registered Columbia Care Shareholders as at the Record Date are entitled to exercise Dissent Rights. Accordingly, a Non-Registered Columbia Care Shareholder as at the Record Date desiring to exercise Dissent Rights must make arrangements for the Registered Columbia Care Shareholder as at the Record Date who holds Columbia Care Shares as an Intermediary for the Non-Registered Columbia Care Shareholder, to dissent on behalf of the holder or, alternatively, may make arrangements for the Columbia Care Shares beneficially owned by such holder to be registered in such holder’s name prior to the time the written objection to the Arrangement Resolution is required to be received by Columbia Care.
If you wish to exercise Dissent Rights, you should review the requirements summarized in this Circular carefully and consult with your legal advisor. See “Dissenting Shareholders’ Rights”.
Q: When will the Arrangement become effective?
A: Subject to obtaining the approvals described above, as well as the satisfaction or waiver of all other conditions precedent set out in the Arrangement Agreement, it is currently anticipated that the Arrangement will be completed in the fourth quarter of 2022.
Q: What will happen to Columbia Care if the Arrangement is completed?
A: If the Arrangement is completed, Cresco will acquire all outstanding Columbia Care Shares and Columbia Care will become a wholly-owned subsidiary of Cresco.
Q: Are the Cresco Shares listed on a stock exchange or marketplace?
A: The Cresco Shares are currently listed and posted for trading on the Canadian Securities Exchange under the symbol “CL” and quoted on the OTCQX under the symbol “CRLBF”. See “Regulatory Matters — Stock Exchange Matters”.
Q: What are the Canadian federal income tax consequences of the Arrangement for Columbia Care Shareholders?
A: Under the Arrangement, a Holder of Columbia Care PV Shares will be deemed to have converted such shares into Columbia Care Common Shares. Such conversion will generally constitute a tax-deferred exchange for purposes of the Tax Act.
A Resident Holder of Columbia Care Common Shares who is an Electing Columbia Care Shareholder will exchange their Columbia Care Common Shares directly to Cresco in exchange for Cresco Shares pursuant to the Arrangement. Such exchange should generally be tax-deferred for purposes of the Tax Act. A Resident Holder that is not an Electing Columbia Care Shareholder will dispose of its Columbia Care Common Shares to AcquisitionCo under the Arrangement. Such a Resident Holder will generally realize a capital gain (or capital loss) and may be subject to tax as a result of the disposition. A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any gain realized on the transfer of its Columbia Care Common Shares to AcquisitionCo, unless such shares constitute “taxable Canadian property” for the purposes of the Tax Act.
For a summary of certain of the principal Canadian federal income tax consequences of the Arrangement applicable to Columbia Care Shareholders, see below under the heading “Certain Canadian Federal Income Tax Considerations for Shareholders.” Such summary is not intended to be legal or tax advice. Columbia Care Shareholders should consult with and rely upon their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.
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Q: What happens if I hold my Columbia Care Shares in a registered retirement savings plan (“RRSP”), tax-free savings account (“TFSA”) or registered education savings plan (“RESP”) account?
A: For Resident Holders that hold their Columbia Care Shares in a RRSP, TFSA, RESP or other registered account, no immediate Canadian income tax will arise as a result of the disposition of their Columbia Care Shares pursuant to the Arrangement, whether or not any gain is realized on the disposition of their Columbia Care Shares.
For a summary of certain of the principal Canadian federal income tax consequences of the Arrangement applicable to Columbia Care Shareholders, see below under the heading “Certain Canadian Federal Income Tax Considerations for Shareholders.” Such summary is not intended to be legal or tax advice. Columbia Care Shareholders should consult with and rely upon their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.
Q: What are the U.S. federal income tax consequences of the Arrangement?
A: A U.S. Holder or a Non-U.S. Holder (other than a Dissenting Columbia Care Shareholder that properly exercises Dissent Rights in respect of its Columbia Care Shares) generally should not recognize gain or loss for U.S. federal income tax purposes as a result of the Arrangement, including with respect to the deemed conversion of Columbia Care PV Shares to Columbia Care Common Shares (if applicable) and the exchange of Columbia Care Common Shares for Cresco Shares.
In the case of the deemed conversion of Columbia Care PV Shares to Columbia Care Common Shares, if applicable, a U.S. Holder or a Non-U.S. Holder generally should not recognize gain or loss for U.S. federal income tax purposes as a result of the conversion, such holder’s aggregate tax basis in the Columbia Care Common Shares received pursuant to the deemed conversion should equal the aggregate tax basis of the holder’s Columbia Care PV Shares surrendered in the exchange, and such holder’s holding period for the Columbia Care Common Shares received pursuant to the deemed conversion should include the holder’s holding period for the Columbia Care PV Shares surrendered in the exchange. A U.S. Holder or a Non-U.S. Holder who acquired different blocks of Columbia Care PV Shares at different times and at different prices generally must apply the foregoing rules separately to each identifiable block of Columbia Care PV Shares. Any such holder should consult its tax advisor with regard to identifying the bases or holding periods of the particular Columbia Care Common Shares received pursuant to this portion of the Arrangement, if applicable.
Similarly, a U.S. Holder or a Non-U.S. Holder generally should not recognize gain or loss for U.S. federal income tax purposes as a result of such holder’s exchange of Columbia Care Common Shares (including any Columbia Care Common Shares received in exchange for the deemed conversion of Columbia Care PV Shares held by such holder immediately before the Effective Time) for Cresco Shares pursuant to the Arrangement. Such holder’s aggregate tax basis in the Cresco Shares received in the Arrangement should equal the aggregate tax basis of the holder’s Columbia Care Common Shares surrendered in the Arrangement. Such holder’s holding period for Cresco Shares received in the Arrangement should include the holder’s holding period for the Columbia Care Common Shares surrendered in the Arrangement. A U.S. Holder or a Non-U.S. Holder who acquired different blocks of Columbia Care Common Shares at different times and at different prices generally must generally apply the foregoing rules separately to each identifiable block of Columbia Care Common Shares. Any such holder should consult its tax advisor with regard to identifying the bases or holding periods of the particular Cresco Shares received in the Arrangement.
A U.S. Holder or a Non-U.S. Holder that is a Dissenting Columbia Care Shareholder that properly exercises Dissent Rights in respect of its Columbia Care Shares will, pursuant to the Arrangement, be deemed to have sold its Columbia Care Shares to Columbia Care and will be entitled to be paid the fair value of such Columbia Care Shares by Columbia Care. Such holder will realize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized by such holder on such disposition and such holder’s adjusted tax basis in the Columbia Care Shares sold. A U.S. Holder generally will recognize, and be subject to U.S. federal income tax on, any such realized gain or loss as capital gain or loss, which gain or loss will be long-term capital gain or loss if the holder’s holding period for the sold Columbia Care Shares exceeds one year as of the date of the sale. A Non-U.S. Holder generally will not be subject to U.S. federal income taxation on gain realized in its sale of Columbia Care Shares to Columbia Care, except in certain, limited circumstances.
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Notwithstanding the foregoing, since your tax circumstances may be unique, you should consult your tax advisor to determine the tax consequences of the Arrangement.
See “Material U.S. Federal Income Tax Considerations for Shareholders” for a more detailed discussion of the U.S. federal income tax treatment of the Arrangement.
Q: Are there risks I should consider in deciding whether to vote for the proposed Arrangement?
A: Yes. The proposed Arrangement is subject to a number of risks and uncertainties. There can be no certainty that all conditions precedent to the Arrangement will be satisfied or waived, and, accordingly, the Arrangement may not be completed. For example: (i) the Key Regulatory Approvals may not be obtained and, therefore, Arrangement may not be completed; (ii) the Arrangement may be terminated in certain circumstances and the termination amount provided under the Arrangement Agreement may discourage other parties from attempting to acquire Columbia Care or Cresco; and (iii) if the Arrangement is consummated, the difficulties that management of the combined company may encounter in the process of integrating the business and operations of Columbia Care and Cresco could have an adverse effect on the revenues, level of expenses and operating results of the combined company.
Before deciding whether to vote for or against the Arrangement Resolution, you should carefully consider these and other risks as well as the more detailed discussion of risks found at “Risk Factors Relating to the Arrangement” and other information included in this Circular.
Q: Who can help answer my questions?
A: If you have any questions or require assistance with voting your proxy, please contact the Columbia Care proxy solicitation agent, Morrow Sodali, at 1-888-999-2785 toll free in North America, or call collect outside North America at 1-289-695-3075 or by email at assistance@morrowsodali.com.
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SUMMARY
The following is a summary of the principal features of the Arrangement and certain other matters and should be read together with the more detailed information contained elsewhere in the Circular, including the appendices hereto. Capitalized terms have the meanings ascribed to such terms in the Glossary of Terms in Appendix A. This summary is qualified in its entirety by the more detailed information appearing or referred to elsewhere herein.
The Meeting and Record Date
The Meeting will be held at 10:00 a.m. (Toronto time), on July 8, 2022 virtually via live audio webcast online at https://web.lumiagm.com/200807187. The Columbia Care Board has fixed the close of business on May 10, 2022, as the record date for the determination of the Columbia Care Shareholders entitled to receive notice of, and to vote at, the Meeting. Only Columbia Care Shareholders whose names have been entered in the register of Columbia Care Shareholders as of the Record Date will be entitled to receive notice of, and to vote at, the Meeting. The purpose of the Meeting is for Columbia Care Shareholders to consider and vote upon the Arrangement Resolution. To be effective, the Arrangement Resolution must receive the Required Shareholder Approval.
See “The Arrangement — Required Shareholder Approval”.
The Arrangement
Purpose of the Arrangement
The purpose of the Arrangement is for Cresco to acquire all of the issued and outstanding Columbia Care Shares. Pursuant to the Arrangement Agreement and the Plan of Arrangement, Columbia Care Shareholders will receive 0.5579 of a Cresco Share for each Columbia Care Share (on an as converted to Columbia Care Common Share basis) outstanding immediately prior to the Effective Time.
See “The Arrangement — Purpose of the Arrangement”.
Background to the Arrangement
A summary of the material events leading up to the negotiation of the Arrangement Agreement and the material meetings, negotiations, and discussions between the Company and Cresco that preceded the execution and public announcement of the Arrangement Agreement are included in this Circular under the heading “The Arrangement — Background to the Arrangement”.
ATB Fairness Opinion
ATB was engaged to provide the ATB Fairness Opinion pursuant to the ATB Engagement Agreement.
The summary of the ATB Fairness Opinion in this Circular is qualified in its entirety by, and should be read in conjunction with, the full text of the ATB Fairness Opinion attached to this Circular as Appendix G. The full text of the ATB Fairness Opinion describes, among other things, the assumptions made, matters considered, and limitations and qualifications on the review undertaken in connection with the ATB Fairness Opinion. Columbia Care Shareholders are encouraged to read the ATB Fairness Opinion carefully in its entirety.
Based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in the ATB Fairness Opinion and such other factors as ATB considered relevant, ATB was of the opinion that, as of March 22, 2022, the Consideration to be received under the Arrangement by the Columbia Care Shareholders is fair, from a financial point of view, to the Columbia Care Shareholders.
See “The Arrangement — ATB Fairness Opinion”.
Canaccord Genuity Fairness Opinion
Canaccord Genuity was engaged to provide the Canaccord Genuity Fairness Opinion pursuant to the Canaccord Genuity Engagement Agreement.
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The summary of the Canaccord Genuity Fairness Opinion in this Circular is qualified in its entirety by, and should be read in conjunction with, the full text of the Canaccord Genuity Fairness Opinion attached to this Circular as Appendix H. The full text of the Canaccord Genuity Fairness Opinion describes, among other things, the assumptions made, matters considered, and limitations and qualifications on the review undertaken in connection with the Canaccord Genuity Fairness Opinion. Columbia Care Shareholders are encouraged to read the Canaccord Genuity Fairness Opinion carefully in its entirety.
Based upon and subject to the assumptions, qualifications, explanations and limitations set forth in the Canaccord Genuity Fairness Opinion and such other factors as Canaccord Genuity considered relevant, Canaccord Genuity was of the opinion that, as of March 22, 2022, the Consideration to be received under the Arrangement by the Columbia Care Shareholders is fair, from a financial point of view, to the Columbia Care Shareholders.
See “The Arrangement — Canaccord Genuity Fairness Opinion”.
Recommendation of the Columbia Care Special Committee
After consultation with management of Columbia Care and after careful consideration and having considered, among other things, the ATB Fairness Opinion and the Canaccord Genuity Fairness Opinion, the Columbia Care Special Committee unanimously recommended that the Columbia Care Board approve the Arrangement and the Arrangement Agreement, authorize the submission of the Arrangement to Columbia Care Shareholders for their approval at the Meeting and recommend to Columbia Care Shareholders that they vote FOR the Arrangement Resolution.
See “The Arrangement — Recommendation of the Columbia Care Special Committee”.
Recommendation of the Columbia Care Board
After careful consideration and having considered, among other things, the ATB Fairness Opinion, the Canaccord Genuity Fairness Opinion and the recommendation of the Columbia Care Special Committee, the Columbia Care Board has unanimously determined that the Arrangement is, and continues to be, in the best interests of the Company and that the Arrangement is fair to Columbia Care Shareholders, and has authorized the submission of the Arrangement to Columbia Care Shareholders for their approval at the Meeting. The Columbia Care Board has unanimously determined to recommend to Columbia Care Shareholders that they vote FOR the Arrangement Resolution.
See “The Arrangement — Recommendation of the Columbia Care Board”.
Reasons for the Arrangement
In evaluating the Arrangement and the Arrangement Agreement, and in making their recommendations, the Columbia Care Board and the Columbia Care Special Committee gave careful consideration to the current and expected future financial position of the Company and all terms of the Arrangement Agreement and the Plan of Arrangement. The Columbia Care Board and the Columbia Care Special Committee considered a number of factors including, among others, the following:

Meaningful Participation by Shareholders in the Future Growth of the Combined Company.   Under the Arrangement, Columbia Care Shareholders will receive, in consideration for their Columbia Care Shares, Cresco Shares. As a result, Columbia Care Shareholders will have an opportunity to own approximately 35% of the enlarged Cresco on a pro forma basis. The combination of Columbia Care with Cresco is an opportunity to own shares in a larger licensed cannabis operator with (i) superior market access based on establishments in the largest and fastest-growing markets across the United States, (ii) market and category share leadership based on the strongest brands in cannabis and leading retail productivity, and (iii) balanced economics, through an industry-proven channel mix, diversified state exposure and stronger financials.

No Other Expression of Interest.   Since first announcing a potential business combination transaction with Cresco on March 23, 2022, Columbia Care has not received any inquiries or proposals that are, or could reasonably be expected to lead to, an Acquisition Proposal.
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Key Shareholder Support.   The Supporting Columbia Care Shareholders, who collectively as of the Record Date, beneficially own, or exercise control or direction over, directly or indirectly, approximately 17.84% of the voting rights attached to the Columbia Care Shares, have entered into the Voting Support Agreements under which they have agreed to vote FOR the Arrangement Resolution.

Receipt of the Canaccord Genuity Fairness Opinion and the ATB Fairness Opinion.   The Columbia Care Board and the Columbia Care Special Committee have received the Canaccord Genuity Fairness Opinion and the ATB Fairness Opinion, respectively, stating that, as of the date of such opinions and based upon and subject to the assumptions made, limitations considered and qualifications set forth therein, the Consideration to be received under the Arrangement by Columbia Care Shareholders is fair, from a financial point of view, to Columbia Care Shareholders.

Strong Management Ability and Skills.   Cresco has an experienced management team with a proven track record of generating shareholder value in the context of the evolving cannabis regulatory regimes in the United States and elsewhere, as well as substantial knowledge of all stages of cannabis production and sales.

Shareholder Approval.   The Required Shareholder Approval is protective of the rights of Columbia Care Shareholders. To be effective, the Arrangement Resolution must be approved by the affirmative vote of at least (i) 6623% of the votes cast by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting; and (ii) a simple majority of the votes cast by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting, excluding the votes of the persons whose votes may not be included under minority approval requirements for a business combination under MI 61-101.

Court Process.   The Arrangement will be subject to a judicial determination of the Court that the Arrangement is fair and reasonable, both procedurally and substantively, to Columbia Care Shareholders.

Dissent Rights.   Registered Columbia Care Shareholders as at the Record Date who do not vote in favour of the Arrangement will have the right to require a judicial appraisal of their Columbia Care Shares and obtain “fair value” pursuant to the proper exercise of the Dissent Rights.

Evaluation and Analysis.   The Columbia Care Special Committee was formed in October 2021 to review, consider and evaluate a strategic opportunity which arose from an unsolicited proposal from a third party, as well as any other strategic alternatives that might be available to the Company. The Columbia Care Special Committee considered and evaluated an unsolicited third party proposal in the fall of 2021 and a subsequent unsolicited third party proposal late in 2021. As a result, the Columbia Care Special Committee and the Columbia Care Board have for an extended period of time been involved in reviewing strategic alternatives that could enhance shareholder value. With respect to the Arrangement, the Columbia Care Board has given lengthy consideration to the business, operations, assets, financial condition, operating results and prospects for the combined company as well as current industry, economic and market conditions and related risks. The Columbia Care Board considered the current and anticipated future opportunities and risks associated with the business, operations, assets, financial performance and condition of Columbia Care, both in giving effect to the Arrangement and in considering Columbia Care continuing as a stand-alone company.

Terms of the Arrangement Agreement.   The Arrangement Agreement is the result of an arm’s length negotiation process (which negotiations included an increase in the Exchange Ratio) and includes terms and conditions that the Columbia Care Board, with advice from its advisors and the Columbia Care Special Committee, determined to be reasonable in the circumstances including the right to change the Columbia Care Board Recommendation if Columbia Care receives a Superior Proposal. Though the Company is limited in its ability to solicit additional interest from third parties, by virtue of the right to change the Columbia Care Board Recommendation, the Columbia Care Board is able to advise Columbia Care Shareholders of any Superior Proposal so that they may make an informed decision with respect to approving the Arrangement Resolution.
The Columbia Care Board and the Columbia Care Special Committee also considered a number of potential risks and potential negative factors relating to the Arrangement.
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See “The Arrangement — Reasons for the Arrangement” and “Cautionary Statement Regarding Forward-Looking Information”.
Arrangement Mechanics
Pursuant to the Plan of Arrangement attached to this Circular as Appendix C, at the Effective Time, the following transactions, among others, will occur and will be deemed to occur sequentially in the following order:
(a)
each Columbia Care Share outstanding immediately prior to the Effective Time held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised will be deemed to have been transferred (free and clear of all Liens) without any further act or formality by or on behalf of any Dissenting Holder, to the Company for cancellation, in consideration for a debt claim against the Company for the amount determined in accordance with the Plan of Arrangement;
(b)
each Columbia Care PV Share outstanding immediately prior to the Effective Time (other than a Columbia Care PV Share held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised) will, without any further action by or on behalf of such Columbia Care PV Shareholder, be deemed to be converted by the holder thereof for 100 Columbia Care Common Shares per Columbia Care PV Share in accordance with the terms of the Columbia Care PV Shares;
(c)
each Columbia Care Common Share outstanding immediately following the preceding step, including, for greater certainty, the Columbia Care Common Shares issued upon conversion of the Columbia Care PV Shares pursuant to the step above (other than a Columbia Care Common Share held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised and Columbia Care Common Shares held by any Electing Columbia Care Shareholder) will, without any further action by or on behalf of such Columbia Care Shareholder, be deemed to be assigned and transferred by the holder thereof to AcquisitionCo solely in exchange for the issuance by Cresco to the holder thereof of the Consideration;
(d)
concurrently with the preceding step, AcquisitionCo will issue to Cresco as consideration for the Cresco Shares issued to Columbia Care Shareholders pursuant to such step an equal number of AcquisitionCo Shares;
(e)
concurrently with the transfer in step (c) above, each Columbia Care Common Share outstanding immediately prior to the Effective Time and each Columbia Care Common Share acquired by a Columbia Care Shareholder pursuant to step (b) above that is, in each case, held by an Electing Columbia Care Shareholder, will, without any further action by or on behalf of such Electing Columbia Care Shareholder, be deemed to be assigned and transferred by the holder thereof to Cresco solely in exchange for the issuance by Cresco to the holder thereof of the Consideration;
(f)
each Columbia Care Common Share held by Cresco immediately following the preceding step will be, and will be deemed to be, transferred to and acquired by AcquisitionCo in consideration for such number of AcquisitionCo Shares equal to the number of Cresco Shares issued in exchange for the Columbia Care Common Shares;
(g)
each Columbia Care Option outstanding at the Effective Time (whether vested or unvested) will cease to represent an option or other right to acquire Columbia Care Common Shares and will be exchanged for a Replacement Option to acquire such number of Cresco Shares as is equal to: (A) that number of Columbia Care Common Shares that were issuable upon exercise of such Columbia Care Option immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio, rounded down to the nearest whole number of Cresco Shares, at an exercise price per Cresco Share equal to the quotient determined by dividing: (X) the exercise price per Columbia Care Common Share at which such Columbia Care Option was exercisable immediately prior to the Effective Time, by (Y) the Exchange Ratio rounded up to the nearest whole cent. All terms and conditions of a Replacement Option, including the term to expiry, vesting, conditions to and manner of exercising, will be the same as the Columbia Care Option for which it was exchanged, and any certificate or option agreement previously evidencing the Columbia Care Option will thereafter evidence and be deemed to evidence such Replacement Option;
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(h)
each Columbia Care RSU held by Columbia Care RSU Holders will be exchanged for a Replacement RSU and upon vesting thereof on or after the Effective Time, each such former Columbia Care RSU Holder will accept the Consideration in lieu of each Columbia Care Common Share to which such holder was theretofore entitled upon such vesting, and all other terms and conditions of any Replacement RSU, including term to expiry, vesting and conditions to vesting, will be the same as the Columbia Care RSU so exchanged (as may have been amended from time to time);
(i)
each Columbia Care PSU held by Columbia Care PSU Holders will be exchanged for a Replacement PSU and upon vesting thereof on or after the Effective Time, each such former Columbia Care PSU Holder will accept the Consideration in lieu of each Columbia Care Common Share to which such holder was theretofore entitled upon such vesting, and all other terms and conditions of any Replacement PSU, including term to expiry, vesting and conditions to vesting, will be the same as the Columbia Care PSU so exchanged (as may have been amended from time to time);
(j)
Columbia Care will reduce its capital and paid-up capital to CAD$1, without any payment to its shareholders;
(k)
the Company and AcquisitionCo will amalgamate to continue as one corporate entity with the same effect as if they had amalgamated under Section 276 of the BCBCA;
(l)
each CCLLC Membership Interest held by Amalco will be, and will be deemed to be, transferred to and acquired by HoldingCo in consideration for the HoldingCo Consideration;
(m)
Cresco and Amalco will adopt a plan of complete liquidation of Amalco under Division 3 of Part 10 of the BCBCA and pursuant to subsection 319(1) of the BCBCA, Amalco will commence to wind-up and dissolve in accordance with subsection 88(1) of the Tax Act, and pursuant thereto, will transfer beneficial ownership in all of its property to Cresco as its sole shareholder and Cresco will assume all obligations of Amalco; and
(n)
each HoldingCo Membership Interest held by Cresco will be, and will be deemed to be, transferred to and acquired by CUSCo in consideration for a CUSCo Share.
The foregoing share entitlement may be subject to downward adjustment in the event that Columbia Care is required to issue shares in satisfaction of certain earn-out payments under the gLeaf Agreement, with the potential adjustment in proportion to the additional dilution from such potential issuance relative to Columbia Care’s current fully diluted in-the-money outstanding shares. See “The Arrangement — Downward Adjustment”.
See “The Arrangement — Arrangement Mechanics” or the Plan of Arrangement, a copy of which is attached to this Circular as Appendix C.
Required Shareholder Approval
Pursuant to the Interim Order, to be effective, the Arrangement Resolution must receive the Required Shareholder Approval. The Arrangement Resolution must receive such Required Shareholder Approval in order for the Company to seek the Final Order and implement the Arrangement on the Effective Date in accordance with the Final Order.
See “The Arrangement — Required Shareholder Approval”.
Voting Support Agreements
The Supporting Columbia Care Shareholders entered into the Voting Support Agreements with Cresco pursuant to which, among other things, and subject to certain terms, conditions and exceptions, the Supporting Columbia Care Shareholders agreed to vote the Subject Securities (to the extent such securities carry the right to vote) FOR the Arrangement Resolution.
The Supporting Columbia Care Shareholders, collectively as of the Record Date, beneficially own, or exercise control or direction over, directly or indirectly, approximately 17.20% of the Columbia Care Common
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Shares and 35.89% of the Columbia Care PV Shares, representing together approximately 17.84% of the voting rights attached to the Columbia Care Shares.
The Voting Support Agreements will automatically terminate and be of no further force or effect upon the earliest to occur of: (a) the mutual agreement in writing of the Supporting Columbia Care Shareholder and Cresco; (b) written notice by the Supporting Columbia Care Shareholder to Cresco if, without the prior written consent of the Supporting Columbia Care Shareholder, the Arrangement Agreement is amended to change the amount or form of consideration payable pursuant to the Arrangement (other than to increase the total Consideration and/or to add additional consideration); (c) valid termination of the Arrangement Agreement, including, without limitation, where the Arrangement Agreement is terminated in connection with the acceptance by the Company of a Superior Proposal; and (d) the acquisition of the Subject Securities by Cresco.
Under the terms of the Voting Support Agreements, the Supporting Columbia Care Shareholders have agreed to support an Alternative Transaction including any take-over bid made by Cresco, that occurs during the term of the Voting Support Agreement.
See “The Arrangement — Voting Support Agreements”.
Lock-up Agreements
The Lock-up Columbia Care Shareholders, collectively as of the Record Date, beneficially own, or exercise control or direction over, directly or indirectly, Columbia Care Shares representing approximately 17.84% of the voting rights attached to the Columbia Care Shares.
The Lock-up Agreements set forth, among other things, and subject to certain terms, conditions and exceptions, the agreement of each Lock-up Columbia Care Shareholder that it will not, for the applicable Lock-up Period, directly or indirectly: (a) sell, offer, contract or grant any option or right to sell, pledge, transfer, or otherwise dispose of Lock-up Securities, whether of record or beneficially held; (b) monetize, or engage in any swap or hedging transaction, or enter into any form of agreement, arrangement or understanding the effect of which is to alter, directly or indirectly, the Lock-Up Columbia Care Shareholder’s economic interest in, or economic exposure to Lock-up Securities; or (c) publicly announce an intention to do any of the foregoing. The Lock-up Securities will be released over a period of eight months following closing of the Arrangement.
The Lock-up Agreements terminate on the close of trading on the date that the last Lock-up Period expires.
See “The Arrangement — Lock-up Agreements”.
Expenses of the Arrangement
Except as otherwise provided in the Arrangement Agreement, all out-of-pocket third party transaction expenses incurred in connection with the Arrangement Agreement and the Plan of Arrangement and the transactions contemplated thereunder, will be paid by the party incurring such fees, costs or expenses, whether or not the Arrangement is consummated.
See “The Arrangement — Expenses of the Arrangement”.
Court Approval of the Arrangement and Completion of the Arrangement
An arrangement under the BCBCA requires Court approval. Prior to the sending of this Circular, the Company obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached to this Circular as Appendix D.
Subject to obtaining the Required Shareholder Approval, the hearing in respect of the Final Order is currently scheduled to take place on July 14, 2022 at 9:45 a.m. (Vancouver time) in Vancouver, British Columbia.
If the Arrangement is approved at the Meeting, the Final Order approving the Arrangement is issued by the Court and the applicable conditions to the completion of the Arrangement are satisfied or waived, the
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Arrangement is expected to take effect at 12:01 a.m. (Vancouver time) on the Effective Date, which is expected to occur in the fourth quarter of 2022, or such other date as may be agreed by Cresco and the Company.
The Final Order of the Court will, if granted, constitute the basis for the Section 3(a)(10) Exemption with respect to the securities to be issued under the Arrangement. Prior to the hearing on the Final Order, the Court will be informed of this effect of the Final Order. See “Securities Law Matters — U.S. Securities Laws”.
See “The Arrangement — Court Approval of the Arrangement and Completion of the Arrangement.
Unaudited Pro Forma Condensed Financial Information
The unaudited pro forma condensed combined financial information of the combined company, can be found in Appendix K.
See “Unaudited Pro Forma Condensed Financial Information”.
Canadian Securities Laws
A general overview of certain requirements of Canadian Securities Laws relating to the Arrangement that may be applicable to certain Columbia Care securityholders is described in this Circular under the heading “Securities Law Matters — Canadian Securities Laws”. Each Columbia Care securityholder is urged to consult such person’s professional advisors to determine the Canadian conditions and restrictions applicable to trade in the securities issuable pursuant to the Arrangement.
The issuance of securities pursuant to the Arrangement will constitute a distribution of securities that is exempt from the prospectus requirements of applicable Canadian Securities Laws. Securities issued pursuant to the Arrangement may be resold in each province and territory of Canada provided that certain conditions are met.
To the extent that a Columbia Care securityholder resides outside Canada, the securities received by such person may be subject to certain additional transfer restrictions under Securities Laws. All Columbia Care securityholders residing outside Canada are advised to consult their own legal advisors regarding such transfer restrictions.
Application of Multilateral Instrument 61-101
Columbia Care is a reporting issuer (or its equivalent) in all of the provinces of Canada except in Quebec and, accordingly, is subject to the applicable Securities Laws of such provinces, including MI 61-101 which has been adopted in Ontario and certain other provinces of Canada. MI 61-101 regulates transactions which raise the potential for conflicts of interest, including issuer bids, insider bids, related party transactions and business combinations.
As Mr. Vita may be considered to be entitled to a “collateral benefit” owing to the acceleration or potential acceleration of his Columbia Care RSUs and Columbia Care PSUs and his right in certain circumstances to receive change of control entitlements following completion of the Arrangement, the minority approval requirement for a business combination under MI 61-101 will apply in connection with the Arrangement. Accordingly, the Arrangement Resolution must receive the Required Shareholder Approval.
Mr. Vita is the only party whose votes will be excluded for the purposes of determining minority approval for the Arrangement under MI 61-101. As of the Record Date, Mr. Vita (including any related party or joint actor of Mr. Vita) beneficially owns, or exercises control or direction over, 36,283,801 Columbia Care Common Shares (representing approximately 9.43% of the Columbia Care Common Shares and 9.10% of the votes attaching to all of the outstanding Columbia Care Shares) which will be excluded for purposes of determining minority approval in accordance with MI 61-101.
Columbia Care is not required to obtain a formal valuation under MI 61-101 as no interested party is, as a consequence of the Arrangement, directly or indirectly acquiring Columbia Care or its business and neither the Arrangement nor the transactions contemplated thereunder is a “related party transaction” ​(as defined in MI 61-101) for which Columbia Care would be required to obtain a formal valuation.
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See “Securities Law Matters — Canadian Securities Laws” and “The Arrangement — Interests of Certain Persons in the Arrangement”.
U.S. Securities Laws
A general overview of certain requirements of U.S. Securities Laws relating to the Arrangement that may be applicable to certain Columbia Care securityholders is described in this Circular under the heading “Securities Law Matters — U.S. Securities Laws”. Each Columbia Care securityholder is urged to consult such person’s professional advisors to determine the U.S. conditions and restrictions applicable to trade in the securities issuable pursuant to the Arrangement.
Further information applicable to the holders of such securities resident in the United States is disclosed in this Circular under the heading “Notice to Securityholders in the United States”.
Dissenting Shareholders’ Rights
Registered Columbia Care Shareholders as at the Record Date may exercise Dissent Rights from the Arrangement Resolution pursuant to and in the manner set forth under Sections 237 to 247 of the BCBCA, as modified by the Plan of Arrangement, the Interim Order and any other order of the Court. Any Registered Columbia Care Shareholder as at the Record Date is entitled to be paid the fair value of the Columbia Care Shares held by such holder in accordance with Sections 237 to 247 of the BCBCA, as modified by the Plan of Arrangement, the Interim Order and any other order of the Court, if such holder validly exercises Dissent Rights and the Arrangement becomes effective.
A brief summary of the Dissent Rights available to Registered Columbia Care Shareholders in respect of the Arrangement Resolution is set forth under the heading “Dissenting Shareholders’ Rights” in this Circular. However, such summary is qualified in its entirety by the provisions of Sections 237 to 247 of the BCBCA, the full text of which is set forth in Appendix F, and by the Plan of Arrangement and Interim Order, the full texts of which are set forth in Appendix C and Appendix D, respectively. Failure to comply strictly with the provisions of Sections 237 to 247 of the BCBCA, as modified by the Plan of Arrangement, the Interim Order and any other order of the Court, may result in the loss of all Dissent Rights.
Anyone who is a Non-Registered Columbia Care Shareholder as at the Record Date and who wishes to dissent should be aware that only Registered Columbia Care Shareholders as at the Record Date are entitled to exercise Dissent Rights.
Risk Factors Relating to the Arrangement
Columbia Care Shareholders should carefully consider the following risk factors relating to the Arrangement before deciding to vote or instruct their vote to be cast to approve the matters relating to the Arrangement.
Some of these risks include, but are not limited to: risk that not all the conditions precedent to closing of the Arrangement will be satisfied; risk that the Key Regulatory Approvals may not be obtained or, if obtained, may not be obtained on a favorable basis; risks that Columbia Care and Cresco may not be able to complete the Divestitures, or if completed, may not be completed on a favorable basis; risk that if the Arrangement is not approved by the Columbia Care Shareholders, or the Arrangement is otherwise not completed, then the market price for the Columbia Care Common Shares may decline; risk that there can be no assurance that the Arrangement Agreement will not be terminated by Columbia Care or Cresco in certain circumstances; risk that the Termination Fee may discourage other parties from attempting to acquire Columbia Care; risk that the uncertainty surrounding the Arrangement could negatively impact Columbia Care’s current and future operations, financial condition and prospects; risk that restrictions during the pending Arrangement that prevent Columbia Care from pursuing business opportunities could have an adverse effect on Columbia Care; risk that there can be no assurance that the value of the Cresco Shares received by Columbia Care Shareholders will equal or exceed the value of the Columbia Care Common Shares prior to the Effective Date; risk that potential payments to Columbia Care Shareholders who exercise Dissent Rights could have an adverse effect on Columbia Care’s financial condition or prevent the completion of the Arrangement; risk that another attractive take-over, merger or business combination may not be available if the Arrangement is not completed;
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risk that Columbia Care will incur costs even if the Arrangement is not completed and may have to pay the Termination Fee; risk that following completion of the Arrangement, former Columbia Care Shareholders will not have the ability to significantly influence certain corporate actions of Cresco; risk that the pending Arrangement may divert the attention of Columbia Care’s management; risk that Cresco may issue additional equity securities; risk that the Columbia Care directors and executive officers may have interests in the Arrangement that are different from those of the Columbia Care Shareholders; risks associated with COVID-19 and disease outbreaks; risk that Columbia Care Notes and Columbia Care Warrants may cease to be qualified investments for Registered Plans; risk that Columbia Care and Cresco may not integrate successfully; risk that the issuance and future sale of Cresco Shares could affect the market price for Cresco Shares; risk that it may be challenging for Cresco to service any additional indebtedness incurred; risk that enforcement of rights against Cresco in Canada may not be possible; risk that cannabis remains illegal under U.S. federal law; risk that, to the extent Cresco, following the completion of the Arrangement, is not able to be competitive, such inability could adversely affect Cresco’s results; risk that any ability to secure necessary supplies and services from third-party suppliers, manufacturers and contractors could have a material adverse impact on Cresco’s business; risk that U.S. state and local regulation of cannabis is uncertain and changing; and risks that tax consequences of the Arrangement may differ from anticipated treatment, including if the Arrangement does not qualify as a “reorganization” under Section 368(a) of the Code, U.S. Holders may be required to pay substantial U.S. federal income taxes.
In addition to the risk factors relating to the Arrangement as set out in “Risk Factors Relating to the Arrangement”, there are also significant risks associated with Cresco’s businesses. Columbia Care Shareholders are strongly encouraged to carefully consider the risks discussed in the section titled “Risk Factors” in Appendix J. In addition, Columbia Care Shareholders should also carefully consider the risk factors applicable to the Company, which have been disclosed in Columbia Care’s Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2021 filed with the SEC on EDGAR and with certain Canadian securities regulators on SEDAR.
Additional risks and uncertainties, including those currently unknown or considered immaterial by Cresco, may also adversely affect the business of the Company and Cresco following completion of the Arrangement. These risks could have a material adverse effect on, among other things, the operating results, earnings, properties, business and condition (financial or otherwise) of Cresco.
See “Cautionary Statement Regarding Forward-Looking Information”, “Risk Factors Relating to the Arrangement”and “Information Concerning Cresco — Risk Factors” in Appendix J.
Procedures for the Surrender of Share Certificates and Payment of Consideration
If the Arrangement Resolution is passed and the Arrangement is implemented, in order to receive the Consideration that you are entitled to, Registered Columbia Care Shareholders must complete and sign the Letter of Transmittal enclosed with this Circular and deliver it (or an originally signed facsimile thereof), together with the certificates or DRS advices representing their Columbia Care Shares and the other relevant documents required by the instructions set out therein, to the Depositary in accordance with the instructions contained in the Letter of Transmittal. The Letter of Transmittal contains procedural information relating to the Arrangement and should be reviewed carefully. The deposit of Columbia Care Shares pursuant to the procedures in the Letter of Transmittal will constitute a binding agreement between the depositing Registered Columbia Care Shareholder and Cresco upon the terms and subject to the conditions of the Arrangement.
Each Registered Columbia Care Shareholder that meets the required conditions will have the right to elect in the applicable Letter of Transmittal delivered to the Depositary to be an Electing Columbia Care Shareholder in order to transfer its Columbia Care Shares directly to Cresco in exchange for Cresco Shares pursuant to the Arrangement. A Columbia Care Shareholder that does not meet the required conditions to, or does not elect in a duly completed Letter of Transmittal deposited with the Depositary no later than the Election Deadline to, be an Electing Columbia Care Shareholder, will dispose of its Columbia Care Shares to AcquisitionCo, under the Arrangement. Columbia Care Shareholders, if eligible, must make the appropriate election in the Letter of Transmittal to be Electing Columbia Care Shareholders. See “Procedures for the Surrender of Share Certificates and Payment of Consideration” and “Certain Canadian Federal Income Tax Considerations for Shareholders — Holders Resident in Canada — Resident Holders of Columbia Care Common Shares Participating in the Arrangement”.
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Registered Columbia Care Shareholders who do not deliver certificates or DRS advices representing their Columbia Care Shares and all other required documents to the Depositary on or before the second anniversary of the Effective Date will lose their right to receive any Consideration for their Columbia Care Shares and any claim or interest of any kind or nature against Cresco or the Company. On such date, all Consideration to which such former holder was entitled shall be deemed to have been surrendered to Cresco and shall be delivered by the Depositary to Cresco or as directed by Cresco.
If you are a Non-Registered Columbia Care Shareholder, you should carefully follow the instructions from the Intermediary that holds Columbia Care Shares on your behalf in order to receive the Consideration for your Columbia Care Shares and in order for you to make the election described herein to be an Electing Columbia Care Shareholder, if you are eligible and wish to do so, so that your Columbia Care Shares will be transferred directly to Cresco pursuant to the Arrangement.
See “Procedures for the Surrender of Share Certificates and Payment of Consideration”.
Income Tax Considerations
Holders of securities of the Company should consult their own tax advisors about the applicable Canadian or United States federal, provincial, state and local tax consequences of the Arrangement. See “Notice to Securityholders in the United States”, “Certain Canadian Federal Income Tax Considerations for Shareholders”and “Material U.S. Federal Income Tax Considerations for Shareholders”.
Information Concerning Cresco
For information concerning Cresco, including information concerning Cresco following the completion of the Arrangement, please see Appendix J.
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NOTICE TO SECURITYHOLDERS IN THE UNITED STATES
THE ARRANGEMENT AND THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATES, NOR HAS THE SEC OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATES PASSED UPON THE FAIRNESS OR MERITS OF THE ARRANGEMENT OR UPON THE ADEQUACY OR ACCURACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
The following discussion is only a general overview of certain requirements of U.S. Securities Laws relating to the Arrangement that may be applicable to Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders, Columbia Care PSU Holders, holders of Columbia Care Warrants and holders of Columbia Care Notes. Each Columbia Care securityholder is urged to consult such person’s professional advisors to determine the U.S. conditions and restrictions applicable to trades in the Cresco Shares issuable pursuant to the Arrangement.
Exemption from U.S. Registration
The Cresco Shares, Replacement Options, Replacement RSUs and Replacement PSUs to be distributed to Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia Care PSU Holders, respectively, under the Arrangement have not been and will not be registered under the U.S. Securities Act or the securities laws of any state of the United States, and will be issued and exchanged in reliance upon the Section 3(a)(10) Exemption and exemptions under the securities laws of each of the respective U.S. states in which U.S. Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia Care PSU Holders reside. The Section 3(a)(10) Exemption exempts from registration a security that is issued in exchange for outstanding securities and other property where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange have the right to appear (and receive timely and adequate notice thereof), by a court or by a Governmental Entity expressly authorized by law to grant such approval. Such court or Governmental Entity must be advised before the hearing that the issuer will rely on the Section 3(a)(10) Exemption based on the court’s or Governmental Entity’s approval of the transaction.
Pursuant to the terms of the Arrangement Agreement, to the extent permitted by applicable Law, Cresco will, as promptly as practicable following the Effective Date, cause a registration statement on Form S-8 to be filed with the SEC which registers the issuance of the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement RSUs and Replacement PSUs, as applicable. In addition, if Cresco is not permitted by applicable Law to file a Form S-8 registering the issuance of the Cresco Shares issuable upon exercise, vesting or settlement, as applicable, of the Replacement Options, Replacement PSUs and Replacement RSUs, Cresco will promptly file a registration statement on appropriate form to register the resale of the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable or otherwise take all necessary actions to cause the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable, to be issued without restrictive legends.
The Court issued the Interim Order on June 6, 2022, and, subject to the approval of the Arrangement by the Columbia Care Shareholders, a hearing for a Final Order approving the Arrangement is currently scheduled to take place on July 14, 2022 at 9:45 a.m. (Vancouver time) in Vancouver, British Columbia. All Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia Care PSU Holders are entitled to appear and be heard at this hearing, provided that they satisfy the applicable conditions set forth in the Interim Order. The Final Order of the Court will, if granted, constitute the basis for the Section 3(a)(10) Exemption with respect to the Cresco Shares, Replacement Options, Replacement RSUs and Replacement PSUs to be issued under the Arrangement. Prior to the hearing on the Final Order, the Court will be informed of this effect of the Final Order. See “The Arrangement — Court Approval of the Arrangement and Completion of the Arrangement”.
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The Cresco Shares to be received by Columbia Care securityholders under the Arrangement will be freely tradable for purposes of the U.S. Securities Act, except by any person who is an “affiliate” ​(as defined in Rule 144 under the U.S. Securities Act) of Cresco after completion of the Arrangement (such as Columbia Care directors or executive officers who become directors or executive officers of Cresco after the Arrangement and any person deemed to be an affiliate of Cresco within 90 days before the closing of the Arrangement). Any resale of Cresco Shares by such an affiliate (or former affiliate) may be subject to the registration requirements of the U.S. Securities Act, absent an exemption therefrom. The summary presented in this Circular does not cover resales of any Cresco Shares received by any person upon completion of the Arrangement, and no person is authorized to make any use of this Circular in connection with any resale.
Holders of Columbia Care Options, Columbia Care RSUs and Columbia Care PSUs are advised that the Section 3(a)(10) Exemption will not be available with respect to the Cresco Shares issuable upon exercise or vesting, as applicable, of the Replacement Options, Replacement RSUs or Replacement PSUs. In addition, unless and until the registration statement on Form S-8 (or other appropriate form as described above and in the Arrangement Agreement) is filed with the SEC, the Cresco Shares issuable upon the exercise of the Replacement Options will be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act, and may be issued only pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. In connection with any exercise or vesting, as applicable, of Replacement Options, Replacement RSUs or Replacement PSUs, that is not registered pursuant to a Form S-8 (or other appropriate form as described above and in the Arrangement Agreement), Cresco may require the delivery of reasonably satisfactory evidence, which may include, without limitation, an opinion of counsel of recognized standing, to the effect that such exercise does not require registration under the U.S. Securities Act.
Holders of Columbia Care Warrants and Columbia Care Convertible Notes, are advised that the Section 3(a)(10) Exemption will not be available with respect to the Cresco Shares issuable upon exercise or conversion, as applicable, of the Columbia Care Warrants and Columbia Care Convertible Notes. The Cresco Shares issuable upon the exercise or conversion of the Columbia Care Warrants and Columbia Care Convertible Notes will be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act, and may be issued only pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. In connection with any such exercise or conversion, Cresco may require the delivery of reasonably satisfactory evidence, which may include, without limitation, an opinion of counsel of recognized standing, to the effect that such exercise or conversion does not require registration under the U.S. Securities Act.
See “Securities Law Matters — U.S. Securities Laws” and “Regulatory Matters — Stock Exchange Matters”.
GAAP Accounting Principles
All financial statements and financial data derived therefrom included in this Circular pertaining to Columbia Care and Cresco, including the unaudited pro forma condensed combined financial statements, have been prepared and presented in accordance with United States GAAP except as otherwise noted. Critical accounting policies, estimates, assumptions and elections may vary between Columbia Care and Cresco. Management of Columbia Care and Cresco have reviewed the unaudited pro forma condensed combined financial statements included in this Circular. For further details, see the notes to the unaudited pro forma condensed combined financial statements set forth under the heading “Unaudited Pro Forma Condensed Financial Information” below.
Pro forma financial information included in this Circular is for informational purposes only and is unaudited. All unaudited pro forma financial information contained in this Circular has been derived from underlying financial statements prepared and adjusted in accordance with GAAP to illustrate the effect of the Arrangement. The pro forma financial information set forth in this Circular should not be considered to be what the actual financial position or other results of operations would have necessarily been had Columbia Care and Cresco operated as a single combined company as, at, or for the periods stated.
Tax Matters
This Circular does not address any tax considerations of the Arrangement other than certain Canadian federal income tax considerations and certain U.S. federal income tax considerations applicable to Columbia
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Care Shareholders. Columbia Care Shareholders that are resident or subject to tax in any jurisdiction outside of Canada or the United States (a “Foreign Tax Jurisdiction”) should be aware that the Arrangement may have tax consequences to such Columbia Care Shareholder in one or more Foreign Tax Jurisdictions. No tax advice or opinion whatsoever is provided in this Circular to Columbia Care Shareholders with respect to tax considerations involving Foreign Tax Jurisdictions. Columbia Care Shareholders that are resident or subject to tax in any Foreign Tax Jurisdiction are urged to consult their own independent tax advisors with respect to the relevant tax implications of the Arrangement and for advice regarding the specific federal, provincial, state, local and foreign tax considerations applicable to them, including, without limitation, any associated filing requirements, in such jurisdictions.
HOLDERS OF COLUMBIA CARE WARRANTS, COLUMBIA CARE OPTIONS, COLUMBIA CARE RSUS, COLUMBIA CARE PSUS AND COLUMBIA CARE NOTES SHOULD CONSULT THEIR OWN TAX, LEGAL AND FINANCIAL ADVISORS REGARDING THE PARTICULAR CONSEQUENCES TO THEM OF THE ARRANGEMENT.
Enforcement of Civil Liabilities
The enforcement by securityholders of civil liabilities under U.S. federal securities laws may be affected adversely by the fact that each of the Company and Cresco are incorporated or organized outside the United States, that some or all of their respective directors and officers and the experts named in this Circular may not be residents of the United States, and that all or a substantial portion of their respective assets and the assets of said persons may be located outside the United States. As a result, securityholders in the United States may be unable to effect service of process within the United States upon the Company or Cresco, their respective officers and directors or the experts named herein, or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under the federal securities laws of the United States or any applicable securities laws of any state of the United States. In addition, securityholders in the United States should not assume that the courts of Canada: (i) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the federal securities laws of the United States or any applicable securities laws of any state of the United States; or (ii) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the federal securities laws of the United States or any applicable securities laws of any state of the United States.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Circular contains “forward-looking statements” and “forward-looking information” within the meaning of Securities Laws (forward-looking statements and forward-looking information being collectively referred to as “forward-looking information”) that are based on expectations, estimates and projections as at the date of this Circular. This forward-looking information includes, but is not limited to, statements and information concerning: the Arrangement; the anticipated timing for completion of the Arrangement; the anticipated benefits of the Arrangement; the likelihood of the Arrangement being completed; the principal steps of the Arrangement; statements made in, and based upon, the ATB Fairness Opinion and the Canaccord Genuity Fairness Opinion; statements relating to the business and future activities of the Company and Cresco after the date of this Circular and prior to the Effective Time and after the Effective Time; Columbia Care Shareholder and Court approval of the Arrangement; regulatory approval of the Arrangement; the expected timing to complete the Arrangement and other statements that are not historical facts. To the extent any forward-looking information constitutes future-oriented financial information or financial outlook, as those terms are defined under applicable Canadian Securities Laws, such statements are being provided to describe the current anticipated effect of the Arrangement, and readers are cautioned that these statements may not be appropriate for any other purpose, including investment decisions.
Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes”, “intends” or “proposes” or variations of such words and phrases or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify forward-looking information. This forward-looking information is based on the beliefs of the Company’s management, as well as on assumptions and other factors, which management believes to be reasonable based on information available at the time such information was given. Such assumptions include, among other things, the satisfaction of the terms and conditions of the Arrangement, including the approval of the Arrangement and its fairness by the Court, and the receipt of the required governmental and regulatory approvals and consents.
By its nature, forward-looking information, including future-oriented financial information or financial outlook, is based on assumptions and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements expressed or implied herein to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information, including, without limitation: the Arrangement Agreement may be terminated in certain circumstances; the conditions to the completion of the Arrangement may not be satisfied; Dissent Rights may be exercised with respect to more than 5.0% of the Columbia Care Shares; that the Tax Proposals will be enacted as proposed or at all; general economic conditions; industry conditions; currency fluctuations; competition from other industry participants; and stock market volatility. This list is not exhaustive of the factors that may affect any of the forward-looking information contained herein.
Forward-looking information is information about the future and is inherently uncertain. There can be no assurance that the forward-looking information will prove to be accurate. Actual results could differ materially from those reflected in the forward-looking information as a result of, among other things, the matters set out in this Circular generally and economic and business factors, some of which may be beyond the control of the Company. Some of the more important risks and uncertainties that could affect forward-looking information are described further under the heading “Risk Factors Relating to the Arrangement”. Additional risks are discussed in the Columbia Care management discussion and analysis and annual report on Form 10-K, copies of which are available under the Company’s profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov, and under the heading “Information Concerning Cresco — Risk Factors” in Appendix J. The Company expressly disclaims any intention or obligation to update or revise any information contained in this Circular (including forward-looking information) except as required by applicable Laws, and Columbia Care Shareholders should not assume that any lack of update to information contained in this Circular means that there has been no change in that information since the date of this Circular and should not place undue reliance on forward-looking information.
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GENERAL PROXY INFORMATION
Solicitation of Proxies
This Circular is furnished in connection with the solicitation of proxies by the management and the directors of the Company for use at the Meeting of the Columbia Care Shareholders to be held at 10:00 a.m. (Toronto time), on July 8, 2022 virtually via live audio webcast online at https://web.lumiagm.com/200807187 and at all adjournments or postponements thereof for the purposes set forth in the accompanying Notice of Meeting. The solicitation of proxies will be made primarily by mail and electronic delivery and may be supplemented by telephone or other personal contact by the directors, officers and employees of the Company. Directors, officers, and employees of the Company will not receive any extra compensation for such activities. The Company has retained Morrow Sodali as its proxy solicitation agent and will pay fees of approximately $100,000 to Morrow Sodali for the services, in addition to certain out-of-pocket expenses. The Company may pay brokers or other persons holding Columbia Care Shares in their own names, or in the names of nominees, for their reasonable expenses for sending forms of proxy and this Circular to beneficial owners of Columbia Care Shares and obtaining proxies therefrom. The cost of any such solicitation will be borne by the Company.
The Company is not using “notice and access” to send its proxy related materials to Columbia Care Shareholders, and copies of such materials will be sent to all Columbia Care Shareholders. The Company intends to pay for an Intermediary to deliver to objecting Non-Registered Columbia Care Shareholders the proxy-related materials and Form 54-101F7 — Request for Voting Instructions Made by Intermediary of NI 54-101.
No person is authorized to give any information or to make any representation other than those contained in this Circular and, if given or made, such information or representation should not be relied upon as having been authorized by the Company. The delivery of this Circular shall not, under any circumstances, create an implication that there has not been any change in the information set forth herein since the date hereof.
Appointment of Proxies
The information in this section applies to Columbia Care Shareholders who hold their own Columbia Care Shares in their own name and have a share certificate or direct registration system (DRS) statement (a “Registered Columbia Care Shareholder”). As a Registered Columbia Care Shareholder, you are identified on the share register maintained by the Company’s registrar and transfer agent, Odyssey Trust Company (“Odyssey”), as being a Columbia Care Shareholder.
Enclosed herewith is a form of proxy for use at the Meeting. The persons named in the form of proxy are directors and/or officers of the Company. Each Registered Columbia Care Shareholder submitting a proxy has the right to appoint a person other than the management nominees identified on the form of proxy, who need not be a Columbia Care Shareholder, to represent him, her or it at the Meeting and may do so by inserting such person’s name in the blank space provided in the form of proxy and following the instructions for submitting such form of proxy. This must be completed prior to registering such proxyholder, which is an additional step to be completed once you have submitted your form of proxy or voting instruction form. If you wish that a person other than the management nominees identified on the form of proxy or voting instruction form attend and participate at the Meeting as your proxy and vote your Columbia Care Shares, including if you are a Non-Registered Columbia Care Shareholder and wish to appoint yourself as proxyholder to attend, participate and vote at the Meeting, you MUST register such proxyholder after having submitted your form of proxy or voting instruction form identifying such proxyholder. Failure to register the proxyholder will result in the proxyholder not receiving a Username to participate in the Meeting. Without a Username, proxyholders will not be able to attend, participate or vote at the Meeting. To register a proxyholder, shareholders MUST send an email to appointee@odysseytrust.com and provide Odyssey with their proxyholder’s contact information, amount of Columbia Care Shares appointed, name in which the Columbia Care Shares are registered if they are a Registered Columbia Care Shareholder, or name of broker where the Columbia Care Shares are held if a Non-Registered Columbia Care Shareholder, so that Odyssey may provide the proxyholder with a Username via email.
Revocation of Proxies
A Registered Columbia Care Shareholder who has given a proxy may revoke the proxy at any time prior to use by depositing an instrument in writing, including another completed form of proxy, executed by such
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Registered Columbia Care Shareholder or by his or her attorney authorized in writing or by electronic signature, or, if the Registered Columbia Care Shareholder is a corporation, by an authorized officer or attorney thereof, or by transmitting by telephone or electronic means, a revocation signed, subject to the BCBCA, by electronic signature: (i) to the registered office of the Company, located at 666 Burrard St., #1700, Vancouver, BC V6C 2X8, at any time prior to 5:00 p.m. (Toronto time); or (ii) to Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8, on the last Business Day preceding the day of the Meeting (or any adjournment or postponement thereof).
Non-Registered Columbia Care Shareholders
The information set forth in this section is of significant importance to many Columbia Care Shareholders, as a substantial number of Columbia Care Shareholders do not hold Columbia Care Shares in their own name. Columbia Care Shareholders who do not hold their Columbia Care Shares in their own name (referred to in this Circular as “Non-Registered Columbia Care Shareholders”) should note that only proxies deposited by Registered Columbia Care Shareholders can be recognized and acted upon at the Meeting. If Columbia Care Shares are listed in an account statement provided to a Columbia Care Shareholder by a broker, then in almost all cases those Columbia Care Shares will not be registered in the Columbia Care Shareholder’s name on the records of the Company. Such Columbia Care Shares will more likely be registered under the names of the Columbia Care Shareholder’s broker or an agent of that broker (an “Intermediary”). In Canada, the vast majority of such shares are registered under the name of CDS & Co. (the registration name for CDS Clearing and Depository Services Inc., which acts as nominee for many Canadian brokerage firms). Columbia Care Shares held by Intermediaries or their agents or nominees can only be voted upon the instructions of the Non-Registered Columbia Care Shareholder. Without specific instructions, Intermediaries and their agents and nominees are prohibited from voting Columbia Care Shares for the Intermediary’s clients. Therefore, Non-Registered Columbia Care Shareholders should contact their broker or other Intermediary as soon as practicable to ensure that instructions respecting the voting of their Columbia Care Shares are communicated to the appropriate person.
In accordance with the requirements of NI 54-101, the Company has distributed copies of the Meeting Materials to CDS & Co. and Intermediaries for onward distribution to Non-Registered Columbia Care Shareholders.
Non-Registered Columbia Care Shareholders fall into two categories — those who object to their identity being known to the issuers of the securities which they own (“OBOs”) and those who do not object to their identity being made known to the issuers of the securities which they own (“NOBOs”). Subject to the provisions of NI 54-101, issuers may request and obtain a list of their NOBOs from Intermediaries directly or via their transfer agent and may obtain and use the NOBO list for the distribution of proxy-related materials to such NOBOs. If you are a NOBO and the Company or its agent has sent the Meeting Materials directly to you, your name, address and information about your holdings of Columbia Care Shares have been obtained in accordance with applicable securities regulatory requirements from the Intermediary holding the Columbia Care Shares on your behalf.
The Company’s OBOs can expect to be contacted by their Intermediary. The Company intends to pay for Intermediaries to deliver the Meeting Materials to OBOs.
Applicable regulatory policy requires Intermediaries/brokers to seek voting instructions from Non-Registered Columbia Care Shareholders in advance of shareholders’ meetings. Every Intermediary or broker has its own mailing procedures and provides its own return instructions, which should be carefully followed by Non-Registered Columbia Care Shareholders in order to ensure that their Columbia Care Shares are voted at the Meeting. Often, the form of proxy supplied to a Non-Registered Columbia Care Shareholders by its broker is identical to the form of proxy provided to Registered Columbia Care Shareholders; however, its purpose is limited to instructing the Registered Columbia Care Shareholder how to vote on behalf of the Non-Registered Columbia Care Shareholder. The majority of brokers now delegate responsibility for obtaining instructions from clients to Broadridge Financial Services, Inc. (“Broadridge”). Broadridge typically mails a scannable voting instruction form in lieu of the form of proxy. The Non-Registered Columbia Care Shareholder is requested to complete and return the voting instruction form to them by mail or facsimile. Alternatively, the Non-Registered Columbia Care Shareholder can call a toll-free telephone number or visit www.proxyvote.com to vote the Columbia Care Shares held by the Non-Registered Columbia Care
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Shareholder. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Columbia Care Shares to be represented at the Meeting. A Non-Registered Columbia Care Shareholder receiving a voting instruction form cannot use that voting instruction form to vote Columbia Care Shares directly at the Meeting as the voting instruction form must be returned as directed by Broadridge well in advance of the Meeting in order to have the Columbia Care Shares voted.
Although a Non-Registered Columbia Care Shareholder may not be recognized directly at the Meeting for the purposes of voting Columbia Care Shares registered in the name of his, her or its broker (or agent of the broker), a Non-Registered Columbia Care Shareholder may attend at the Meeting as proxyholder for a Registered Columbia Care Shareholder and vote the Columbia Care Shares in that capacity. Non-Registered Columbia Care Shareholders who wish to attend at the Meeting and indirectly vote their Columbia Care Shares as proxyholder for a Registered Columbia Care Shareholder should enter their own names in the blank space on the instrument of proxy provided to them and return the same to their broker (or the broker’s agent) in accordance with the instructions provided by such broker (or agent), well in advance of the Meeting.
Voting of Proxies
If you are a Registered Columbia Care Shareholder and are unable to virtually attend the Meeting, please exercise your right to vote by dating, signing and returning the accompanying form of proxy to Odyssey, the transfer agent of the Company. To be valid, completed proxy forms must be dated, completed, signed and deposited with Odyssey by mail to: Odyssey Trust Company, Attention: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8. You may also vote through the internet by going to https://login.odysseytrust.com/pxlogin and click on VOTE PROXY and enter the 12 digit control number found on the form of proxy. Your proxy or voting instructions must be received in each case no later than 10:00 a.m. (Toronto time) on July 6, 2022 or two Business Days preceding the date of any adjournment or postponement. If you are unable to attend the Meeting, we encourage you to complete the enclosed form of proxy as soon as possible. If a Columbia Care Shareholder received more than one form of proxy because such holder owns Columbia Care Shares registered in different names or addresses, each form of proxy should be completed and returned. The Chairman of the Meeting shall have the discretion to waive or extend the proxy deadline without notice.
All Columbia Care Shares represented at the Meeting by properly executed proxies will be voted on any matter that may be called for and, where a choice with respect to any matter to be acted upon has been specified in the accompanying form of proxy, the Columbia Care Shares represented by the proxy will be voted in accordance with such instructions. In the absence of any such instructions, the persons whose names appear on the printed form of proxy will vote in favour of all the matters set out thereon.
The enclosed form of proxy confers discretionary authority upon the persons named therein. If any other business or amendments or variations to matters identified in the Notice of Meeting properly comes before the Meeting, then discretionary authority is conferred upon the person appointed in the proxy to vote in the manner they see fit, in accordance with their best judgment.
At the time of the printing of this Circular, the management of the Company knew of no such amendment, variation or other matter to come before the Meeting other than the matters referred to in the Notice of Meeting.
Voting at the Meeting
Registered Columbia Care Shareholders may vote at the Meeting by completing a ballot online during the Meeting, as further described below. See “How to Attend and Participate in the Meeting”.
Non-Registered Columbia Care Shareholders who have not duly appointed themselves as proxyholder will not be able to attend, participate or vote at the Meeting. This is because the Company and Odyssey do not have a record of the Non-Registered Columbia Care Shareholders, and, as a result, will have no knowledge of your shareholdings or entitlement to vote, unless you appoint yourself as proxyholder. If you are a Non-Registered Columbia Care Shareholder and wish to vote at the Meeting, you have to appoint yourself as proxyholder, by inserting your own name in the space provided on the voting instruction form sent to you and
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must follow all of the applicable instructions provided by your Intermediary. See “Appointment of a Third Party as a Proxy” and “How to Attend and Participate in the Meeting”.
Appointment of a Third Party as a Proxy
The following applies to Columbia Care Shareholders who wish to appoint a person (a “Third Party Proxyholder”) other than the management nominees set forth in the form of proxy or voting instruction form as proxyholder, including Non-Registered Columbia Care Shareholders who wish to appoint themselves as proxyholder to attend, participate or vote at the Meeting.
Columbia Care Shareholders who wish to appoint a Third Party Proxyholder to attend, participate or vote at the Meeting as their proxy and vote their Columbia Care Shares MUST submit their proxy or voting instruction form (as applicable) appointing such Third Party Proxyholder AND register the Third Party Proxyholder, as described below. Registering your proxyholder is an additional step to be completed AFTER you have submitted your proxy or voting instruction form. Failure to register the proxyholder will result in the proxyholder not receiving a Username to attend, participate or vote at the Meeting.
Step 1 — Submit your proxy or voting instruction form — To appoint a Third Party Proxyholder, insert such person’s name in the blank space provided in the form of proxy or voting instruction form (if permitted) and follow the instructions for submitting such form of proxy or voting instruction form. This must be completed prior to registering such proxyholder, which is an additional step to be completed once you have submitted your form of proxy or voting instruction form. If you are a Non-Registered Columbia Care Shareholder located in the United States, you must also provide Odyssey with a duly completed legal proxy if you wish to attend, participate or vote at the Meeting or, if permitted, appoint a third party as your proxyholder. See below under this section for additional details.
Step 2 — Register your proxyholder — To register a proxyholder, shareholders MUST send an email to appointee@odysseytrust.com by 10:00 a.m. (Toronto time) on July 6, 2022 and provide Odyssey with the required proxyholder contact information, amount of Columbia Care Shares appointed, name in which the Columbia Care Shares are registered if they are a Registered Columbia Care Shareholder, or name of broker where the shares are held if a Non-Registered Columbia Care Shareholder, so that Odyssey may provide the proxyholder with a Username via email. Without a Username, proxyholders will not be able to attend, participate or vote at the Meeting.
If you are a Non-Registered Columbia Care Shareholder and wish to attend, participate or vote at the Meeting, you have to insert your own name in the space provided on the voting instruction form sent to you by your Intermediary, follow all of the applicable instructions provided by your Intermediary AND register yourself as your proxyholder, as described above. By doing so, you are instructing your Intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your Intermediary. Please also see further instructions below under the heading “How to Attend and Participate in the Meeting”.
Legal Proxy — Beneficial Shareholders
If you are a Non-Registered Columbia Care Shareholder located in the United States and wish to attend, participate or vote at the Meeting or, if permitted, appoint a third party as your proxyholder, in addition to the steps described above and below under “How to Attend and Participate in the Meeting”, you must obtain a valid legal proxy from your Intermediary. Follow the instructions from your Intermediary included with the legal proxy form and the voting information form sent to you, or contact your Intermediary to request a legal proxy form or a legal proxy if you have not received one. After obtaining a valid legal proxy from your Intermediary, you must then submit such legal proxy to Odyssey. Requests for registration from Non-Registered Columbia Care Shareholders located in the United States that wish to attend, participate or vote at the Meeting or, if permitted, appoint a third party as their proxyholder must be sent by e-mail to appointee@odysseytrust.com and received by 10:00 a.m. (Toronto time) on July 6, 2022.
How to Attend and Participate in the Meeting
The Company is holding the Meeting in a virtual only format, which will be conducted via live audio webcast. Columbia Care Shareholders will not be able to attend the Meeting in person. In order to attend,
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participate or vote at the Meeting (including for voting and asking questions at the Meeting), Columbia Care Shareholders must have a valid Username. Guests are welcome to attend and view the webcast, but will be unable to participate or vote at the Meeting. To join as a guest please visit the Meeting online at https://web.lumiagm.com/200807187 and select “Join as a Guest” when prompted.
Registered Columbia Care Shareholders and duly appointed proxyholders will be able to attend, participate and vote at the Meeting online at https://web.lumiagm.com/200807187. Such persons may then enter the Meeting by clicking “I have a login” and entering a Username and Password before the start of the Meeting:
Registered Columbia Care Shareholders:   The control number located on the form of proxy is the Username. The Password to the Meeting is “columbia2022” ​(case sensitive). If as a Registered Columbia Care Shareholder you are using your control number to login to the Meeting and you have previously voted, you do not need to vote again when the polls open. By voting at the meeting, you will revoke your previous voting instructions received prior to the voting deadline.
Duly appointed proxyholders:   Odyssey will provide the proxyholder with a Username by e-mail after the voting deadline has passed. The Password to the Meeting is “columbia2022” ​(case sensitive). Only Registered Columbia Care Shareholders and duly appointed proxyholders will be entitled to attend, participate and vote at the Meeting. Non-Registered Columbia Care Shareholders who have not duly appointed themselves as proxyholder will be able to attend the meeting as a guest but not be able to participate or vote at the Meeting. Columbia Care Shareholders who wish to appoint a Third Party Proxyholder to represent them at the Meeting, including Non-Registered Columbia Care Shareholders who wish to appoint themselves as proxyholder to attend, participate or vote at the Meeting, MUST submit their duly completed proxy or voting instruction form AND register the proxyholder. See “Appointment of a Third Party as a Proxy”.
If you attend the Meeting online, it is important that you are connected to the internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting. You should allow ample time to check into the Meeting online and complete the related procedure.
Quorum
A quorum for the transaction of business at the Meeting is present if Columbia Care Shareholders who, together, hold not fewer than 25% of the votes attaching to the outstanding Columbia Care Shares entitled to vote at the Meeting are present or represented by proxy. In the event that a quorum is not present at the time fixed for holding the Meeting, the Meeting shall stand adjourned to such date and to such time and place as may be determined by the Columbia Care Shareholders present at the Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The record date for the determination of the Columbia Care Shareholders entitled to receive the Notice of Meeting has been fixed at the close of business on May 10, 2022 (the “Record Date”). Columbia Care Shareholders of record on the Record Date will be entitled to vote at the Meeting and at all adjournments thereof. Each Columbia Care Common Share will entitle the holder of record thereof to one vote at the Meeting and each Columbia Care PV Share will entitle the holder of record thereof to 100 votes at the Meeting.
As of the Record Date, there were 384,943,683 Columbia Care Common Shares and 136,410.48 Columbia Care PV Shares outstanding. To the knowledge of the directors and executive officers of the Company, as of the Record Date, no persons or companies beneficially owned, directly or indirectly, or exercised control or direction over, 10% or more of the voting rights attached to the Columbia Care Shares.
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THE ARRANGEMENT
At the Meeting, Columbia Care Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Arrangement Resolution to approve, inter alia, the Arrangement pursuant to Division 5 of Part 9 of the BCBCA. The terms of the Arrangement, the Plan of Arrangement and the Arrangement Agreement are summarized below. This summary does not purport to be complete and is qualified in its entirety by reference to the Arrangement Agreement and the Plan of Arrangement attached thereto, which have been, or will be, filed on SEDAR at www.sedar.com and EDGAR at www.sec.gov under the Company’s profile. A copy of the Plan of Arrangement is also attached to this Circular as Appendix C.
To be effective, the Arrangement Resolution must receive the Required Shareholder Approval. See “The Arrangement — Required Shareholder Approval”. A copy of the Arrangement Resolution is set out in Appendix B.
Unless otherwise directed in properly completed forms of proxy, it is the intention of the individuals named in the enclosed form of proxy to vote FOR the Arrangement Resolution. If you do not specify how you want your Columbia Care Shares to be voted at the Meeting, the persons named as proxyholders in the enclosed form of proxy will cast the votes represented by your proxy at the Meeting FOR the Arrangement Resolution.
If the Arrangement is approved at the Meeting, the Final Order approving the Arrangement is issued by the Court and the applicable conditions to the completion of the Arrangement are satisfied or waived, the Arrangement is expected to take effect at 12:01 a.m. (Vancouver time) on the Effective Date, which is expected to occur in the fourth quarter of 2022, or such other date as may be agreed by Cresco and the Company.
Purpose of the Arrangement
The purpose of the Arrangement is for Cresco to acquire all of the issued and outstanding Columbia Care Shares. Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, Columbia Care Shareholders will receive 0.5579 of a Cresco Share, subject to adjustment as described below, for each Columbia Care Share (on an as converted to Columbia Care Common Share basis) outstanding immediately prior to the Effective Time (such ratio, subject to adjustment as described herein, the “Exchange Ratio”), with the Columbia Care PV Shares treated on an as-converted basis to Columbia Care Common Shares pursuant to their respective terms; provided, the Exchange Ratio is subject to adjustment in the event that Columbia Care is required to issue Columbia Care Shares in satisfaction of an earn-out payment for a prior acquisition, with the potential adjustment in proportion to the additional dilution from such potential issuance relative to Columbia Care’s current fully diluted in-the-money outstanding Columbia Care Shares. See “The Arrangement — Downward Adjustment”.
Background to the Arrangement
The Arrangement Agreement is the result of extensive arm’s length negotiations among representatives of Cresco and Columbia Care and their respective legal and financial advisors. The following is a summary of the material meetings, negotiations, discussions and actions among the Parties which preceded the execution of the Arrangement Agreement and the public announcement of the Arrangement.
The cannabis industry is rapidly evolving, which necessitates the frequent consideration of various strategic opportunities. In this regard, in October 2021, the Company established the Columbia Care Special Committee, consisting of independent directors Jeff Clarke, Alison Worthington and Julie Hill, to review, consider and evaluate a strategic opportunity which arose from an unsolicited proposal from a third party (the “October Proposal”), as well as any other strategic alternatives that might be available to the Company in the future to enhance shareholder value. In connection with the October Proposal, the Company entered into a mutual non-disclosure agreement with a third party which contemplated standstill provisions in favour of both parties for a period of 12 months, which standstill expired in connection with the execution of the Arrangement Agreement. Although the October Proposal never led to material negotiations following brief mutual diligence, the Columbia Care Special Committee was maintained to consider future strategic alternatives and established a routine of meeting for updates with management on a bi-weekly basis. In late 2021, the Company received another unsolicited expression of interest from a different third party in
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connection with a proposed business combination (the “December Proposal”). The Columbia Care Special Committee reviewed, considered and evaluated the December Proposal and sought the advice of its Canadian legal counsel, Stikeman Elliott LLP (“Stikeman Elliott”) and the financial advisor of the Columbia Care Board, Canaccord Genuity Corp. (“Canaccord Genuity”) with respect to same. At the recommendation of the Columbia Care Special Committee and based in part on the advice of such advisors, the Columbia Care Board decided not to pursue the December Proposal.
In mid-January 2022, Charles Bachtell, Chief Executive Officer of Cresco, approached Nicholas Vita, Chief Executive Officer of Columbia Care, about having a call to discuss potential strategic opportunities between the companies, including potential strategic opportunities between the companies. Cresco and Columbia Care are two of the longest-standing multi-state operators in the United States cannabis industry.
On January 20, 2022, the Columbia Care Special Committee met as a matter of routine for one of its bi-weekly updates with management, which meeting included an in-camera session. The principal topic at this meeting was to confirm that the work associated with the December Proposal was fully closed as both parties appeared to have moved on from the discussions. At the meeting, in the wake of the December Proposal no longer being considered, Mr. Vita informed the Columbia Care Special Committee that Cresco had reached out to have an initial discussion with Columbia Care regarding potential strategic opportunities between the companies. The Columbia Care Special Committee was supportive of entering into discussions with Cresco and executing a mutual non-disclosure agreement with a view to exploring a potential transaction with Cresco.
On January 21, 2022, Cresco and Columbia Care conducted a conference call, which was attended by Nicholas Vita and Joshua Snyder from Columbia Care and Charles Bachtell and TJ Cole from Cresco. Following this call, Cresco and Columbia Care executed a mutual non-disclosure agreement on January 21, 2022 and made available to each other certain confidential business information in connection with a potential business combination transaction. Shortly thereafter, Joshua Snyder of Columbia Care and TJ Cole of Cresco spoke via telephone to discuss next steps for the potential business combination and to arrange for reciprocal site visits to occur as part of the mutual due diligence process.
On January 26, 2022, the Columbia Care Business Development team, including Joshua Snyder and Andrew Kessner flew to Illinois to provide Cresco management team members, including TJ Cole, Nate Reid, Joe Ales, Danny Rohloff and Melissa Goldfarb, with a tour of its Aurora cultivation facility. Following that tour, Joshua Snyder and Andrew Kessner also toured Cresco’s Joliet manufacturing and processing facility as well as their cultivation facility in Lincoln. The Columbia Care team was impressed with both the management team members that they spoke with as well as the facilities which they visited.
On January 29, 2022, the Columbia Care Special Committee held a brief meeting at which Mr. Vita provided an update on Columbia Care’s initial due diligence, including his positive impressions of the Illinois facility and the Cresco management team The meeting included an in-camera session. In addition to the Columbia Care Special Committee members and Mr. Vita, other attendees at this meeting were Columbia Care’s Executive Chairman Michael Abbott and management team members Derek Watson, Chief Financial Officer of Columbia Care; David Sirolly, Chief Legal Officer and General Counsel of Columbia Care and Joshua Snyder, Senior Vice President, Mergers and Acquisitions of Columbia Care. Mr. Vita noted that Cresco had historically taken a similar approach to Columbia Care with respect to how to build a multi-state cannabis operation in the United States. Cresco had developed strong retail brands and was believed to have a significant presence in California, Illinois and Pennsylvania. Mr. Vita indicated that if Cresco made an offer to acquire Columbia Care, that it would be on a stock-for-stock basis and that certain asset sales would likely be needed due to overlapping footprint in certain regions.
On January 31, 2022, Cresco continued its operational due diligence by visiting Columbia Care’s facilities in Portsmouth, Virginia and Richmond, Virginia, which left the visiting Cresco teams impressed with the Virginia market and Columbia Care’s business infrastructure.
On February 1, 2022, members of the Cresco management team, including Charles Bachtell, TJ Cole, Joe Ales, Drew Duvall and Donny Trivisonno, toured Columbia Care’s New Jersey facilities and met with Joshua Snyder of Columbia Care. That evening, the teams met jointly for a dinner to discuss the transaction more generally as well as proposed next steps to diligence. The dinner was also attended by Derek Watson; David Hart, Chief Operating Officer of Columbia Care and Dennis Olis, Chief Financial Officer of Cresco.
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On February 2, 2022, members of the Cresco management team, including Charles Bachtell, TJ Cole, Joe Ales, Drew Duvall and Donny Trivisonno, toured Columbia Care’s Colorado facilities and met with Joshua Snyder of Columbia Care.
On February 3, 2022, the Columbia Care Special Committee held its bi-weekly update with management. Columbia Care Special Committee members Jeff Clarke and Alison Worthington attended, as did Columbia Care management team members Nicholas Vita, David Hart and David Sirolly. With respect to Cresco, Mr. Vita briefly updated that initial reciprocal due diligence was continuing.
Following multiple weeks of reciprocal due diligence among the parties, on February 12, 2022, Cresco delivered to Columbia Care a draft letter of intent (the “Letter of Intent”) along with a supporting presentation outlining the strategic rationale and financial implications of a potential business combination transaction. The Letter of Intent and supporting materials were shared with the Columbia Care Special Committee, Stikeman Elliott and Canaccord Genuity. The Letter of Intent contemplated an Exchange Ratio of 0.5474 Cresco Shares for each Columbia Care Share (on an as-converted to Columbia Care Common Share basis), which implied a value per Columbia Care Common Share of US$4.08, representing a premium of 30% per Columbia Care Common Share based on the most recent closing share prices of Cresco and Columbia Care, being February 11, 2022. The Letter of Intent also contemplated a “force the vote” requirement, which is a firm requirement for Columbia Care to hold a shareholder meeting regarding a Cresco transaction, significant Columbia Care Shareholders to enter into voting support agreements and a unilateral exclusivity covenant in favour of Cresco.
On February 13, 2022, the Columbia Care Special Committee held a meeting to review the Letter of Intent and supporting documents and authorized Columbia Care management to engage independent financial advisors in connection with the potential transaction. Directors Nicholas Vita and Michael Abbott as well as Columbia Care management members David Hart, David Sirolly and Joshua Snyder were also in attendance at such meeting, which included an in-camera session. The principal point of discussion by the Columbia Care Special Committee at this meeting was the need for additional financial analysis from a third party financial advisor to more fully evaluate and assess the Letter of Intent in light of a variety of factors including premium precedents for comparable deals; relative valuation and ownership between the two companies, especially given Cresco’s wholesale focus and Columbia Care’s retail focus; Columbia Care’s growth prospects and trajectory as a standalone enterprise; and the potential for federal regulatory changes for the cannabis industry in the United States. This meeting concluded with the Columbia Care Special Committee asking management to re-engage with Canaccord Genuity for additional analysis and assessment of the Letter of Intent and also to begin to develop a potential response to the offer.
On February 14, 2022, Joshua Snyder from Columbia Care toured the Cresco facility in Fall River, Massachusetts, as well as the adjoining dispensary.
On February 15, 2022, the Columbia Care Special Committee held another meeting for the purpose of updating the other members of the Columbia Care Board on the progressing discussions with Cresco, which meeting was also attended by David Sirolly, Board Observer Kevin Goldberg and Stikeman Elliott and included an in-camera session. At this meeting, the Columbia Care Special Committee noted that it had received an initial written presentation and assessment of the Letter of Intent from Canaccord Genuity and that proposed revisions to the Letter of Intent were being developed, specifically with respect to transaction economics, deal protections, closing conditions and mutual exclusivity.
On February 16, 2022, Columbia Care delivered to Cresco proposed revisions to the Letter of Intent based on feedback from the Columbia Care Special Committee and Columbia Care’s advisors. The revised Letter of Intent contemplated an increased Exchange Ratio of 0.5684 Cresco Shares for each Columbia Care Share (on an as-converted to Columbia Care Common Share basis), which implied a value per Columbia Care Common Share of US$4.25, representing a premium of 35% per Columbia Care Common Share based on the closing share prices of Columbia Care and Cresco on February 11, 2022, the last trading day prior to receipt of the Letter of Intent. The revisions also removed the proposed “force the vote” requirement, removed the “hard” requirement on the voting support agreements and limited the obligation of executing voting support agreements to only the directors and officers of Columbia Care. Additionally, the revised Letter of Intent contemplated a mutual exclusivity covenant and provided that Nicholas Vita would join not only the Cresco
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Board (as contemplated in the draft previously circulated by Bennett Jones LLP (“Bennett Jones”), Cresco’s legal counsel), but also the executive committee of the Cresco Board upon closing of the proposed transaction.
On February 17, 2022, Cresco returned a revised draft of the Letter of Intent to Columbia Care. This revised draft accepted the majority of Columbia Care’s previous revisions, other than its increase of the Exchange Ratio, which reverted to its original position of 0.5474 Cresco Shares for each Columbia Care Share (on an as-converted to Columbia Care Common Share basis). However, following discussions between Nicholas Vita and Joshua Snyder of Columbia Care and Charles Bachtell and TJ Cole of Cresco, Cresco returned a further revised draft of the Letter of Intent to Columbia Care which contemplated an Exchange Ratio of 0.5579 Cresco Shares for each Columbia Care Share (on an as-converted to Columbia Care Common Share basis), which implied a value per Columbia Care Common Share of US$4.16, representing a premium of 32.5% per Columbia Care Common Share based on the February 11, 2022 closing share prices of Columbia Care and Cresco. This Exchange Ratio was lower than the ratio proposed by Columbia Care on February 16, 2022, but higher than the one initially proposed by Cresco on February 12, 2022 (and subsequently on February 17, 2022).
On February 18, 2022, the Columbia Care Special Committee held a meeting with Stikeman Elliott and Canaccord Genuity to discuss the revised Letter of Intent, which was also attended by directors Nicholas Vita and Michael Abbott and Columbia Care management members David Sirolly and Joshua Snyder. This meeting included an in-camera session. At this meeting, based partially on the input from its legal and financial advisors, and with support from Columbia Care Special Committee member Julie Hill, who was unable to attend the meeting, the Columbia Care Special Committee recommended that Columbia Care continue negotiations regarding a potential transaction with Cresco on the basis of the terms set forth in the revised Letter of Intent and the Parties agreed to negotiate exclusively for an initial period of 30 days regarding a potential transaction.
On February 18, 2022, Cresco and Columbia Care also entered into a new mutual confidentiality agreement containing customary standstill provisions for purposes of facilitating a more intensive reciprocal due diligence undertaking by all parties.
In the weeks that followed, Cresco and Columbia Care engaged in cross-functional due diligence, including respective site visits (including Cresco’s facilities in Arizona, California, Colorado, Florida, Maryland, Massachusetts and Pennsylvania) and recurring management meetings among Nicholas Vita and Joshua Snyder of Columbia Care and Charlie Bachtell and TJ Cole of Cresco to maintain momentum of the diligence process. Columbia Care Special Committee members Jeff Clarke and Julie Hill, as well as directors Michael Abbott and Jim Kennedy, also had individual telephone conversations with each of Charles Bachtell and Tom Manning, Chairman of Cresco, respectively, to discuss and assess Cresco’s governance model, its decision-making processes and the strategic direction of the proposed combined company, all of which left positive impressions on the Columbia Care Board and members of their management team. The Columbia Care Special Committee also retained an additional independent financial advisor, ATB, to prepare the ATB Fairness Opinion, and also engaged Foley Hoag LLP (“Foley Hoag”) to assist with U.S. legal considerations during the deal process (including legal due diligence) and Kroll Inc. to assist with financial due diligence.
On March 3, 2022, the Columbia Care Special Committee held a meeting with Columbia Care directors Nicholas Vita, Michael Abbott and Frank Savage, as well as Columbia Care management members David Sirolly and Joshua Snyder, which meeting included an in-camera session. At this meeting, the Columbia Care Special Committee was updated with respect to the proposed transaction, the due diligence process and transaction timing. Among the topics that were discussed at this meeting were the engagement letter process with Canaccord Genuity, the risk for leaks and associated contingency plans with respect to a delay, the impact, if any, on the timing of the deal and Columbia Care’s scheduled fourth quarter earnings call and confirmation that access to Cresco information had been adequate during due diligence to date.
On March 4, 2022, Bennett Jones circulated an initial draft of the Arrangement Agreement to Stikeman Elliott, which was promptly shared with Columbia Care management, as well as its financial and legal advisors. Columbia Care and its advisors noted a number of material issues with respect to the initial draft Arrangement Agreement, including the non-solicitation covenants of Columbia Care; the interim period covenants; the conditions precedent to the Arrangement, which included conditions in favour of Cresco to obtain the consent of all holders of Columbia Care Convertible Notes and the Key Regulatory Approvals; the amount of the
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Termination Fee and circumstances in which it would be payable; the scope of the representations and warranties of the parties (which were not reciprocal); and responsibility for expenses incurred in connection with the Arrangement.
On March 9, 2022, as the parties continued their due diligence efforts, the Columbia Care Special Committee held another meeting with director Nicholas Vita and Columbia Care management members David Sirolly and Joshua Snyder, which meeting included an in-camera session. At this meeting, the Columbia Care Special Committee was updated by Columbia Care management with respect to the proposed transaction, including an overview of the corporate governance schedule and a summary of the material issues noted above.
On March 11, 2022, Stikeman Elliott, with input from Columbia Care, Canaccord Genuity and Foley Hoag, delivered a revised draft Arrangement Agreement to Bennett Jones, which addressed the material Columbia Care issues noted above, among other changes.
On March 14, 2022, the Columbia Care Board met via video conference for its regularly scheduled quarterly Board meeting, which meeting was attended by the Columbia Care management team, Board Observer Kevin Goldberg, and representatives from each of Stikeman Elliott, Foley Hoag, Canaccord Genuity and Kroll Inc. and included an in-camera session. At this meeting, the Columbia Care Board was updated by its external advisors as to their preliminary conclusions with respect to valuation and financial analysis, financial and legal due diligence, as well as an update on deal process and definitive documentation, including the draft Arrangement Agreement. After the meeting, the Columbia Care Board, consistent with its standard quarterly practices, held a meeting of independent directors, also attended by David Sirolly.
On March 15, 2022, Bennett Jones delivered to Stikeman Elliott a revised draft of the Arrangement Agreement, which reverted, in large part, to Cresco’s initial positions on the material issues noted above. This revised draft also included certain new concepts, including consideration adjustment mechanisms and the requirement for roll-ups of minority interest holders.
On March 16, 2022, Stikeman Elliott delivered to Bennett Jones a further revised draft Arrangement Agreement which addressed the Columbia Care issues noted above in a similar fashion to their prior draft.
On March 17, 2022, the Columbia Care Special Committee held a meeting with Columbia Care directors Nicholas Vita and Michael Abbott, as well as Columbia Care management members David Sirolly, Bryan Olson and Derek Watson, which meeting was followed by an in-camera session. Representatives of Stikeman Elliott and Foley Hoag were also in attendance. At this meeting, the Columbia Care Special Committee was updated with respect to the proposed transaction, including the due diligence process. Following this meeting, the Columbia Care Special Committee and Columbia Care management updated the Columbia Care Board with respect to the matters discussed therein.
On March 19, 2022, Bennett Jones delivered to Stikeman Elliott a revised draft of the Arrangement Agreement, which accepted a number of Columbia Care’s previous proposals. However, there remained several unresolved issues, including interim period covenants, conditions precedent, the Termination Fee and expense reimbursement. On March 20, 2022, Stikeman Elliott delivered to Bennett Jones a revised draft of the Arrangement Agreement which took into consideration the changes proposed by Bennett Jones in their prior draft.
On March 21, 2022, the Columbia Care Special Committee held a meeting with members of Columbia Care management, including directors Nicholas Vita and Michael Abbott as well as Bryan Olson, David Sirolly, Derek Watson, David Hart and Joshua Snyder, along with Stikeman Elliott, Canaccord Genuity, Foley Hoag and Kroll, which meeting was followed by an in-camera session. At this meeting, the Columbia Care Special Committee was updated by Columbia Care management with respect to the proposed transaction, including the due diligence process, as well as the status of the Arrangement Agreement. Following such meeting, the Columbia Care Special Committee and Columbia Care management updated the Columbia Care Board with respect to the matters discussed therein.
On March 22, 2022, Bennett Jones delivered to Stikeman Elliott a revised draft of the Arrangement Agreement. Over the course of the day, Cresco, Columbia Care and their respective legal and financial advisors held a number of conference calls to resolve the remaining issues in the Arrangement Agreement, including
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the interim period covenants such as the requirement to obtain all Key Regulatory Approvals, the Exchange Ratio adjustment mechanisms, minority interest holder roll-ups and expense reimbursements.
On the evening of March 22, 2022, each of the Columbia Care Special Committee and the Columbia Care Board attended meetings with Stikeman Elliott, Canaccord Genuity, ATB and Foley Hoag, which meetings included an in-camera session. The Columbia Care Board received an oral version of the Canaccord Genuity Fairness Opinion from Canaccord Genuity and the Columbia Care Special Committee received an oral version of the ATB Fairness Opinion from ATB, each of which confirmed that the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement was fair, from a financial point of view, to Columbia Care Shareholders and each of which was subsequently provided in writing. Based in part on the receipt of such fairness opinions, on March 22, 2022, the Columbia Care Special Committee recommended that the Columbia Care Board approve the Arrangement and enter into the Arrangement Agreement and the Columbia Care Board unanimously approved the Arrangement and the execution by Columbia Care of the Arrangement Agreement and unanimously recommended that Columbia Care Shareholders vote in favour of the Arrangement Resolution.
The Arrangement Agreement was executed early on March 23, 2022 and announced before the opening of financial markets in Toronto, Canada on that day.
Description of the Arrangement
The Arrangement provides for the acquisition by Cresco of all of the issued and outstanding Columbia Care Shares. Pursuant to the Arrangement Agreement and the Plan of Arrangement, Columbia Care Shareholders will receive Cresco Shares based on the Exchange Ratio, which is subject to adjustment. The Arrangement further involves a number of steps in addition to the ones discussed in this section, which will be deemed to occur sequentially commencing at the Effective Time without any further act or formality except as expressly provided in the Plan of Arrangement.
At the Effective Time:
1)
all Columbia Care equity awards granted under Columbia Care’s equity incentive plan or otherwise that are outstanding immediately prior to the Effective Time will be exchanged for replacement equity awards such that, upon exercise (with respect to Columbia Care Options) or vesting (with respect to Columbia Care PSUs and Columbia Care RSUs), as applicable, the holder of such award will be entitled to receive Cresco Shares, with the number of shares underlying such award and, in the case of Columbia Care Options, the exercise price of such award, adjusted based on the Exchange Ratio;
2)
each of the Columbia Care Warrants that are outstanding immediately prior to the Effective Time will be exercisable, in accordance with the terms of such Columbia Care Warrants, for the number of Cresco Shares that the holder of such Columbia Care Warrants would have been entitled to receive as a result of the transactions contemplated by the Arrangement if, immediately prior to the Effective Date, such holder had been the registered holder of the number of Columbia Care Common Shares to which such holder would have been entitled if such holder had exercised such holder’s Columbia Care Warrants immediately prior to the Effective Time; and
3)
each of the Columbia Care Convertible Notes that are outstanding immediately prior to the Effective Time will be convertible, in accordance with the terms of such Columbia Care Convertible Notes, into the number of Cresco Shares that the holder of such Columbia Care Convertible Notes would have been entitled to receive as a result of the transactions contemplated by the Arrangement if, immediately prior to the Effective Date, such holder had been the registered holder of the number of Columbia Care Common Shares to which such holder would have been entitled if such holder had converted such holder’s Columbia Care Convertible Notes immediately prior to the Effective Time.
The Arrangement is subject to a number of conditions, including the approval by Columbia Care Shareholders at the Meeting. To be effective, the Arrangement Resolution must receive the Required Shareholder Approval. It is a condition to closing in favor of Cresco that holders of less than 5% of the outstanding Columbia Care Shares will have validly exercised dissent rights with respect to the Arrangement that have not been withdrawn as of the Effective Date.
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In addition, the Arrangement is subject to approval of the Supreme Court of British Columbia (or any other court with appropriate jurisdiction) at a hearing upon the procedural and substantive fairness of the terms and conditions of the Arrangement, the Canadian Securities Exchange and certain regulatory approvals, including, but not limited to, clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Arrangement is also conditioned upon neither a delisting from the Canadian Securities Exchange having occurred nor a cease trade order having been issued by any Governmental Entity in respect of the Cresco Shares between the date of the Arrangement Agreement and the Effective Date.
ATB Fairness Opinion
On March 4, 2022, Columbia Care and ATB held a meeting to discuss general business opportunities, during which Columbia Care brought to ATB’s attention the potential acquisition of Columbia Care by Cresco and the need for an opinion from an independent financial advisor. ATB advised Columbia Care of its interest in providing such services and delivered a proposal to Columbia Care later that evening. Subsequent to those discussions, and in connection with the Arrangement, ATB was formally engaged by the Columbia Care Special Committee pursuant to an engagement agreement dated March 13, 2022 (the “ATB Engagement Agreement”) to render an opinion as to the fairness, from a financial point of view, of the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement, to Columbia Care Shareholders. On March 22, 2022, at a meeting of the Columbia Care Special Committee held to evaluate the Arrangement, ATB rendered an oral opinion, confirmed by delivery of the ATB Fairness Opinion, to the Columbia Care Special Committee to the effect that, as of that date and based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken and described in its opinion, the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement was fair, from a financial point of view, to Columbia Care Shareholders. Except as otherwise described in this summary, Columbia Care and the Columbia Care Board imposed no other instructions or limitations on ATB with respect to the investigations made or procedures followed by ATB in rendering the ATB Fairness Opinion.
The full text of the ATB Fairness Opinion, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Appendix G to this Circular and is incorporated into this Circular by reference. Except with respect to the matters set out under the headings “Overview of Financial and Comparative Analyses” and “March 15, 2022 Financial Presentation to the Columbia Care Special Committee” below, the description of the ATB Fairness Opinion set forth below is qualified in its entirety by reference to the full text of the ATB Fairness Opinion.
The ATB Fairness Opinion was provided to the Columbia Care Special Committee (in ATB’s capacity as advisor to the Columbia Care Special Committee) for its benefit and use in evaluating the Consideration from a financial point of view. The ATB Fairness Opinion did not address the relative merits of the Arrangement as compared to any other transactions or strategic alternatives or business strategies that may be available to Columbia Care, nor did it address the underlying Columbia Care business decision to enter into the Arrangement Agreement and carry out the Arrangement. In considering the fairness, from a financial point of view, of the Consideration to be received by the Columbia Care Shareholders, ATB considered the Arrangement from the perspective of the Columbia Care Shareholders generally and did not consider the specific circumstances of any particular Columbia Care Shareholder or holders of any class of securities, creditors or other constituencies of Columbia Care (together, the “Columbia Care Stakeholders”), and ATB expressed no opinion as to whether the Arrangement was consistent with the best interests of any Columbia Care Stakeholders. Furthermore, the ATB Fairness Opinion did not constitute a recommendation as to how any securityholder or any other party should vote or act on any matter relating to the Arrangement and was not a recommendation to the Columbia Care Board to enter into the Arrangement Agreement or to proceed with the Arrangement or any other action the Columbia Care Board, any securityholder or any other party should take in connection with the Arrangement or otherwise.
The ATB Fairness Opinion was prepared in accordance with the Disclosure Standards for Formal Valuations and Fairness Opinion of the Investment Industry Regulatory Organization of Canada (“IIROC”) but IIROC was not involved in the preparation and review of such opinion.
The ATB Fairness Opinion did not constitute an independent formal valuation for the purposes of MI 61-101.
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In connection with rendering the ATB Fairness Opinion, ATB reviewed and relied upon, or carried out, among other things, the following:
1.
the Arrangement Agreement;
2.
the unaudited condensed interim consolidated financial statements of Columbia Care and Cresco for the three and nine months ended September 30th, 2021 and September 30th, 2020 and the management discussion and analysis related thereto;
3.
the unaudited condensed interim consolidated financial statements of Columbia Care and Cresco for the three and six months ended June 30th, 2021 and June 30th, 2020 and the management discussion and analysis related thereto;
4.
the unaudited condensed interim consolidated financial statements of Columbia Care and Cresco for the three months ended March 31st, 2021 and March 31st, 2020 and the management discussion and analysis related thereto;
5.
the audited consolidated financial statements of Columbia Care and Cresco for the years ended December 31st, 2020 and December 31st, 2019 and the management discussion and analysis related thereto;
6.
certain other public filings of Columbia Care and Cresco available on SEDAR;
7.
certain publicly available information relating to the business, operations, financial condition and trading history of Columbia Care, Cresco and other selected public companies ATB considered relevant;
8.
certain press releases issued by Columbia Care and Cresco;
9.
certain internal financial, operating, corporate and other information prepared or provided by or on behalf of Columbia Care and Cresco relating to the business, operations and financial condition of Columbia Care and Cresco;
10.
certain internal management models, forecasts, projections, estimates and budgets prepared or provided by or on behalf of management of Columbia Care and Cresco;
11.
discussions with management of Columbia Care relating to Columbia Care’s current stand-alone business plan, financial condition, industry outlook and prospects and other issues considered relevant;
12.
discussions with management of Cresco relating to Cresco’s current stand-alone business plan, financial condition, industry outlook and prospects and other issues considered as relevant;
13.
certain other non-public information in respect of Columbia Care and Cresco, including information provided to ATB through the respective data rooms of Columbia Care and Cresco;
14.
various reports published by equity research analysts and industry sources, as available, which ATB considered relevant;
15.
public information with respect to selected precedent transactions ATB considered relevant;
16.
a letter of representation as to certain factual matters and the completeness and accuracy of certain information upon which the ATB Fairness Opinion was based, addressed to ATB and dated March 29, 2022 and provided by senior officers of Columbia Care; and
17.
such other corporate, industry, and financial market information, investigations, analyses and discussions as ATB considered necessary or appropriate in the circumstances.
With the Columbia Care Special Committee’s acknowledgement and agreement as provided for in the ATB Engagement Agreement, ATB relied upon the accuracy, completeness and fair presentation of all financial information, data, advice, opinions, representations and other information obtained by it from public sources, provided to it by or on behalf of Columbia Care and/or Cresco, or otherwise obtained by ATB
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(collectively, the “ATB Fairness Opinion Information”) and relied upon the representations of management of Columbia Care to confirm that the terms agreed to between the parties to the Arrangement and the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement appropriately reflected all material information relating to Columbia Care and Cresco and their respective businesses, operations and assets. ATB assumed that such information, data, advice, opinions and representations were complete, accurate and fairly presented as of the date thereof and did not omit to state any material fact or any fact necessary to be stated to make such information, data, advice, opinions and representations not misleading. ATB was advised, and it assumed, without independent investigation, that forecasts, projections, estimates and budgets provided to ATB and used in its analyses were reasonably prepared on bases reflecting the best currently available assumptions, estimates and good faith judgments of the management of Columbia Care and/or Cresco, having regard to the business, plans, financial condition and prospects of Columbia Care and/or Cresco. ATB expressed no opinion with respect to any such forecasts, projections, estimates or budgets or the assumptions on which they were based nor attempted to verify independently the accuracy, completeness or fair presentation of any of the ATB Fairness Opinion Information.
With respect to the budgets, forecasts, projections or estimates of Columbia Care and/or Cresco provided to ATB and used in its analyses, ATB noted that projected future results are inherently subject to uncertainty. However, ATB assumed that such budgets, forecasts, projections and estimates were prepared using the assumptions identified therein, which ATB had been advised were (or were at the time of preparation and continued to be), in the opinion of Columbia Care and/or Cresco, reasonable in the circumstances.
In preparing the ATB Fairness Opinion, ATB made several assumptions, including that all conditions to the Arrangement can and will be satisfied in due course, all consents, permissions, exemptions or orders of relevant regulatory authorities or third parties will be obtained, without adverse conditions or qualifications, the procedures being followed to implement the Arrangement are valid and effective, the Circular will be distributed to Columbia Care Shareholders in accordance with all applicable Laws, and the disclosure in the Circular will be accurate, in all material respects, and will comply, in all material respects, with the requirements of all applicable Laws. In its analysis in connection with the preparation of the ATB Fairness Opinion, ATB made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which were beyond the control of ATB, Columbia Care, Cresco, or their respective affiliates. Among other things, ATB assumed the accuracy, completeness and fair presentation of and relied upon, without independent verification, the financial statements forming part of the ATB Fairness Opinion Information.
ATB assumed that the Arrangement will be consummated in accordance with the terms and conditions of the Arrangement Agreement without waiver of, or amendment to, any term or condition that is in any way material to ATB’s analysis. In rendering the ATB Fairness Opinion, ATB expressed no view as to the likelihood that the conditions respecting the Arrangement will be satisfied or waived or that the Arrangement will be implemented within the time frame which may be set out in the Circular or any other public disclosure. ATB also assumed that all of the representations and warranties contained in the Arrangement Agreement were true and correct as of the date thereof.
The ATB Fairness Opinion was provided to the Columbia Care Special Committee (in its capacity as such) for its benefit and use in evaluating the Consideration from a financial point of view. The ATB Fairness Opinion does not constitute a recommendation as to how any securityholder or any other party should vote or act on any matter relating to the Arrangement and was not a recommendation to the Columbia Care Special Committee to enter into the Arrangement Agreement or to proceed with the Arrangement or any other action the Columbia Care Special Committee, any securityholder or any other party should take in connection with the Arrangement or otherwise.
On March 16, 2022, ATB delivered a presentation to Columbia Care with respect to its analysis and opinion. On March 22, 2022, and at the request of the Columbia Care Special Committee, ATB orally presented its analysis and opinion to the Columbia Care Special Committee. The ATB Fairness Opinion was rendered on the basis of securities markets, economic and general business and financial conditions prevailing as of March 15, 2022 and the condition and prospects, financial and otherwise, of Columbia Care and Cresco, as they were reflected in the ATB Fairness Opinion Information provided or otherwise available to ATB. ATB disclaimed any undertaking or obligation to update, revise or reaffirm its opinion, or otherwise comment on or advise any person of any change in any fact or matter affecting its opinion which may come or be brought
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to the attention of ATB after the date of such opinion, including potential changes in trade, tax or other Laws, regulations and government policies and the enforcement thereof as have been or may be proposed or effected, and the potential effects such changes may have on the Arrangement or the participants in the Arrangement or their respective businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects. Without limiting the foregoing, if ATB learns that any of the ATB Fairness Opinion Information it relied upon in preparing its opinion was inaccurate, incomplete or misleading in any material respect, ATB reserves the right to change or withdraw the ATB Fairness Opinion. In rendering the ATB Fairness Opinion, ATB assumed that the Arrangement is not subject to the valuation requirements under MI 61-101. ATB was not engaged to prepare, and has not prepared, a valuation or appraisal of Columbia Care, Cresco or any of Columbia Care’s or Cresco’s assets or liabilities and its opinion should not be construed as such.
Overview of Financial and Comparative Analyses
In preparing its opinion, ATB performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below is not a complete description of the ATB Fairness Opinion or the analyses underlying, and factors considered in connection with, the ATB Fairness Opinion, which involved various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The preparation of a financial opinion is a complex process and is not necessarily amenable to partial analysis or summary. Any attempt to do so could lead to undue emphasis on any particular factor or analysis. ATB arrived at its ultimate opinion based on the results of all analyses and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. ATB believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create an incomplete or misleading view of the process underlying the ATB Fairness Opinion.
In its analyses, ATB considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of the ATB Fairness Opinion, many of which are beyond the control of Columbia Care and Cresco. No company, business or transaction reviewed was identical or directly comparable to Columbia Care and Cresco or the Arrangement and an evaluation of these analyses was not entirely mathematical; rather, the analyses involved complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, businesses or transactions reviewed or the results from any particular analysis.
The estimates contained in ATB’s analyses and the ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, ATB’s analyses are inherently subject to substantial uncertainty. For the purposes of ATB’s analysis:

“Enterprise Value”, which is also referred to as “EV” in this summary of the ATB Fairness Opinion, was generally calculated as the market value of the relevant company’s fully diluted common equity (calculated on an in-the-money basis using the treasury stock method) based on its closing share price as of March 15, 2022, which was referred to as “equity value”, (i) plus preferred shares, if any, (ii) plus non-controlling interests, if any, (iii) plus debt, and (iv) less cash and cash equivalents (in each of the foregoing case (i) through (iv), as of the relevant company’s most recently reported quarter end, adjusted for subsequent transactions and events up to March 15, 2022, or in the case of Columbia Care and Cresco, and as per financial information provided by Columbia Care and Cresco).

“EBITDA” was generally calculated as the relevant company’s earnings before interest, taxes, depreciation and amortization, as adjusted to exclude one-time charges and benefits, stock-based compensation, fair value gains or losses from biological assets and derivative liabilities, and certain other material non-cash and certain other adjustments ATB viewed as not being reflective of the ongoing operations and performance of the relevant company.
ATB noted that, as of the date of the ATB Fairness Opinion, Columbia Care prepared its financial statements in accordance with IFRS. In addition, ATB noted that Cresco prepared (and continues to prepare)
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its financial statements in accordance with U.S. GAAP. Furthermore, the Comparable Companies (as defined below) prepare their financial statements in either of the two financial reporting standards. As such, there are accounting differences with each company’s financial statements when under comparison. In particular, there are significant differences in the treatment of leases between the two accounting standards. ATB made certain adjustments to the financial estimates and Enterprise Values of certain companies as applicable to ensure valuation metrics are as comparable as possible.
ATB was not requested to, and it did not, recommend or determine the specific Consideration payable in the Arrangement. The type and amount of consideration payable in the Arrangement were determined through negotiations between Columbia Care and Cresco and the decision to recommend and enter into the Arrangement Agreement was solely that of the Columbia Care Board. The ATB Fairness Opinion was only one of many factors considered by the Columbia Care Board in its evaluation of the Arrangement and should not be viewed as determinative of the views of the Columbia Care Board or the management of Columbia Care with respect to the Arrangement or the Consideration.
The summary of the financial analyses described below under the heading “March 15, 2022 Financial Presentation to the Columbia Care Special Committee” is a summary of the material financial analyses prepared and reviewed with the Columbia Care Special Committee in connection with the ATB Fairness Opinion, dated March 15, 2022. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the ATB Fairness Opinion, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by ATB. In order to fully understand the financial analyses summarized below, the analyses or the factors considered by it must be considered as a whole as selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, does not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, and could create a misleading or incomplete view of such financial analyses. ATB does not assume responsibility if future results are different from those described, whether or not any such difference is material. Financial data for Columbia Care and Cresco utilized in the financial analyses described below were based on, among other things, internal management forecasts and estimates prepared or provided by or on behalf of the management of Columbia Care and Cresco.
March 15, 2022 Financial Presentation to the Columbia Care Special Committee
Financial Analyses
The financial presentation provided to the Columbia Care Special Committee in connection with the ATB Fairness Opinion, included the following material financial analyses:
Select Publicly Traded Companies Analyses
ATB performed an analysis of select publicly traded companies, which ATB believed, in its professional judgment and experience, to be relevant for comparison purposes (the “Comparable Companies”). ATB reviewed financial and stock market information of the Comparable Companies based on public filings and other publicly available information available as of March 15, 2022. When utilizing estimated revenue for calendar year 2022 (“CY2022E Revenue”), estimated EBITDA for calendar year 2022 (“CY2022E EBITDA”), estimated revenue for calendar year 2023 (“CY2023E Revenue”) and estimated EBITDA for calendar year 2023 (“CY2023E EBITDA”), except where specifically noted below, ATB used the mean of the consensus estimates available on S&P Capital IQ as of March 15, 2022 (each, an “Average Consensus Estimate” and together, the “Average Consensus Estimates”).
Columbia Care
The Comparable Companies used in the analysis of Columbia Care included select U.S. multi-state operators with enterprise values of between $500 million and $2 billion (the “Columbia Care Comparable Companies”):

Ascend Wellness Holdings, Inc.

Ayr Wellness Inc.
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Jushi Holdings Inc.

TerrAscend Corp.

4Front Ventures Corp.
As of the date of ATB’s analysis, the Columbia Care Comparable Companies traded between ranges of (i) 1.4x to 3.4x EV to CY2022E Revenue, (ii) 1.0x to 2.3x EV to CY2023E Revenue, (iii) 4.1x to 11.1x EV to CY2022E EBITDA, and (iv) 2.7x to 7.5x EV to CY2023E EBITDA. In light of the foregoing and based on its professional judgement and experience, ATB applied ranges of multiples derived from the Columbia Care Comparable Companies to Columbia Care’s CY2022E Revenue, CY2023E Revenue, CY2022E EBITDA and CY2023E EBITDA forecasts, (a) as projected by Columbia Care management, and (b) based on Columbia Care’s Average Consensus Estimates, to calculate implied equity value ranges for Columbia Care.
In selecting the Columbia Care Comparable Companies and establishing ATB’s ranges of multiples to calculate the implied equity value ranges for Columbia Care, which were informed by the Columbia Care Comparable Companies and determined using ATB’s professional judgement and expertise, ATB considered various factors including, but not limited to, the financial performance, expected growth, timing of cash flows, margin profile, size (from a financial, operational and valuation perspective) and other factors, which ATB considered generally relevant to Columbia Care and the Columbia Care Comparable Companies.
Cresco
The Comparable Companies used in the analysis of Cresco, included select U.S. multi-state operators with enterprise values of greater than $2 billion (the “Cresco Comparable Companies”):

Curaleaf Holdings, Inc.

Green Thumb Industries Inc.

Trulieve Cannabis Corp.

Verano Holdings Corp.
As of the date of ATB’s analysis, the Cresco Comparable Companies traded between ranges of (i) 2.3x to 3.6x EV to CY2022E Revenue, (ii) 1.9x to 2.8x EV to CY2023E Revenue, (iii) 6.1x to 12.2x EV to CY2022E EBITDA, and (iv) 5.1x to 8.6x EV to CY2023E EBITDA. In light of the foregoing and based on its professional judgement and experience, ATB applied ranges of multiples derived from the Cresco Comparable Companies to Cresco’s CY2022E Revenue, CY2023E Revenue, CY2022E EBITDA and CY2023E EBITDA forecasts, (a) as projected by Cresco management, and (b) based on Cresco’s Average Consensus Estimates, to calculate implied equity value ranges for Cresco.
In selecting the Cresco Comparable Companies and establishing ATB’s ranges of multiples to calculate the implied equity value ranges for Cresco, which were informed by the Cresco Comparable Companies and determined using ATB’s professional judgement and expertise, we considered various factors including, but not limited to, the financial performance, expected growth, timing of cash flows, margin profile, size (from a financial, operational and valuation perspective) and other factors, which ATB considered generally relevant to Cresco and the Cresco Comparable Companies.
Although the Comparable Companies were used for comparison purposes, none of those companies are directly comparable to Columbia Care or Cresco. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and judgements concerning the differences in historical and projected financial and operating characteristics of the Comparable Companies and other factors that could affect the public trading value of the Comparable Companies or Columbia Care or Cresco to which they were compared.
Precedent Transaction Premiums Paid
ATB reviewed and analyzed the offer premiums paid for select U.S. cannabis operators, which ATB believed were generally relevant in certain respects to Columbia Care, and compared such offer premiums to the offer premiums implied by the Exchange Ratio in connection with the Arrangement based on the closing
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prices and various volume-weighted average prices of Columbia Care and Cresco on March 15th, 2022 and as of the date of signing of the non-binding letter of intent between Columbia Care and Cresco in connection with the Arrangement.
Precedent Transaction Multiples Paid
ATB reviewed and analyzed the implied enterprise value multiples paid on a one-year forward revenue and EBITDA basis (based on Average Consensus Estimates) for select recent U.S. cannabis precedent M&A transactions (the “Selected Precedent Transactions”), which ATB believed were generally relevant in certain respects to Columbia Care.
ATB noted that the public U.S. cannabis sector had experienced significant market volatility over the last twelve months. As an illustration, the AdvisorShares Pure US Cannabis ETF, a U.S.-listed exchange traded fund with dedicated cannabis exposure focusing exclusively on U.S. operators, declined 62.4% during the twelve-month period ending March 15, 2022.
In ATB’s analysis and review of the Selected Precedent Transactions, ATB took into consideration the changing market conditions experienced by the public U.S. cannabis markets for the relevant time periods as well as considered various factors, including, but not limited to, the financial performance, expected growth, timing of cash flows, margin profile, size (from a financial, operational and valuation perspective) and other factors, which ATB considered generally relevant in its analysis and using its professional judgement and experience, for each Selected Precedent Transaction.
As of the date of ATB’s analysis, the adjusted Selected Precedent Transaction multiples ranged between (i) 0.6x to 2.0x on an EV to one-year forward revenue basis, and (ii) 2.1x to 8.2x on an EV to one-year forward EBITDA basis. In light of the foregoing and based on its professional judgement and experience, ATB applied ranges of multiples derived from the Select Precedent Transactions to Columbia Care’s CY2023E Revenue and CY2023E EBITDA forecasts, (a) as projected by Columbia Care management and (b) based on Columbia Care’s Average Consensus Estimates, to calculate implied equity value ranges for Columbia Care.
Discounted Cash Flow Analysis
ATB performed a discounted cash flow (“DCF”) analyses of both Columbia Care and Cresco using each respective company’s management forecasts to calculate the present value of the estimated future unlevered free cash flows and the present value of the estimated terminal value of each of Columbia Care and Cresco.
Columbia Care
ATB utilized a range of discount rates of 12.0% to 14.0% based on an estimated range of Columbia Care’s weighted average cost of capital (“WACC”) to calculate the present value of the estimated future unlevered free cash flows and the present value of the estimated terminal value, which was derived by applying a range of multiples informed by the estimated EV to CY2022E trading multiples from the Columbia Care Comparable Companies to the projected terminal EBITDA provided by Columbia Care management. Based on the foregoing, ATB derived stand-alone implied equity value ranges and implied per share price ranges for Columbia Care.
Cresco
ATB utilized a range of discount rates of 11.0% to 13.0% based on an estimated range of Cresco’s WACC to calculate the present value of the estimated future unlevered free cash flows and the present value of the estimated terminal value, which was derived by applying a range of multiples informed by the estimated EV to CY2022E trading multiples from the Cresco Comparable Companies to the projected terminal EBITDA provided by Cresco management. Based on the foregoing, ATB derived stand-alone implied equity value ranges and implied per share price ranges for Cresco.
Relative Contribution and Pro Forma Ownership Analysis
ATB reviewed and compared the expected financial contribution of Columbia Care to the pro forma company against Columbia Care’s expected ownership percentage of the pro forma company implied by the Exchange Ratio. In particular, ATB considered the expected contribution of Columbia Care to the pro forma
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company’s expected CY2022E Revenue, CY2023E Revenue, CY2022E EBITDA and CY2023E EBITDA, as (i) projected by management of Columbia Care and Cresco, and (ii) based on Columbia Care’s and Cresco’s Average Consensus Estimates, as well as from a balance sheet perspective.
Has/Gets Analysis
ATB performed a has/gets analysis to calculate value accretion/dilution on a per share basis to the pre-Arrangement Columbia Care Shareholders (calculated on a fully diluted, in-the-money basis using the treasury stock method) implied by the Arrangement by comparing the range of implied equity values of Columbia Care and Cresco based on ATB’s analysis (as described above) with the implied aggregate value of the pro forma equity in the combined company that is owned by the pre-Arrangement Columbia Care Shareholders. As part of the has/gets analysis, ATB also reviewed and considered the potential value creation from anticipated annual cost synergies (as provided by the management of Columbia Care and Cresco) and from potential improvements to the pro forma company’s cost of capital.
Other Information
ATB also reviewed and considered other factors that were not considered part of its financial analyses in connection with rendering its opinion but were referenced for informational purposes.
Historical Exchange Ratio
ATB reviewed the exchange ratio implied by historical closing trading prices of Columbia Care Common Shares and Cresco Shares during the 52-week period ended March 15, 2022, which reflected low and high exchange ratios during such period of 0.3296 and 0.5396. ATB noted that the Exchange Ratio being offered pursuant to the Arrangement is 0.5579.
Historical Trading Prices
ATB reviewed the historical closing trading prices for Columbia Care Common Shares during the 52-week period ended March 15, 2022, which reflected low and high share prices during such period of CAD$3.14 and CAD$8.50 per share. ATB noted the closing price per Columbia Care Common Share of CAD$3.14 as of March 15, 2022.
ATB reviewed the historical closing trading prices for Cresco Shares during the 52-week period ended March 15, 2022, which reflected low and high share prices during such period of CAD$6.97 and CAD$17.25 per share. ATB noted the closing price per Cresco Share of CAD$7.16 as of March 15, 2022.
Equity Research Price Targets
ATB noted the one-year forward share price targets for Columbia Care Common Shares in recently published investment banking research analyst reports available on S&P Capital IQ, which indicated low and high share price targets ranging from CAD$6.42 to CAD$19.00 per share, compared with the closing price per Columbia Care Common Share of CAD$3.14 as of March 15, 2022.
ATB noted the one-year forward share price targets for Cresco in recently published investment banking research analyst reports available on S&P Capital IQ, which indicated low and high share price targets ranging from CAD$15.00 to CAD$40.00 per share, compared with the closing price per Cresco Share of CAD$7.16 as of March 15, 2022.
Miscellaneous
ATB is a Canadian investment banking firm with operations in a broad range of investment banking activities, including corporate finance, mergers and acquisitions, debt capital markets, equity sales and trading and investment research. ATB and its senior investment banking professionals have participated in a significant number of transactions involving public and private companies and have extensive experience in preparing valuations and fairness opinions.
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The ATB Fairness Opinion and its form and content have been approved by a committee of senior investment banking professionals of ATB, each of whom is experienced in merger, acquisition, divestiture, valuation and fairness opinion matters.
As of the date of the ATB Fairness Opinion, neither ATB nor any of its affiliates or associates was an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario)) of Columbia Care, Cresco, or any of their respective associates or affiliates, each referred to as an “interested party” and collectively referred to as the “interested parties”. Neither ATB nor any of its affiliates or associates is an advisor to any interested party in respect of the Arrangement other than to the Columbia Care Special Committee pursuant to the ATB Engagement Agreement. In the 24-month period preceding the date of the ATB Fairness Opinion, ATB has not been engaged by Columbia Care, Cresco or any of their respective associates or affiliates to provide any financial advisory services nor has it participated in any financings in connection to any interested party other than in respect of (i) the engagement by Columbia Care with respect to rendering the ATB Fairness Opinion with respect to the Arrangement, (ii) Columbia Care’s February 2022 private placement of senior secured notes for gross proceeds of $185 million, for which ATB acted as co-lead agent to Columbia Care, (iii) Columbia Care’s June 2021 private placement of Columbia Care Convertible Notes for gross proceeds of $74.5 million, for which ATB acted as co-lead agent to Columbia Care, (iv) Columbia Care’s January 2021 bought deal Columbia Care Common Share financing for gross proceeds of approximately CAD$149.5 million, for which ATB acted as co-lead underwriter, and (v) Cresco’s January 2021 overnight marketed offering of common shares for gross proceeds of approximately $125 million, for which ATB acted as sole bookrunner and agent, for which services described in clauses (ii) through (iv) above ATB and its affiliates received during the 24-month period preceding the date of the ATB Fairness Opinion aggregate fees of approximately CAD$3.3 million from Columbia Care and for which services described in clause (v) above ATB and its affiliates received during such 24-month period aggregate fees of approximately CAD$0.9 million from Cresco.
Other than as set forth above, there were no understandings, agreements or commitments as of the date of the ATB Fairness Opinion between ATB and any of the interested parties with respect to future financial advisory or investment banking business. ATB may in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the interested parties. In addition, ATB has, and may in the future have, other normal course financial dealings with one or more of the interested parties.
ATB acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have and may in the future have positions in the securities of one or more of the interested parties and, from time to time, may have executed or may execute transactions on behalf of one or more of the interested parties or other clients for which it may have received or may receive compensation. As an investment dealer, ATB conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including matters with respect to the Arrangement, or any of the interested parties.
ATB was formally engaged by the Columbia Care Special Committee pursuant to the ATB Engagement Agreement to render an opinion as to the fairness, from a financial point of view, of the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement, to Columbia Care Shareholders. The terms of the ATB Engagement Agreement provide that ATB will receive a fixed fee of approximately $0.5 million for the delivery of the ATB Fairness Opinion, no portion of which is contingent upon the completion of the Arrangement or the conclusions reached in its opinion. No other fees are payable to ATB pursuant to the ATB Engagement Agreement. Columbia Care has also agreed to reimburse all reasonable expenses incurred by ATB in connection with its engagement under the ATB Engagement Agreement, whether or not the Arrangement is completed. In addition, Columbia Care has agreed to indemnify ATB, each of its subsidiaries and affiliates, and each of their respective directors, officers, employees, partners, agents, shareholders, each other person, if any, controlling ATB or any of its respective subsidiaries and affiliates, against certain losses, expenses, claims, actions, damages and liabilities arising from the ATB Engagement Agreement (all as further set out therein).
Canaccord Genuity Fairness Opinion
Canaccord Genuity was formally engaged by Columbia Care as its financial advisor through an agreement between Columbia Care and Canaccord Genuity dated as at March 21, 2022 (“Canaccord Genuity
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Engagement Agreement”). The Canaccord Genuity Engagement Agreement provides the terms upon which Canaccord Genuity has agreed to act as a financial advisor to Columbia Care in connection with the Arrangement.
Columbia Care selected Canaccord Genuity as its financial advisor in connection with the Arrangement, in part, because Canaccord Genuity is an internationally recognized investment banking firm that has substantial M&A experience in the cannabis industry, including transactions similar to the Arrangement, as well as their familiarity with Columbia Care. Canaccord Genuity provides a full range of corporate finance, merger and acquisition, financial restructuring, sales and trading, and equity research services.
On March 22, 2022, Canaccord Genuity verbally delivered its opinion to the Columbia Care Board, which was subsequently confirmed in writing, that, as at the date of such opinion and based upon and subject to the assumptions, qualifications, explanations and limitations set forth therein, and such other matters as Canaccord Genuity considered relevant, the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Columbia Care Shareholders. Canaccord Genuity’s opinion was one of many factors considered by the Columbia Care Board in its evaluation of the Arrangement and should not be viewed as determinative of the views of the Columbia Care Board in its evaluation with respect to the Arrangement or the consideration to be received by Columbia Care Shareholders pursuant to the Arrangement. The full text of the Canaccord Genuity Fairness Opinion, is attached to this Circular as Appendix H and is incorporated into this Circular by reference. The summary of the Canaccord Genuity Fairness Opinion set forth in this Circular is qualified in its entirety by reference to the full text of such opinion. Columbia Care Shareholders are encouraged to read the Canaccord Genuity Fairness Opinion carefully and in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Canaccord Genuity in connection with its opinion. Canaccord Genuity’s opinion was addressed to the Columbia Care Board and only addresses the fairness to Columbia Care Shareholders, from a financial point of view, of the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement, and did not address any other aspect or potential implication of the Arrangement or the Arrangement Agreement. The Canaccord Genuity Fairness Opinion was furnished solely for the use of the Columbia Care Board in connection with, and for the purpose of, its consideration of the Arrangement and is not intended to be relied upon by any other person (including, without limitation, Columbia Care Shareholders, securityholders, creditors or other stakeholders of Columbia Care) or used for any other purpose. The Canaccord Genuity Fairness Opinion does not constitute a recommendation as to how the Columbia Care Board (or any director), management, Columbia Care Shareholder or any securityholder should vote or otherwise act with respect to any matters relating to the Arrangement (including whether the Columbia Care Shareholders should vote for the Arrangement or any related transaction) and does not address the relative merits of the Arrangement as compared to other transactions or business strategies that might be available to Columbia Care. Furthermore, the Canaccord Genuity Fairness Opinion is not, and should not be construed as, a formal valuation or appraisal of Columbia Care or Cresco Labs or any of their respective assets or securities, or advice as to the price at which any securities of Columbia Care or Cresco may trade at any future date, whether before or after implementation of the Arrangement or before or after completion of the Arrangement.
As provided for in the Canaccord Genuity Engagement Agreement, Canaccord Genuity has relied upon and assumed, without attempting to independently verify, the completeness, accuracy and fair presentation of all of the financial and other information, data, documents, advice, opinions or representations, whether in written, electronic, graphic, oral or any other form or medium, including as it relates to Columbia Care and Cresco, obtained by it from public sources, or provided to it by Columbia Care and Cresco and their respective associates, affiliates, agents, consultants and advisors, including, among other things: (i) financial projections provided by Columbia Care’s and Cresco’s respective management teams; (ii) selected public market trading statistics and other public / non-public relevant financial information in respect of both Columbia Care and Cresco, as well as other comparable public entities considered by Canaccord Genuity to be relevant; and (iii) certain other internal financial, operational and corporate information prepared or provided by Columbia Care’s and Cresco’s respective management teams. With respect to the financial projections provided to Canaccord Genuity used in the analysis supporting the Canaccord Genuity Fairness Opinion, Canaccord Genuity assumed that they were reasonably prepared on bases reflecting, at the time, the best available estimates and judgements of the management of each of Columbia Care and Cresco, as applicable, as to the matters covered thereby and which, in the opinion of Columbia Care and Cresco, as applicable, are (and were
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at the time of preparation and continue to be) reasonable in the circumstances. By rendering the Canaccord Genuity Fairness Opinion, Canaccord Genuity expresses no view as to the reasonableness of such forecasts, projections, estimates or the assumptions on which they are based.
In preparing the Canaccord Genuity Fairness Opinion, Canaccord Genuity made several other assumptions, including that all of the conditions required to implement the Arrangement will be met, that all of the representations and warranties contained in the Arrangement Agreement are true and correct as of the date of the Canaccord Genuity Fairness Opinion, that the Arrangement will be completed substantially in accordance with its terms and all applicable laws, and that this Circular will disclose all material facts relating to the Arrangement and will satisfy all applicable legal requirements.
In support of the Canaccord Genuity Fairness Opinion, Canaccord Genuity performed certain financial analyses on each of Columbia Care and Cresco based upon the methodologies and assumptions that Canaccord Genuity considered appropriate in the circumstances for the purposes of arriving at its opinion. The summary below does not purport to be a complete description of the factors considered or financial analyses performed by Canaccord Genuity, nor does the order of analyses described represent relative importance or weight given to those analyses by Canaccord Genuity. In performing its analyses, Canaccord Genuity made numerous assumptions, including with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Canaccord Genuity, Columbia Care and Cresco. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In the context of the Canaccord Genuity Fairness Opinion, Canaccord Genuity considered the following principal methodologies:
(a)
Contribution Analysis.   In order to determine an implied Columbia Care ownership percentage in the pro forma entity, Canaccord Genuity compared Columbia Care’s and Cresco’s relative contribution, after adjusting for their respective capital structures, of (A) EBITDA, which was calculated as revenue, and earnings before interest, taxes, depreciation and amortization, for the calendar years 2021, 2022, and 2023, in each case subject to availability of information, and (B) certain other market capitalization parameters. With respect to (A) above, for each of Columbia Care and Cresco, Canaccord Genuity used both forecast estimates as provided by the respective management teams, as well as research analysts estimates. In addition, where applicable to both management estimates and research analyst estimates, Canaccord Genuity considered the impact of potential synergies, as well as differences due to accounting practices related to IFRS and U.S. GAAP. Canaccord Genuity understands that (i) up to and including the quarter-ended September 30, 2021, Columbia Care prepared its financial statements in accordance with IFRS, and (ii) beginning with the quarter-ended December 31, 2021, Columbia Care prepared its financial statements in accordance with U.S. GAAP. With respect to (B) above, for each of Columbia Care and Cresco, Canaccord Genuity used trading market capitalization with various price inputs, including certain volume-weighted average trading prices and research analysts estimates for target prices. The contribution analysis implied a pro forma ownership range between approximately 27.4% and 39.5% for Columbia Care. Canaccord Genuity then compared the above range to the Columbia Care ownership percentage in the pro forma entity as implied by the consideration.
(b)
Comparable Companies Trading Analysis.   Canaccord Genuity performed an analysis on selected publicly listed U.S. cannabis companies that Canaccord Genuity believed to be generally comparable to each of Columbia Care and Cresco. In performing this analysis, Canaccord Genuity analyzed certain publicly available financial information, including, without limitation, estimated financial information for the selected public companies based on research analysts estimates. When utilizing this approach, Canaccord Genuity considered “Enterprise Value”, which was calculated as fully-diluted equity value plus debt, less cash and cash equivalents, and if applicable, adjusted for any minority interests, compared to calendar years 2021 (estimated or actual, to the extent information was available), 2022 (estimated), and 2023 (estimated) (A) revenue, and (B) EBITDA, to be the primary financial metrics, in each case subject to availability of information. Excluding select outliers, the Enterprise Value to calendar years 2021 (estimated or actual, to the extent information was available), 2022 (estimated), and 2023 (estimated) revenue multiple range for the primary set of comparable companies reviewed by Canaccord Genuity ranged from approximately 2.4x – 4.1x, 1.9x – 2.8x, and 1.3x – 2.4x, respectively. Excluding select outliers, the Enterprise Value to
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calendar years 2021 (estimated or actual, to the extent information was available), 2022 (estimated), and 2023 (estimated) EBITDA multiple range for the primary set of comparable companies reviewed by Canaccord Genuity ranged from approximately 9.2x – 26.0x, 6.6x – 14.3x, and 4.2x – 8.0x, respectively. Canaccord Genuity then compared the above ranges to the Enterprise Value multiples as implied at the time by (a) the consideration, in the case of Columbia Care and (b) valuation parameters, in the case of Cresco, and in each case in respect of calendar years 2021, 2022, and 2023 revenue and EBITDA forecasts, respectively, and (i) as provided by Columbia Care’s and Cresco’s respective management teams and (ii) based on respective research analysts estimates, and in each case subject to availability of information.
(c)
Precedent Transactions Analysis.   Precedent transactions analysis involves the comparison of Enterprise Value multiples as implied by the consideration, to those paid in acquisition transactions involving public and private companies which Canaccord Genuity considered relevant to each of Columbia Care and Cresco, in each case where information is publicly available. Given that each of the precedent transactions identified by Canaccord Genuity were: (i) unique in terms of size, geographic footprint (state-by-state), relative equity cycle in the cannabis market and the broader economic cycle, respective market position, regulatory framework and environment (including medical and/or adult-use), business mix and risks, opportunities for growth, profitability and margin profile; and (ii) reflective of the strategic rationale of each of the acquirer and target, respectively, as well as their respective views on potential synergies, Canaccord Genuity did not rely exclusively on precedent transactions analysis.
(d)
Discounted Cash Flow Analysis.   The DCF approach is used to determine the value of a company by utilizing a net present value calculation on a company’s future cash flows. It requires that certain assumptions be made regarding, among other things, future annual net discretionary (or “free”) cash flows for each year of the cash flow projection period, as well as appropriate discount rates and terminal values. When a company is expected to operate beyond the specified cash flow projection period, these subsequent projected results are accounted for by deriving a terminal value, which is calculated by capitalizing the end of the cash flow period utilizing certain terminal cash flow methodologies, and then discounting such terminal value at an appropriate discount rate to calculate its net present value. There is a possibility that some or all of the assumptions will prove to be inaccurate. Given that (i) the financial projections provided by each of Columbia Care’s and Cresco’s respective management teams was only for the fiscal year ending December 31, 2022, (ii) uncertainty regarding the potential impact of the Exchange Ratio adjustment in respect of gLeaf, (iii) uncertainty regarding the amount and nature of pro forma leverage, (iv) the industry in which Columbia Care and Cresco operate, and (v) the high degree of regulatory uncertainty, including with respect to state-by-state and federal regulations, Canaccord Genuity determined that there was a limited ability to predict long-term free cash flows with accuracy and, as a result, did not perform a DCF analysis on either of Columbia Care or Cresco.
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create a misleading view of the processes underlying the Canaccord Genuity Fairness Opinion. In arriving at its fairness determination, Canaccord Genuity considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Canaccord Genuity made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses, taken as a whole.
Canaccord Genuity prepared its analyses for purposes of providing its opinion to the Columbia Care Board, which opinion only addresses the fairness to Columbia Care Shareholders, from a financial point of view, of the Consideration to be received by Columbia Care Shareholders pursuant to the Arrangement. These analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities may actually be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than as outlined by Canaccord Genuity’s analyses. Given that its analyses is inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Canaccord Genuity, Columbia Care or Cresco or any other person assumes any responsibility if future results are materially different from those forecasted or outlined herein.
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The Canaccord Genuity Fairness Opinion was given as at March 22, 2022 and it should be understood that (i) subsequent developments may affect the conclusions expressed in the Canaccord Genuity Fairness Opinion if such opinion were to be rendered as of a later date, and (ii) Canaccord Genuity disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion which may come, or be brought, to the attention of Canaccord Genuity after the date of such opinion. Without limiting the foregoing, in the event that there is any material change in any fact or matter affecting the Canaccord Genuity Fairness Opinion after the date of such opinion, including, without limitation, the terms and conditions of the Arrangement, or if Canaccord Genuity learns that the information relied upon in rendering the opinion was inaccurate, incomplete or misleading in any material respect, Canaccord Genuity reserves the right to change, modify or withdraw the opinion. Canaccord Genuity are not legal, tax or accounting experts, had not been engaged to review any legal, tax or accounting aspects of the Arrangement and express no opinion concerning any legal, tax or accounting matters concerning the Arrangement. Without limiting the generality of the foregoing, Canaccord Genuity has not reviewed and did not opine upon the tax treatment under the Arrangement.
The Canaccord Genuity Fairness Opinion represents the views and opinions of Canaccord Genuity, and the form and content of the opinion have been approved for release by a committee of Canaccord Genuity’s managing directors, each of whom is experienced in merger, acquisition, divestiture, fairness opinion, and capital markets matters.
Canaccord Genuity is not an insider, associate, or affiliate (as such terms are defined in the Securities Act (Ontario)) of Columbia Care or Cresco. Canaccord Genuity has not been engaged to provide any financial advisory services, have not acted as lead or co-lead manager on any offering of securities of Columbia Care, Cresco or their respective affiliates during the 24 months preceding the date on which Canaccord Genuity was first contacted by Columbia Care in respect of the Arrangement, other than services provided under the Canaccord Genuity Engagement Agreement or as otherwise described herein. Canaccord Genuity acted as financial advisor to Columbia Care in connection with a merger involving wholly-owned subsidiaries of Columbia Care and gLeaf pursuant to the gLeaf Agreement. In addition, Canaccord Genuity acted as (a) agent for Columbia Care’s private placement of debenture units which closed on May 14, 2020, (b) agent for Columbia Care’s add-on debt issuance via a private placement of units which closed on October 29, 2020, (c) sole bookrunner and co-lead underwriter for Columbia Care’s bought deal public offering of Columbia Care Common Shares which closed on January 13, 2021, (d) sole underwriter for Columbia Care’s bought deal private placement of Columbia Care Common Shares which closed on February 25, 2021, (e) sole bookrunner and co-lead agent for Columbia Care’s private placement of Columbia Care Convertible Notes which closed on June 29, 2021, and (f) lead bookrunner and sole lead agent for Columbia Care’s private placement of Columbia Care First-Lien Notes which closed on February 3, 2022. Canaccord Genuity was also appointed to coordinate and facilitate purchases under Columbia Care’s share repurchase program commencing on July 23, 2019 and running through July 17, 2020. Aggregate fees received by Canaccord Genuity from Columbia Care in relation to these engagements totalled approximately $8.2 million (which excludes any fees in relation to the Arrangement). In addition, Canaccord Genuity entered into equity distribution agreements with Cresco on (A) December 3, 2019, pursuant to which Cresco Labs could, from time to time, sell up to CAD$55 million Cresco Shares, and (B) April 26, 2021, pursuant to which Cresco could, from time to time, sell up to $100 million Cresco Shares.
In addition, Columbia Care was incorporated on August 13, 2018 under the name Canaccord Genuity Growth Corp. (“CGGC”) as a special purpose acquisition corporation for the purpose of effecting a “qualifying transaction” in accordance with the rules of the NEO. The sponsor of CGGC was CG Investments Inc., a wholly-owned subsidiary of Canaccord Genuity Group Inc. and an affiliate of Canaccord Genuity.
In addition, Canaccord Genuity and its affiliates act as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have long or short positions in the securities of Columbia Care, Cresco or any of their respective associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it receives or may receive commission(s). As an investment dealer, Canaccord Genuity and its affiliates conduct research on securities and may, in the ordinary course of their business, provide research reports and investment advice to their clients on investment matters, including with respect to Columbia Care, Cresco and the Arrangement. In
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addition, Canaccord Genuity and its affiliates may, in the ordinary course of their business, provide other financial services to Columbia Care, Cresco or any of their respective associates or affiliates, including financial advisory, investment banking and capital market activities such as raising debt or equity capital. In addition, Canaccord Genuity and certain employees of Canaccord Genuity currently own or may have owned securities of either or both of Columbia Care and Cresco.
Except as otherwise described in this summary, Columbia Care and the Columbia Care Board imposed no other instructions or limitations on Canaccord Genuity with respect to the investigations made or procedures followed by Canaccord Genuity in rendering the Canaccord Genuity Fairness Opinion. The consideration was determined through arms-length negotiations between Columbia Care, on the one hand, and Cresco, on the other, and was approved by each of the Columbia Care Board and the Cresco Board. Canaccord Genuity did not recommend any specific consideration to Columbia Care or the Columbia Care Board, or that any specific amount or type of consideration constituted the only appropriate consideration for the Arrangement.
Canaccord Genuity acted as the financial advisor to Columbia Care in connection with the Arrangement and will receive a transaction fee for its services equal to $7.0 million, and which is contingent upon the consummation of the Arrangement or any alternative transaction. Canaccord Genuity also received a fee of $500,000, which fee became payable upon the delivery of the Canaccord Genuity Fairness Opinion, no part of which is contingent upon the opinion being favorable or upon the successful consummation of the Arrangement or any alternative transaction. In addition, Columbia Care has agreed to reimburse Canaccord Genuity for its reasonable out-of-pocket expenses and to indemnify Canaccord Genuity in respect of certain expenses, losses, claims, including shareholder actions, derivative or otherwise, actions, costs, damages and liabilities, that might arise in connection with its engagement under the Canaccord Genuity Engagement Agreement (all as further set out therein).
Recommendation of the Columbia Care Special Committee
After consultation with management of Columbia Care and after careful consideration and having considered, among other things, the ATB Fairness Opinion and the Canaccord Genuity Fairness Opinion, the Columbia Care Special Committee unanimously recommended that the Columbia Care Board approve the Arrangement and the Arrangement Agreement, authorize the submission of the Arrangement to Columbia Care Shareholders for their approval at the Meeting and recommend to Columbia Care Shareholders that they vote FOR the Arrangement Resolution.
Recommendation of the Columbia Care Board
After careful consideration and having considered, among other things, the ATB Fairness Opinion, the Canaccord Genuity Fairness Opinion and the recommendation of the Columbia Care Special Committee, the Columbia Care Board has unanimously determined that the Arrangement is, and continues to be, in the best interests of the Company and that the Arrangement is fair to Columbia Care Shareholders, and has authorized the submission of the Arrangement to Columbia Care Shareholders for their approval at the Meeting. The Columbia Care Board has unanimously determined to recommend to Columbia Care Shareholders that they vote FOR the Arrangement Resolution.
Reasons for the Arrangement
In evaluating the Arrangement and the Arrangement Agreement, and in making their recommendations, the Columbia Care Board and the Columbia Care Special Committee gave careful consideration to the current and expected future financial position of the Company and all terms of the Arrangement Agreement and the Plan of Arrangement. The Columbia Care Board and the Columbia Care Special Committee considered a number of factors including, among others, the following:
(a)
Meaningful Participation by Shareholders in the Future Growth of the Combined Company.   Under the Arrangement, Columbia Care Shareholders will receive, in consideration for their Columbia Care Shares, Cresco Shares. As a result, Columbia Care Shareholders will have an opportunity to own approximately 35% of the enlarged Cresco on a pro forma basis. The combination of Columbia Care with Cresco is an opportunity to own shares in a larger licensed cannabis operator with
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(i) superior market access based on establishments in the largest and fastest-growing markets across the United States, (ii) market and category share leadership based on the strongest brands in cannabis and leading retail productivity, and (iii) balanced economics, through an industry-proven channel mix, diversified state exposure and stronger financials.
(b)
No Other Expression of Interest.   Since first announcing a potential business combination transaction with Cresco on March 23, 2022, Columbia Care has not received any inquiries or proposals that are, or could reasonably be expected to lead to, an Acquisition Proposal.
(c)
Key Shareholder Support.   The Supporting Columbia Care Shareholders, who collectively as of the Record Date, beneficially own, or exercise control or direction over, directly or indirectly, approximately 17.84% of the voting rights attached to the Columbia Care Shares, have entered into the Voting Support Agreements under which they have agreed to vote FOR the Arrangement Resolution.
(d)
Receipt of the Canaccord Genuity Fairness Opinion and the ATB Fairness Opinion.   The Columbia Care Board and the Columbia Care Special Committee have received the Canaccord Genuity Fairness Opinion and the ATB Fairness Opinion, respectively, stating that, as of the date of such opinions and based upon and subject to the assumptions made, limitations considered and qualifications set forth therein, the Consideration to be received under the Arrangement by Columbia Care Shareholders is fair, from a financial point of view, to Columbia Care Shareholders.
(e)
Strong Management Ability and Skills.   Cresco has an experienced management team with a proven track record of generating shareholder value in the context of the evolving cannabis regulatory regimes in the United States and elsewhere, as well as substantial knowledge of all stages of cannabis production and sales.
(f)
Shareholder Approval.   The Required Shareholder Approval is protective of the rights of Columbia Care Shareholders. To be effective, the Arrangement Resolution must receive the Required Shareholder Approval.
(g)
Court Process.   The Arrangement will be subject to a judicial determination of the Court that the Arrangement is fair and reasonable, both procedurally and substantively, to Columbia Care Shareholders.
(h)
Dissent Rights.   Registered Columbia Care Shareholders as at the Record Date who do not vote in favour of the Arrangement will have the right to require a judicial appraisal of their Columbia Care Shares and obtain “fair value” pursuant to the proper exercise of the Dissent Rights.
(i)
Evaluation and Analysis.   The Columbia Care Special Committee was formed in October 2021 to review, consider and evaluate a strategic opportunity which arose from an unsolicited proposal from a third party, as well as any other strategic alternatives that might be available to the Company. The Columbia Care Special Committee considered and evaluated an unsolicited third party proposal in the fall of 2021 and a subsequent unsolicited third party proposal late in 2021. As a result, the Columbia Care Special Committee and the Columbia Care Board have for an extended period of time been involved in reviewing strategic alternatives that could enhance shareholder value. With respect to the Arrangement, the Columbia Care Board has given lengthy consideration to the business, operations, assets, financial condition, operating results and prospects for the combined company as well as current industry, economic and market conditions and related risks. The Columbia Care Board considered the current and anticipated future opportunities and risks associated with the business, operations, assets, financial performance and condition of Columbia Care, both in giving effect to the Arrangement and in considering Columbia Care continuing as a stand-alone company.
(j)
Terms of the Arrangement Agreement.   The Arrangement Agreement is the result of an arm’s length negotiation process (which negotiations included an increase in the Exchange Ratio) and includes terms and conditions that the Columbia Care Board, with advice from its advisors and the Columbia Care Special Committee, determined to be reasonable in the circumstances including the right to change the Columbia Care Board Recommendation if Columbia Care receives a Superior Proposal.
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Though the Company is limited in its ability to solicit additional interest from third parties, by virtue of the right to change the Columbia Care Board Recommendation, the Columbia Care Board is able to advise Columbia Care Shareholders of any Superior Proposal so that they may make an informed decision with respect to approving the Arrangement Resolution.
The Columbia Care Board and the Columbia Care Special Committee also considered a number of potential risks and potential negative factors relating to the Arrangement, including the following:
(a)
Regulatory Risk.   To complete the Arrangement, each of Cresco and Columbia Care must make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities. The Regulatory Approvals have not been obtained yet. The regulatory approval processes may take a lengthy period of time to complete, which could delay completion of the Arrangement. If obtained, the Regulatory Approvals may be conditioned, with the conditions imposed by the applicable Governmental Entity not being acceptable to either Cresco or Columbia Care, or, if acceptable, not being on terms that are favorable to the combined company. There can be no assurance as to the outcome of the regulatory approval processes, including the undertakings and conditions that may be required for approval or whether the Regulatory Approvals will be obtained. If not obtained, or if obtained on terms that are not satisfactory to either Cresco or Columbia Care, the Arrangement may not be completed.
(b)
Completion Risk.   The risks to the Company if the Arrangement is not completed, including that: (i) the market price of the Columbia Care Shares may decline, to the extent that the market price reflects an assumption that the Arrangement will be completed; (ii) the Company will have incurred significant costs in pursuing the Arrangement; (iii) management of the Company will have their attention diverted from the Company’s business in the Ordinary Course; (iv) under certain circumstances, there could be negative and irreparable impacts on the Company’s business relationships (including with current and prospective employees, customers, suppliers, partners and regulators, among others); and (v) if the Arrangement Agreement is terminated under certain circumstances, the Company must pay the Termination Fee to Cresco, as described under the heading “The Arrangement Agreement — Termination Fee”.
(c)
Non-Solicitation Covenants.   There are limitations contained in the Arrangement Agreement on the Company’s ability to solicit additional interest from third parties.
(d)
Anticipated Benefits May Not Occur.   The combined company may fail to realize growth opportunities and synergies currently anticipated due to, among other things, challenges associated with integrating the operations and personnel of the Company and Cresco and the ability of the combined company to attract capital.
(e)
Exchange Ratio.   The Consideration is at a fixed exchange ratio per Columbia Care Share and, as a result, there is a possibility that the Cresco Shares to be issued on the Effective Time will have a market value different than at the time of the entering into of the Arrangement Agreement.
(f)
Downward Adjustment.   The fixed exchange ratio per Columbia Care Share is subject to certain downward adjustments in prescribed circumstances that may result in Columbia Care Shareholders receiving fewer Cresco Shares than expected. See “The Arrangement — Downward Adjustment.”
(g)
Termination Rights.   Cresco has the right to terminate the Arrangement Agreement under certain limited circumstances.
(h)
Ability to Respond to a Superior Proposal.   While the Company has reserved the right to respond to a Superior Proposal provided certain conditions are met, (i) Cresco has the right to match any such Superior Proposal and (ii) if Cresco fails to match such Superior Proposal and Columbia Care proceeds to terminate the Arrangement Agreement, it will be required to pay a Termination Fee in the amount of $65 million to Cresco. These circumstances may discourage other parties from attempting to acquire the Columbia Care Shares, even if those parties would otherwise be willing to offer greater value than offered under the Arrangement.
(i)
Restrictions on the Company’s Business.   The Arrangement Agreement imposes certain restrictions on the conduct of the Company’s business during the period between the execution of the
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Arrangement Agreement and the consummation of the Arrangement, which may have a negative impact on the Company’s performance and may adversely affect the ability of the Company to execute certain business strategies. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement. As the Arrangement is dependent upon the satisfaction of certain conditions, its completion is subject to uncertainty and the Company’s customers and suppliers may delay or defer decisions concerning the Company, which could have a negative impact on the Company’s business and operations, regardless of whether the Arrangement is ultimately completed.
The reasons of the Columbia Care Board and the Columbia Care Special Committee for recommending the Arrangement include certain assumptions relating to forward-looking information, and such information and assumptions are subject to various risks. See “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors Relating to the Arrangement” in this Circular.
The Columbia Care Board and the Columbia Care Special Committee evaluated all the factors summarized above in light of their knowledge of the business and operations of the Company, based on the advice of financial and legal advisors to the Columbia Care Board and the Columbia Care Special Committee and in the exercise of their business judgment. However, the foregoing summary of the information and factors considered by the Columbia Care Board and the Columbia Care Special Committee is not intended to be exhaustive. In view of the variety of factors and the amount of information considered in connection with its evaluation of the Arrangement, the Columbia Care Board and the Columbia Care Special Committee did not find it practicable to, and did not, quantify, rank or otherwise attempt to assign relative weights to the foregoing factors considered in their determinations. In addition, in considering the factors described above, individual members of the Columbia Care Board and the Columbia Care Special Committee may have given different weights to various factors and may have applied a different analysis to each of the material factors considered by the Columbia Care Board and the Columbia Care Special Committee.
Arrangement Mechanics
The following description is qualified in its entirety by reference to the full text of the Plan of Arrangement, a copy of which is attached to this Circular as Appendix C. Commencing at the Effective Time and pursuant to the Plan of Arrangement, the following transactions, among others, will occur and will be deemed to occur sequentially in the following order:
(a)
each Columbia Care Share outstanding immediately prior to the Effective Time held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised will be deemed to have been transferred (free and clear of all Liens) without any further act or formality by or on behalf of any Dissenting Holder, to the Company for cancellation, in consideration for a debt claim against the Company for the amount determined in accordance with the Plan of Arrangement;
(b)
each Columbia Care PV Share outstanding immediately prior to the Effective Time (other than a Columbia Care PV Share held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised) will, without any further action by or on behalf of such Columbia Care PV Shareholder, be deemed to be converted by the holder thereof for 100 Columbia Care Common Shares per Columbia Care PV Share in accordance with the terms of the Columbia Care PV Shares;
(c)
each Columbia Care Common Share outstanding immediately following the preceding step, including, for greater certainty, the Columbia Care Common Shares issued upon conversion of the Columbia Care PV Shares pursuant to the step above (other than a Columbia Care Common Share held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised and Columbia Care Common Shares held by any Electing Columbia Care Shareholder) will, without any further action by or on behalf of such Columbia Care Shareholder, be deemed to be assigned and transferred by the holder thereof to AcquisitionCo solely in exchange for the issuance by Cresco to the holder thereof of the Consideration;
(d)
concurrently with the preceding step, AcquisitionCo will issue to Cresco as consideration for the Cresco Shares issued to Columbia Care Shareholders pursuant to such step an equal number of AcquisitionCo Shares;
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(e)
concurrently with the transfer in step (c) above, each Columbia Care Common Share outstanding immediately prior to the Effective Time and each Columbia Care Common Share acquired by a Columbia Care Shareholder pursuant to step (b) above that is, in each case, held by an Electing Columbia Care Shareholder, will, without any further action by or on behalf of such Electing Columbia Care Shareholder, be deemed to be assigned and transferred by the holder thereof to Cresco solely in exchange for the issuance by Cresco to the holder thereof of the Consideration;
(f)
each Columbia Care Common Share held by Cresco immediately following the preceding step will be, and will be deemed to be, transferred to and acquired by AcquisitionCo in consideration for such number of AcquisitionCo Shares equal to the number of Cresco Shares issued in exchange for the Columbia Care Common Shares;
(g)
each Columbia Care Option outstanding at the Effective Time (whether vested or unvested) will cease to represent an option or other right to acquire Columbia Care Common Shares and will be exchanged for a Replacement Option to acquire such number of Cresco Shares as is equal to: (A) that number of Columbia Care Common Shares that were issuable upon exercise of such Columbia Care Option immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio, rounded down to the nearest whole number of Cresco Shares, at an exercise price per Cresco Share equal to the quotient determined by dividing: (X) the exercise price per Columbia Care Common Share at which such Columbia Care Option was exercisable immediately prior to the Effective Time, by (Y) the Exchange Ratio rounded up to the nearest whole cent. All terms and conditions of a Replacement Option, including the term to expiry, vesting, conditions to and manner of exercising, will be the same as the Columbia Care Option for which it was exchanged, and any certificate or option agreement previously evidencing the Columbia Care Option will thereafter evidence and be deemed to evidence such Replacement Option;
(h)
each Columbia Care RSU held by Columbia Care RSU Holders will be exchanged for a Replacement RSU and upon vesting thereof on or after the Effective Time, each such former Columbia Care RSU Holder will accept the Consideration in lieu of each Columbia Care Common Share to which such holder was theretofore entitled upon such vesting, and all other terms and conditions of any Replacement RSU, including term to expiry, vesting and conditions to vesting, will be the same as the Columbia Care RSU so exchanged (as may have been amended from time to time);
(i)
each Columbia Care PSU held by Columbia Care PSU Holders will be exchanged for a Replacement PSU and upon vesting thereof on or after the Effective Time, each such former Columbia Care PSU Holder will accept the Consideration in lieu of each Columbia Care Common Share to which such holder was theretofore entitled upon such vesting, and all other terms and conditions of any Replacement PSU, including term to expiry, vesting and conditions to vesting, will be the same as the Columbia Care PSU so exchanged (as may have been amended from time to time);
(j)
Columbia Care will reduce its capital and paid-up capital to CAD$1, without any payment to its shareholders;
(k)
the Company and AcquisitionCo will amalgamate to continue as one corporate entity (as so amalgamated, “Amalco”) with the same effect as if they had amalgamated under Section 276 of the BCBCA;
(l)
each CCLLC Membership Interest held by Amalco will be, and will be deemed to be, transferred to and acquired by HoldingCo in consideration for the HoldingCo Consideration;
(m)
Cresco and Amalco will adopt a plan of complete liquidation of Amalco under Division 3 of Part 10 of the BCBCA and pursuant to subsection 319(1) of the BCBCA, Amalco will commence to wind-up and dissolve in accordance with subsection 88(1) of the Tax Act, and pursuant thereto, will transfer beneficial ownership in all of its property to Cresco as its sole shareholder and Cresco will assume all obligations of Amalco; and
(n)
each HoldingCo Membership Interest held by Cresco will be, and will be deemed to be, transferred to and acquired by CUSCo in consideration for a CUSCo Share.
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The foregoing share entitlement may be subject to downward adjustment in the event that Columbia Care is required to issue shares in satisfaction of an earn-out payment for a prior acquisition, with the potential adjustment in proportion to the additional dilution from such potential issuance relative to Columbia Care’s current fully diluted in-the-money outstanding shares.
Downward Adjustment
The Consideration is subject to downward adjustment in connection with potential issuances of Columbia Care Shares pursuant to the terms of the Agreement and Plan of Merger dated December 21, 2020 (as amended, the “gLeaf Agreement”) between, among others, Columbia Care, Columbia Care LLC and Green Leaf Medical, LLC (“gLeaf”), in satisfaction of certain earn-out payments that Columbia Care will be required to pay in the event that gLeaf successfully meets or exceeds certain Adjusted EBITDA targets as set forth in the gLeaf Agreement.
If Columbia Care Shares are issued under the gLeaf Agreement, the Exchange Ratio would be adjusted by multiplying such ratio by a fraction, (the “Exchange Ratio Adjustment Factor”), the numerator of which is 418,821,453 and the denominator of which is equal to the sum of:
(a)
418,821,453; and
(b)
the number of Columbia Care Shares (if any) that Columbia Care becomes obligated to issue under the provisions of the gLeaf Agreement in respect of the period from July 1, 2021 through June 30, 2022, up to a maximum number of Columbia Care Shares having a value of $58 million (calculated using the volume-weighted average price of the Columbia Care Shares for the 10 days prior to the release of Columbia Care’s interim financial statements for the period ended June 30, 2022 or the dissemination of the press release in respect thereof);
Required Shareholder Approval
Pursuant to the Interim Order, to be effective, the Arrangement Resolution must receive the Required Shareholder Approval. The Arrangement Resolution must receive such Required Shareholder Approval in order for the Company to seek the Final Order and implement the Arrangement on the Effective Date in accordance with the Final Order. See “Securities Law Matters — Canadian Securities Laws — Application of Multilateral Instrument 61-101”.
Voting Support Agreements
The Supporting Columbia Care Shareholders entered into the Voting Support Agreements with Cresco pursuant to which, among other things, and subject to certain terms, conditions and exceptions, the Supporting Columbia Care Shareholders agreed to vote the Columbia Care Shares legally or beneficially owned by them, or over which they exercise control or direction, as applicable (the “Subject Securities”) (to the extent such securities carry the right to vote) FOR the Arrangement Resolution.
The Supporting Columbia Care Shareholders, collectively as of the Record Date, beneficially own, or exercise control or direction over, directly or indirectly, approximately 17.20% of the Columbia Care Common Shares and 35.89% of the Columbia Care PV Shares, representing together approximately 17.84% of the voting rights attached to the Columbia Care Shares.
The Voting Support Agreements set forth, among other things, and subject to certain terms, conditions and exceptions, the agreement of each Supporting Columbia Care Shareholder to vote their Columbia Care Shares in favour of the Arrangement Resolution at the Meeting and any matters related thereto. In addition, Supporting Columbia Care Shareholders have agreed, among other things and subject to the terms and conditions of the Voting Support Agreements, during the term of the Voting Support Agreements, to:
(a)
not sell, transfer, gift, assign, convey, pledge, hypothecate, encumber, option or otherwise dispose of any right or interest in any of the Subject Securities or tender any of the Subject Securities to a take-over bid or enter into any agreement, arrangement, commitment or understanding in connection therewith, other than: (i) pursuant to the Arrangement or the completion of the acquisition of the Columbia Care Shares by Cresco other than as contemplated by the Arrangement
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Agreement on a basis that (A) provides for economic terms which, in relation to the Supporting Columbia Care Shareholder, on an after-tax basis, are at least equivalent to or better than those contemplated by the Arrangement Agreement, (B) would not likely result in a delay or time to completion of the Arrangement, and (C) is otherwise on terms and conditions not materially more onerous on the Columbia Care Shareholder than the Arrangement (including any take-over bid) (any such transaction, an “Alternative Transaction”); (ii) any exercise, conversion or exchange of securities exercisable, convertible or exchangeable for Columbia Care Shares in accordance with their terms (including, for greater certainty, any conversion of Columbia Care PV Shares in exchange for Columbia Care Common Shares); or (iii) to one or more of a parent, spouse, child or grandchild of, or a corporation partnership, limited liability company or other entity controlled by the Supporting Columbia Care Shareholder or a trust or account (including an RRSP, RESP, RRIF or similar account) existing for the benefit of such Person or entity; and (D) transfers of Subject Securities for the sole purpose of paying taxes that become due and payable upon the vesting of an equity incentive held by the Supporting Columbia Care Shareholder at the closing of the Arrangement, provided that the Supporting Columbia Care Shareholder has sold all of the free trading subordinate voting shares of Cresco received by the Supporting Columbia Care Shareholder upon closing of the Arrangement and the proceeds of such sales are insufficient to pay such taxes; and provided further that the Supporting Columbia Care Shareholder provides notice to Cresco of the number of Subject Securities sold pursuant to this exemption, provided that in the case of (A), (B) and (C), and for greater certainty, any Subject Securities acquired as a result thereof shall remain Subject Securities and subject to the terms and conditions of the Voting Support Agreement and any such transferee shall agree in writing with Cresco to be bound hereby and, in the case of a corporation, partnership, limited liability company or other entity controlled by, the Supporting Columbia Care Shareholder, provided that such entity remains controlled by the Supporting Columbia Care Shareholder until the termination of the Voting Support Agreement;
(b)
not grant or agree to grant any proxies or powers of attorney, deliver any voting instruction form, deposit any Subject Securities into a voting trust or pooling agreement, or enter into a voting agreement, commitment, understanding or arrangement, oral or written, with respect to the voting of the Subject Securities (other than as otherwise set out in the Voting Support Agreements);
(c)
not requisition or join in the requisition of any meeting of any of the securityholders of the Company for the purpose of considering any resolution (other than the Meeting and the Arrangement Resolution);
(d)
to cause to be counted as present for purposes of establishing quorum and to vote (or cause to be voted) all of the Subject Securities: (i) at any meeting of any of the securityholders of the Company at which the Supporting Columbia Care Shareholder or any registered or beneficial owner of the Subject Securities are entitled to vote, including the Meeting, and (ii) in any action, by written consent of the securityholders of the Company, in favour of the approval, consent, ratification and adoption of the Arrangement Resolution and the transactions contemplated by the Arrangement Agreement (and any actions required for the consummation of the transactions contemplated by the Arrangement Agreement) and to not take, nor permit any person on its behalf to take, any action to withdraw, revoke, change, amend or invalidate any proxy or voting instruction form deposited pursuant to the Voting Support Agreement;
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(e)
to cause to be counted as present for purposes of establishing quorum and to vote (or cause to be voted) all of the Subject Securities against any proposed action by the Company, any Columbia Care Shareholders, any of the Subsidiaries of the Company or any other Person (or group of Persons) other than Cresco: (i) in respect of any Acquisition Proposal; or (ii) which would reasonably be regarded as being directed towards or likely to prevent or delay the successful completion of the Arrangement, including without limitation any amendment to the articles or by-laws of the Company or any of its Subsidiaries or their respective corporate structures or capitalization;
(f)
not (i) solicit, initiate, or knowingly facilitate any proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal, (ii) solicit proxies or become a participant in or act jointly or in concert with any person in connection with a solicitation in opposition to or competition with Cresco’s proposed purchase of the Columbia Care Shares as contemplated by the Arrangement, (iii) participate in any discussions or negotiations with any Person (other than Cresco) regarding any inquiry, proposal or offer that constitutes or would reasonably be expected to constitute or lead to an Acquisition Proposal, or (iv) accept or enter into, or publicly propose to accept or enter into, any letter of intent, agreement, arrangement or understanding regarding any Acquisition Proposal; and
(g)
not (i) exercise any Dissent Rights in respect of the Arrangement, (ii) contest in any way the approval of the Arrangement by any Governmental Entity, or (iii) take any other action of any kind, in each case which would reasonably be regarded as likely to reduce the success of, or materially delay or interfere with, the completion of the transactions contemplated by the Arrangement Agreement.
Each Voting Support Agreement automatically terminates upon the earliest of:
(a)
the mutual agreement in writing of the Supporting Columbia Care Shareholder and Cresco;
(b)
written notice by the Supporting Columbia Care Shareholder to Cresco if, without the prior written consent of the Supporting Columbia Care Shareholder, the Arrangement Agreement is amended to change the amount or form of consideration payable pursuant to the Arrangement (other than to increase the total Consideration and/or to add additional consideration); provided that at the time of such termination, the Supporting Columbia Care Shareholder has not breached the Voting Support Agreement in any material respect and is not in material default in the performance of its obligations under the Voting Support Agreement;
(c)
the valid termination of the Arrangement Agreement , including, without limitation, where the Arrangement Agreement is terminated in connection with the acceptance by the Company of a Superior Proposal pursuant to Section 5.4 thereof; and
(d)
the acquisition of the Subject Securities by Cresco.
Lock-up Agreements
The Lock-up Columbia Care Shareholders entered into the Lock-up Agreements with Cresco pursuant to which, among other things, and subject to certain terms, conditions and exceptions, the Lock-up Columbia Care Shareholders agreed to refrain from taking certain actions with respect to 90% of the Cresco Shares to be received by the Lock-up Columbia Care Shareholder under the Arrangement (collectively, the “Lock-up Securities”), to be legally or beneficially owned by them following the Arrangement, for the period commencing on the closing date of the Arrangement and expiring:
(a)
in respect of the first 25% of the Lock-up Securities, the date that is 60 days following the closing of the Arrangement;
(b)
in respect of the second 25% of the Lock-up Securities, the date that is 120 days following the closing of the Arrangement;
(c)
in respect of the third 25% of the Lock-up Securities, the date that is 180 days following the closing of the Arrangement; and
(d)
in respect of the balance of the Lock-up Securities, the date that is 240 days following the closing of the Arrangement (“Lock-up Period”).
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The Lock-up Columbia Care Shareholders, collectively as of the Record Date, beneficially own, or exercise control or direction over, directly or indirectly, Columbia Care Shares representing approximately 17.84% of the voting rights attached to the Columbia Care Shares.
The Lock-up Agreements set forth, among other things, and subject to certain terms, conditions and exceptions, the agreement of each Lock-up Columbia Care Shareholder that it will not, for the applicable Lock-up Period, directly or indirectly:
(a)
sell, offer, contract or grant any option or right to sell, pledge, transfer, or otherwise dispose of Lock-up Securities, whether of record or beneficially held;
(b)
monetize, or engage in any swap or hedging transaction, or enter into any form of agreement, arrangement or understanding the effect of which is to alter, directly or indirectly, the Lock-Up Columbia Care Shareholder’s economic interest in, or economic exposure to Lock-up Securities; or
(c)
publicly announce an intention to do any of the foregoing (collectively, a “Transfer”).
Despite the foregoing restrictions on Transfers on the Lock-up Securities, the Lock-up Columbia Care Shareholders may undertake any of the following Transfers of Lock-up Securities during the applicable Lock-up Period:
(a)
by way of pledge or security interest, provided that the pledgee or beneficiary of the security interest agrees in writing with Cresco to be bound by the Lock-up Agreement for the remainder of the applicable Lock-up Period;
(b)
a Transfer to a spouse, parent, child or grandchild of, or corporations, partnerships, limited liability companies or other entities controlled by, the Shareholder or a trust or account (including RRSP, RESP, RRIF or similar account) existing for the benefit of such person or entity, so long as such person or entity agrees in writing with Cresco to be bound by the Lock-up Agreement for the remainder of the applicable Lock-up Period and, in the case of corporations, partnerships, limited liability companies or other entities controlled by, the Shareholder, so long as such entity remains controlled by the Shareholder for the remainder of the applicable Lock-up Period;
(c)
a Transfer of Lock-up Securities pursuant to a bona fide take-over bid, merger, plan of arrangement or other similar transaction made to all holders of such Lock-up Securities, involving a change of control of Cresco, provided that in the event that the take-over bid, merger, plan of arrangement or other such transaction is not completed, the Lock-up Securities owned by the Lock-up Columbia Care Shareholders will remain subject to the restrictions contained in the Lock-up Agreement;
(d)
Transfers of Lock-up Securities for the sole purpose of paying taxes that become due and payable upon the vesting of an equity incentive held by the Lock-up Columbia Care Shareholder at the closing of the Arrangement, provided that the Lock-up Columbia Care Shareholder has sold all of the free trading Cresco Shares received by the Lock-up Columbia Care Shareholder upon closing of the Arrangement and the proceeds of such sales are insufficient to pay such taxes; and provided further that the Lock-up Columbia Care Shareholder provides notice to Cresco of the number of Lock-up Securities sold pursuant to this exemption; and
(e)
a Transfer occurring by operation of law or in connection with transactions as a result of the death or incapacitation of the Lock-up Columbia Care Shareholder.
The Lock-up Agreements terminate on the close of trading on the date that the last Lock-up Period expires.
Interests of Certain Persons in the Arrangement
In considering the Arrangement and the recommendation of the Columbia Care Board with respect to the Arrangement, Columbia Care Shareholders should be aware that certain directors and certain executive officers of the Company have interests in connection with the Arrangement that may present them with actual or potential conflicts of interest in connection with the Arrangement. These interests and benefits are described below.
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Except as otherwise disclosed below or elsewhere in this Circular, all benefits received, or to be received, by directors or executive officers of Columbia Care as a result of the Arrangement are, and will be, solely in connection with their services as directors or employees of Columbia Care. No benefit has been, or will be, conferred for the purpose of increasing the value of consideration payable to any such person for Columbia Care Shares, nor is it, or will it be, conditional on the person supporting the Arrangement.
Columbia Care Shares
As of the Record Date, the directors and executive officers of Columbia Care beneficially owned, or exercised control or direction, directly or indirectly, over Columbia Care Shares representing in the aggregate approximately 13.38% of the voting rights attached to all issued and outstanding Columbia Care Shares. All of the Columbia Care Shares held by such directors and executive officers of Columbia Care will be treated in the same fashion under the Arrangement as Columbia Care Shares held by all other Columbia Care Shareholders.
See “The Arrangement — Arrangement Mechanics”.
Columbia Care Options
As of the Record Date, the directors and executive officers of Columbia Care do not own any Columbia Care Options.
Columbia Care Warrants
As of the Record Date, the only director or executive officer that owns any Columbia Care Warrants is Jonathan P. May who owns 60,775. All other directors and executive officers of Columbia Care do not own any Columbia Care Warrants.
Columbia Care RSUs
As of the Record Date, the directors and executive officers of Columbia Care owned an aggregate of 5,361,746 Columbia Care RSUs granted pursuant to the LTIP or otherwise (representing in the aggregate approximately 34.31% of all outstanding Columbia Care RSUs), all of which are unvested. Upon vesting, each Columbia Care RSU shall be exchanged for one Columbia Care Common Share within 60 days of such vesting.
All of the Columbia Care RSUs held by such directors and executive officers of Columbia Care will be treated in the same fashion under the Arrangement as Columbia Care RSUs held by all other holders of Columbia Care RSUs. Pursuant to the Arrangement, all Columbia Care RSUs outstanding as of the Effective Time will be exchanged for Replacement RSUs and upon vesting thereof on or after the Effective Time, each former holder of Columbia Care RSUs will receive the Consideration in lieu of each Columbia Care Common Share to which such holder was theretofore entitled upon such vesting.
Columbia Care PSUs
As of the Record Date, the directors and executive officers of Columbia Care owned an aggregate of 7,155,204 Columbia Care PSUs granted pursuant to the LTIP or otherwise (representing in the aggregate approximately 82.93% of all outstanding Columbia Care PSUs), all of which are unvested. Upon vesting, each Columbia Care PSU shall be exchanged for one Columbia Care Common Share within 60 days of such vesting.
All of the Columbia Care PSUs held by such directors and executive officers of Columbia Care will be treated in the same fashion under the Arrangement as Columbia Care PSUs held by all other holders of Columbia Care PSUs. Pursuant to the Arrangement, all Columbia Care PSUs outstanding as of the Effective Time will be exchanged for Replacement PSUs and upon vesting thereof on or after the Effective Time, each former holder of Columbia Care PSUs will receive the Consideration in lieu of each Columbia Care Common Share to which such holder was theretofore entitled upon such vesting.
See “The Arrangement — Arrangement Mechanics”. See also “Securities Law Matters — Canadian Securities Laws — Minority Approval”.
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Ownership of Columbia Care Shares, Columbia Care Options, Columbia Care Warrants, Columbia Care Convertible Notes, Columbia Care RSUs and Columbia Care PSUs
None of the directors and executive officers of Columbia Care nor, to the knowledge of the Company after reasonable enquiry: (a) their respective associates and affiliates; (b) any insider of Columbia Care (other than the directors and executive officers) and their respective associates and affiliates; (c) any associate or affiliate of Columbia Care; and (d) any person acting jointly or in concert with Columbia Care, beneficially own, or exercise control or direction over, securities of Columbia Care except as set forth below and which will be affected by the Arrangement as described under “The Arrangement — Arrangement Mechanics.
Securities of Columbia Care Beneficially Owned, Directly or Indirectly, over which Control or Direction is Exercised(1)
Name and
Position(s) /
Relationship
with
Columbia Care
Number of
Columbia
Care
Common
Shares
Held(2)
Number of
Columbia
Care PV
Shares Held(3)
Percentage
of Voting
Rights of
Columbia
Care
Shares(4)
Number of
Columbia
Care Options
Held(5)
Number of
Columbia
Care
Warrants
Held(6)
Number of
Columbia
Care
Convertible
Notes Held(7)
Percentage of
Columbia
Care
RSUs
Held(8)
Percentage of
Columbia
Care
PSUs
Held(9)
Total Estimated
Value of
Consideration to
be Received
from the
Arrangement(10)
Nicholas Vita,
Chief Executive Officer
and Director
36,283,801 9.10% 9.36% 29.55% $ 95,545,145.49
Michael Abbott,
Executive Chairman and Director
481,550 0.12% 7.32% 26.85% $ 11,186,526.94
Frank Savage,
Director
106,987 0.03% 0.23% 0.00% $ 329,015.60
James A.C. Kennedy,
Director
98,618 18,234.28 0.48% 0.04% 0.00% $ 4,431,522.38
Jonathan P. May,
Director
89,388 29,467.67 0.76% 60,775 0.25% 0.00% $ 7,068,103.53
Jeff Clarke,
Director
453,039 47.29 0.11% 0.23% 0.00% $ 1,135,204.72
Alison Worthington,
Director
43,257 0.01% 0.23% 0.00% $ 182,546.91
Julie Hill,
Director
0.00% 0.35% 0.00% $ 124,694.89
Philip Goldberg,
Director
7,760,627 1.95% 0.55% 0.00% $ 18,035,117.08
David Hart,
Chief Operating Officer
1,035,419 746.92 0.28% 5.25% 9.48% $ 7,401,746.85
Lars Boesgaard,(11)
Former Chief Financial
Officer
48,866 0.01% 0.00% 0.00% $ 112,307.22
Dr. Rosemary Mazanet,
Chief Scientific Officer
1,286,858 186.74 0.33% 2.31% 4.31% $ 5,412,559.21
Bryan Olson,
Chief People and Administrative
Officer
397,698 248.97 0.11% 2.60% 4.51% $ 3,555,917.64
Guy Hussussian,
Chief Data Officer
131,070 31.13 0.03% 1.23% 2.79% $ 1,835,245.51
Jesse Channon,
Chief Growth
Officer
270,417 0.07% 3.89% 4.97% $ 3,763,460.52
Derek Watson,
Chief Financial Officer
0.00% 0.00% 0.00% $ 731,736.00
David Sirolly,
Chief Legal Officer and
General Counsel
0.00% 0.46% 0.45% $ 1,002,549.94
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Notes
(1)
As of the Record Date. Information as to securities of Columbia Care beneficially owned, or over which control or direction is exercised, not being within the knowledge of Columbia Care, has been obtained by Columbia Care from publicly disclosed information and/or provided by the Columbia Care securityholder listed above.
(2)
Based on 384,943,683 Columbia Care Common Shares outstanding as at the Record Date.
(3)
Based on 136,410.48 Columbia Care PV Shares outstanding as at the Record Date.
(4)
Based on 384,943,683 Columbia Care Common Shares and 136,410.48 Columbia Care PV Shares outstanding as at the Record Date.
(5)
Based on 27,692 Columbia Care Options outstanding as at the Record Date.
(6)
Based on 11,482,766 Columbia Care Warrants outstanding as at the Record Date.
(7)
Based on $80,100,000 principal amount of Columbia Care Convertible Notes outstanding as at the Record Date.
(8)
Based on 15,628,370 Columbia Care RSUs outstanding as at the Record Date.
(9)
Based on 8,628,465 Columbia Care PSUs outstanding as at the Record Date.
(10)
Based on the trading price of the Cresco Shares on the CSE as of the close of markets on the Record Date, which was $4.12 (equal to CAD$5.35 using an exchange ratio of CAD$1 equals US$0.77), and assuming no exercise of Columbia Care Options or Columbia Care Warrants held by the above securityholders.
(11)
Mr. Boesgaard resigned effective as of August 31, 2021.
To the knowledge of the Company, there are no agreements, commitments or understandings to acquire securities of the Company or of Cresco by any of the persons referred to above except for Columbia Care Shares and/or Cresco Shares that may be acquired upon the exercise of Columbia Care Options, Replacement Options, Columbia Care Warrants, Columbia Care Convertible Notes, Columbia Care RSUs, Replacement RSUs, Columbia Care PSUs or Replacement PSUs, respectively, or as otherwise disclosed herein.
Change of Control Benefits
Nicholas Vita
On April 26, 2019, the Company entered into an employment agreement with Mr. Vita (the “Vita Agreement”). In the event of termination without cause of Mr. Vita’s employment or if Mr. Vita resigns for good reason in connection with a change of control, Mr. Vita shall receive (i) an amount equal to thirty-six (36) months of the sum of Mr. Vita’s then base salary and target bonus paid over such 36-month period in installments on the Company’s regular payroll schedule following the termination date; (ii) the Company shall pay its share of Mr. Vita’s health insurance premiums to continue Mr. Vita’s health insurance coverage for thirty-six (36) months beyond the termination date; and (iii) Mr. Vita shall receive outplacement services for a period of one (1) year following the termination date. The change of control payments and benefits that would be made to Mr. Vita are conditioned on and subject to Mr. Vita signing and not rescinding a non-disclosure agreement and an effective, general release of all claims in favour of the Company within no greater than 60 days following the termination date. Upon a qualifying termination in connection with a change of control, Mr. Vita’s outstanding time-vested Columbia Care RSUs, including the time-vested portion of his outstanding restricted stock unit award, granted April 26, 2019 (the “Vita Post-Closing RSU Grant”), will vest in full and his outstanding performance-vested Columbia Care RSUs and Columbia Care PSUs, including his performance-vested portion of the Vita Post-Closing RSU Grant, will vest, with the number of Columbia Care Shares earned to be based on actual performance through the consummation of the change of control. The total estimated incremental payments, payables and benefits to Mr. Vita in the event his employment is terminated in connection with a change of control, as if such event occurred on May 24, 2022 is $12,155,208.63 with Mr. Vita’s health insurance coverage continuing for thirty-six (36) months from the termination date.
Michael Abbott
On April 26, 2019, the Company entered into an employment agreement with Mr. Abbott (the “Abbott Agreement”). In the event of termination without cause of Mr. Abbott’s employment or if Mr. Abbott resigns for good reason in connection with a change of control, Mr. Abbott shall receive (i) an amount equal to thirty-six (36) months of the sum of Mr. Abbott’s then base salary and target bonus paid over such 36-month period in installments on the Company’s regular payroll schedule following the termination date; (ii) the Company shall pay its share of Mr. Abbott’s health insurance premiums to continue Mr. Abbott’s health
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insurance coverage for thirty-six (36) months beyond the termination date; and (iii) Mr. Abbott shall receive outplacement services for a period of one (1) year following the termination date. The change of control payments and benefits that would be made to Mr. Abbott are conditioned on and subject to Mr. Abbott signing and not rescinding a non-disclosure agreement and an effective, general release of all claims in favour of the Company within no greater than 60 days following the termination date. Upon a qualifying termination in connection with a change of control, Mr. Abbott’s outstanding time-vested Columbia Care RSUs, including the time-vested portion of his outstanding restricted stock unit award, granted April 26, 2019 (the “Abbott Post-Closing RSU Grant”), will vest in full and his outstanding performance-vested Columbia Care RSUs/Columbia Care PSUs, including his performance-vested portion of the Abbott Post-Closing RSU Grant, will vest, with the number of shares earned to be based on actual performance through the consummation of the change of control. The total estimated incremental payments, payables and benefits to Mr. Abbott in the event his employment is terminated in connection with a change of control, as if such event occurred on May 24, 2022 is $10,079,795.48 with Mr. Abbott’s health insurance coverage continuing for thirty-six (36) months from the termination date.
David Hart
The Company has entered into an employment agreement with David Hart (Chief Operating Officer), (the “Hart Employment Agreement”). Pursuant to the terms of the Hart Employment Agreement, which may be terminated at any time by either party thereto, in the event of termination without cause of Mr. Hart in connection with a change of control of the Company, Mr. Hart would be entitled to receive: (i) an amount equal to twenty-four (24) months of Mr. Hart’s then base salary, plus target bonus, paid over such 24-month period in installments on the Company’s regular payroll schedule following the termination date; and (ii) the Company shall pay its share of Mr. Hart’s health insurance premiums to continue his health insurance coverage for twenty-four (24) months beyond the termination date. The change of control payments and benefits that would be made to Mr. Hart are conditioned on and subject to Mr. Hart signing and not rescinding a non-disclosure agreement and an effective, general release of all claims in favor of the Company within no greater than 60 days following the termination date. Furthermore, upon a qualifying termination in connection with a change of control, Mr. Hart’s Columbia Care RSUs and Columbia Care PSUs shall vest, with the number of shares earned to be based on actual performance through the consummation of the change of control. If Mr. Hart was terminated without cause in connection with a change of control, the total estimated incremental payments, payable and benefits to him would be $4,850,413.09 in the aggregate, calculated as at May 24, 2022 with Mr. Hart’s health insurance coverage continuing for twenty-four (24) months from the termination date.
Other Executive Officers of Columbia Care
The Company has entered into employment agreements with each of Derek Watson (Chief Financial Officer), Dr. Rosemary Mazanet (Chief Scientific Officer), Bryan Olson (Chief People & Administrative Officer), Guy Hussussian (Chief Data Officer), Jesse Channon (Chief Growth Officer) and David Sirolly (Chief Legal Officer & General Counsel) (the “Executive Employment Agreements”). Pursuant to the terms of the Executive Employment Agreements, which may be terminated at any time by either party thereto, in the event of termination without cause of any officer of the of the Company listed above, in connection with a change of control of the Company, such officer would be entitled to receive: (i) an amount equal to eighteen (18) months of such officer’s then base salary, plus target bonus, paid over such 18-month period in installments on the Company’s regular payroll schedule following the termination date; and (ii) the Company shall pay its share of such officer’s health insurance premiums to continue such officer’s health insurance coverage for eighteen (18) months beyond the termination date. The change of control payments and benefits that would be made to such officer are conditioned on and subject to such officer signing and not rescinding a non-disclosure agreement and an effective, general release of all claims in favor of the Company within no greater than 60 days following the termination date. Furthermore, upon a qualifying termination in connection with a change of control, certain of the officers’ Columbia Care RSUs and Columbia Care PSUs shall vest, with the number of shares earned to be based on actual performance through the consummation of the change of control. If all of the officers party to the Executive Employment Agreements were terminated without cause in connection with a change of control, the total estimated incremental payments, payable and benefits to the officers would be $11,399,888.37 in the aggregate, calculated as at May 24, 2022 with each officer’s health insurance coverage continuing for eighteen (18) months from the termination date.
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Continuing Insurance Coverage for Directors and Executive Officers of Columbia Care
The Arrangement Agreement provides that, prior to the Effective Date, the Company will purchase customary “tail” policies of directors’ and officers’ liability insurance providing protection no less favourable in the aggregate to the protection provided by the policies maintained by the Company and its Subsidiaries which are in effect immediately prior to the Effective Date and providing protection in respect of claims arising from facts or events which occurred on or prior to the Effective Date and Cresco will, or will cause Columbia Care and its Subsidiaries to maintain such tail policies in effect without any reduction in scope or coverage for six years from the Effective Date; provided that Cresco is not required to pay any amounts in respect of such coverage prior to the Effective Time and provided further that the cost of such policies will not exceed 300% of the Company’s current annual aggregate premium for policies currently maintained by it or its Subsidiaries.
Directorship
Pursuant to the terms of the Arrangement Agreement, on the Effective Date, up to three individuals nominated by the Company (such group of three to include Nicholas Vita, who would also join the executive committee of the Cresco Board), each of which must be acceptable to Cresco, acting reasonably, will be appointed to the Cresco Board.
Expenses of the Arrangement
Except as otherwise provided in the Arrangement Agreement, all out-of-pocket third party transaction expenses incurred in connection with the Arrangement Agreement and the Plan of Arrangement and the transactions contemplated thereunder, will be paid by the party incurring such fees, costs or expenses, whether or not the Arrangement is consummated.
The estimated fees, costs and expenses of the Company in connection with the Arrangement are approximately $10,500,000 in the aggregate, which includes, without limitation, fees, costs and expenses with respect to financial advisors, legal services and printing and mailing matters.
Court Approval of the Arrangement and Completion of the Arrangement
An arrangement under the BCBCA requires Court approval. Prior to the sending of this Circular, the Company obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached to this Circular as Appendix D.
Subject to obtaining the Required Shareholder Approval, the hearing in respect of the Final Order is currently scheduled to take place on July 14, 2022 at 9:45 a.m. (Vancouver time) in Vancouver, British Columbia. Any Columbia Care Shareholder, Columbia Care Optionholder, Columbia Care RSU Holder, Columbia Care PSU Holder or other person who wishes to appear, or to be represented, and to present evidence or arguments must serve and file a Notice of Appearance as set out in the Petition for an Interim Order and Final Order and satisfy any other requirements of the Court. The Court will consider, among other things, the substantive and procedural fairness of the Arrangement to the parties affected, including the Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia Care PSU Holders. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with any terms and conditions, if any, as the Court deems fit. In the event that the hearing is postponed, adjourned or rescheduled then, subject to further order of the Court, only those persons having previously served a Notice of Appearance in compliance with the Petition for an Interim Order and Final Order will be given notice of the postponement, adjournment or rescheduled date. A copy of the Petition for the Final Order is attached to this Circular as Appendix E.
THE ARRANGEMENT AGREEMENT
The following descriptions of certain provisions of the Arrangement Agreement are not comprehensive and are qualified in their entirety by reference to the full text of the Arrangement Agreement. Please refer to the Arrangement Agreement for a full description of the terms and conditions thereof. Capitalized terms used
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herein, but not defined, have the meanings ascribed thereto in the Arrangement Agreement. The Arrangement Agreement has, or will be, filed on SEDAR at www.sedar.com and EDGAR at www.sec.gov, under the Company’s profile.
On March 23, 2022, Cresco entered into the Arrangement Agreement with the Company. Pursuant the Arrangement Agreement, Cresco has agreed to acquire all of the issued and outstanding Columbia Care Shares by way of the Arrangement.
Representations and Warranties
The Arrangement Agreement contains certain customary representations and warranties provided between the Company and Cresco. The assertions embodied in those representations and warranties are solely for the purposes of the Arrangement Agreement. Certain representations and warranties may not be accurate and complete as of any specified date because they are qualified by certain disclosure provided by the Company to Cresco or are subject to a standard of materiality or are qualified by reference to a Columbia Care Material Adverse Effect. Therefore, Columbia Care Shareholders should not rely on the representations and warranties as statements of factual information.
The representations and warranties provided by Columbia Care in favour of Cresco in the Arrangement Agreement relate to, among other things, the Fairness Opinions and directors’ approval, organization and qualification, authority relative to the Arrangement Agreement, no violation, government approvals, capitalization, ownership of subsidiaries, reporting issuer status and securities laws matters, Company filings, financial statements, internal controls and financial reporting, books and records, disclosure, independent auditors, minute books, no undisclosed liabilities, no material change, litigation, taxes, data privacy and security, property, title to assets, material contracts, authorizations, environmental matters, compliance with laws, employment and labour matters, intellectual property, related party transactions, brokers, insurance, warranties and claims, Competition Act, Investment Canada Act and no misrepresentations.
The representations and warranties provided by Cresco in favour of Columbia Care in the Arrangement Agreement relate to, among other things, organization and qualification, authority relative to the Arrangement Agreement, no violation, government approvals, capitalization, Cresco Shares, ownership of subsidiaries, reporting issuer status and securities laws matters, Cresco filings, financial statements, internal controls and financial reporting, books and records, disclosure, independent auditors, no undisclosed liabilities, no material change, restrictions on business activities, authorizations, shareholder approval, litigation, taxes, data, privacy and security, property, sufficiency of assets, material contracts, environmental matters, compliance with laws, security ownership, intellectual property, brokers, insurance, warranties and claims and no misrepresentation.
Covenants
Conduct of Business
The Arrangement Agreement includes a general covenant by the Company in favour of Cresco that, during the Pre-Effective Date Period, (i) except with the prior written consent of Cresco, (ii) as required or expressly permitted by the Arrangement Agreement or the Plan of Arrangement, (iii) as required by applicable Law, (iv) as required to comply with any COVID-19 measures, or (v) as expressly contemplated in the Columbia Care Disclosure Letter, the Company will, and will cause each of its Subsidiaries to, conduct business only in the Ordinary Course and in accordance with applicable Laws and use commercially reasonable efforts to maintain and preserve its and its Subsidiaries’ business organization, properties, employees, goodwill and business relationships with Governmental Entities, customers, suppliers, partners and other Persons with which the Company or any of its Subsidiaries has material business relations.
The Company has particularly covenanted and agreed that, during the Pre-Effective Date Period, except (i) with the prior written consent of Cresco (not to be unreasonably withheld, conditioned or delayed), (ii) as required or expressly permitted by the Arrangement Agreement or the Plan of Arrangement, (iii) as required by applicable Law, or (iv) as disclosed in the Columbia Care Disclosure Letter, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly:
(a)
amend its Constating Documents, or, in the case of any Subsidiary which is not a corporation, its similar organizational documents, in any manner;
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(b)
split, combine or reclassify any shares of its authorized share structure or declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) or amend any term of any outstanding debt or security therefor;
(c)
redeem, repurchase, or otherwise acquire or offer to redeem, repurchase or otherwise acquire any shares of its authorized share structure or the capital stock of its Subsidiaries;
(d)
issue, grant, deliver, sell, pledge or otherwise encumber, or authorize the issuance, delivery, sale, pledge or other encumbrance of any shares of its authorized share structure or other equity or voting interests, including the capital stock of its Subsidiaries, or any options, warrants or similar rights exercisable or exchangeable for or convertible into such authorized share structure or other equity or voting interests, or other rights that are linked to the price or the value of Columbia Care Shares or other share capital of the Company or any Subsidiary except for (i) the issuance of Columbia Care Common Shares issuable upon conversion of Columbia Care PV Shares that are outstanding as of the date of the Arrangement Agreement in each case upon conversion by the holder thereof, (ii) the issuance of Columbia Care Common Shares issuable in connection with the exercise of the Columbia Care Options or Columbia Care Warrants that are outstanding as of the date of the Arrangement Agreement in each case upon exercise by the holder thereof; and (iii) the issuance of Columbia Care Common Shares issuable upon the vesting of the Columbia Care RSUs and Columbia Care PSUs that are outstanding as of the date of the Arrangement Agreement or that will be outstanding after the date of the Arrangement Agreement and are disclosed in the Columbia Care Disclosure Letter;
(e)
amend, modify or waive the terms of any of its securities;
(f)
except purchases of inventory in the Ordinary Course consistent with past practice, acquire or agree to acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, in one transaction or in a series of related transactions, assets, securities, properties, interests or businesses or make any investment either by the purchase of securities, contribution of capital, property transfer, or purchase of any other property or assets of any other Person, or acquire any license rights, for an amount greater than $1,500,000, in the aggregate, other than transactions between two or more of its wholly-owned Subsidiaries or a wholly-owned Subsidiary of the Company and the Company;
(g)
except as directed by Cresco conditional upon the Effective Time occurring, sell, pledge, lease, transfer, license, mortgage, encumber or otherwise transfer or dispose of any of its assets the value of which in the aggregate exceed $250,000, except for inventory sold in the Ordinary Course;
(h)
enter into any joint venture or similar agreement, arrangement or relationship;
(i)
make any capital expenditures or commitments to do so, to the extent not included in the budget of the Company contained in the Columbia Care Disclosure Letter, in excess of 10% of the budget of the Company contained in the Columbia Care Disclosure Letter; provided that the Company will notify Cresco in advance and provide regular updates to Cresco of any of the capital expenditures listed in the Columbia Care Disclosure Letter in excess of CAD$2,000,000 in aggregate;
(j)
except as expressly set forth in the Columbia Care Disclosure Letter, prepay indebtedness before its scheduled maturity or increase, create, incur, assume or otherwise become liable for any indebtedness for borrowed money or guarantees thereof;
(k)
make any loan or advance to, or any capital contribution or investment in, or assume, guarantee or otherwise become liable with respect to the liabilities or obligations of, any Person;
(l)
reduce the capital of any of its securities;
(m)
reorganize, amalgamate or merge the Company or any Subsidiary or adopt a plan of liquidation or resolution providing for the liquidation or dissolution of the Company or any of its Subsidiaries;
(n)
grant any Lien (other than Permitted Liens) on any assets of the Company or its Subsidiaries;
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(o)
(A) make, change or rescind any material Tax election, (B) amend, in any manner adverse to the Company, any Tax Return, (C) settle or compromise any material liability for Taxes, (D) change or revoke any of its methods of Tax accounting, (E) file any amended Tax Return if doing so is reasonably likely to result in a material increase to a Tax liability, (F) enter into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) relating to any Tax, (G) agree to an extension of a statute of limitations with respect to any Tax, (H) take any action with respect to the computation of Taxes or the preparation of Tax Returns that is in any material respect inconsistent with past practice, (I) incur any material liability for Taxes other than in the ordinary course of business consistent with past practice, or (J) file any Tax Return in a jurisdiction where the Company or the applicable Subsidiary did not file a Tax Return of the same type in the immediately preceding Tax period;
(p)
enter into any interest rate, currency, equity or commodity swaps, hedges, derivatives, forward sales contracts or similar financial instruments in excess of $500,000;
(q)
except as required by Law or Contract, make profit sharing distribution or similar payment of any kind;
(r)
make any material change in the Company’s accounting methods, principles or practices, except as required by concurrent changes in U.S. GAAP or as required by a Governmental Entity;
(s)
except as required by Law or Contract existing as of the date of the Arrangement Agreement, grant any general increase in the rate of wages, salaries, bonuses or other remuneration of any employees, or accelerate the vesting of any securities of the Company other than to non-executive employees where such increase does not exceed 5% of their annual compensation;
(t)
except as required by Law or Contract existing as of the date of the Arrangement Agreement: (i) increase any severance, change of control or termination pay (or improvements to notice or pay in lieu of notice) to (or amend any existing arrangement with) any current or former employee of the Company or any current or former director of the Company or any of its Subsidiaries; (ii) increase the benefits payable under any existing severance or termination pay policies with any current or former employee of the Company or any current or former director of the Company or any of its Subsidiaries; (iii) increase the benefits payable under any employment agreements with any current or former employee of the Company or any current or former director of the Company or any of its Subsidiaries; (iv) enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with any current or former employee of the Company or any current or former director of the Company or any of its Subsidiaries; (v) increase by more than $5,000 per individual compensation, bonus levels or other benefits payable to: (A) any current or former employee of the Company whose compensation exceeds, or at the time of their employment in the case of former employees, exceeded, $150,000 annually; or (B) any current or former director of the Company or any of its Subsidiaries; (vi) adopt any new Employee Plan or any amendment or modification of an existing Employee Plan; (vii) increase or agree to increase, any funding obligation or accelerate, or agree to accelerate, the timing of any funding contribution under any Employee Plan; (viii) grant any equity, equity-based or similar awards, except for equity grants to new employees in the Ordinary Course; or (ix) materially reduce the Company’s or its Subsidiaries’ work force;
(u)
enter into any agreement or arrangement that limits or otherwise restricts in any material respect the Company or any of its Subsidiaries or any successor thereto, or that would, after the Effective Time, limit or restrict in any material respect the Company or any of its affiliates from competing in any manner;
(v)
enter into or amend any Contract with any broker, finder or investment banker;
(w)
cancel, waive, release, assign, settle or compromise any material claims or rights of the Company or its Subsidiaries;
(x)
compromise or settle any material litigation, proceeding or governmental investigation relating to the assets or the business of the Company;
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(y)
amend or modify, or terminate or waive any material right under, any Material Contract or enter into any contract or agreement that would be a Material Contract if in effect on the date of the Arrangement Agreement;
(z)
enter into, amend or modify, in any material respect, any union recognition agreement, Collective Agreement or similar agreement with any trade union or representative body;
(aa)
except as contemplated in Section 4.9 [Indemnification] of the Arrangement Agreement, amend, modify in any material respect or terminate any material insurance policy of the Company or any Subsidiary in effect on the date of the Arrangement Agreement;
(bb)
abandon or intentionally fail to maintain in good standing any existing material licences, permits, Authorizations or registrations, or abandon or fail to diligently pursue any ongoing application for any material licences, permits, Authorizations or registrations;
(cc)
grant or commit to grant an exclusive licence or otherwise transfer any Intellectual Property or exclusive rights in or in respect thereto that is material to the Company and its Subsidiaries taken as a whole, other than in the Ordinary Course or to wholly-owned Subsidiaries;
(dd)
release any Columbia Care Shareholders from any share transfer restrictions, lock-up or similar trading, transfer or restrictions on encumbrances in respect of the Columbia Care Shares or any Columbia Care Options, Columbia Care RSUs or Columbia Care Warrants subject to the Lock-Up Agreements;
(ee)
materially change its business or regulatory strategy;
(ff)
knowingly take any action or knowingly enter into any transaction (other than a transaction or action undertaken in the ordinary course of business or a transaction or action contemplated by the Arrangement Agreement (including the Pre-Acquisition Reorganization) or otherwise requested in writing by Cresco) that could reasonably be expected to have the effect of materially reducing or eliminating the amount of the tax cost ”bump” pursuant to paragraphs 88(1)(c) and 88(1)(d) of the Tax Act in respect of the securities of any affiliates or Subsidiaries and other non-depreciable capital property owned by the Company or any of its Subsidiaries on the date of the Arrangement Agreement, upon an amalgamation or winding-up of the Company or any of its Subsidiaries (or any of their respective successors); or
(gg)
authorize, agree, resolve or otherwise commit, whether or not in writing, to do any of the foregoing.
The Company has further agreed to use all commercially reasonable efforts to cause the current insurance (or re-insurance) policies maintained by the Company or any of its Subsidiaries not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance and reinsurance companies of nationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect; provided that, neither the Company nor any of its Subsidiaries will obtain or renew any insurance (or re-insurance) policy for a term exceeding 12 months.
Pursuant to the Arrangement Agreement, Cresco has covenanted and agreed that, during the Pre-Effective Date Period, except (i) with the prior written consent of the Company (not to be unreasonably withheld), (ii) as required or expressly permitted by the Arrangement Agreement or the Plan of Arrangement; (iii) as required by applicable Law, (iv) as required to comply with any COVID-19 measures, or (v) as expressly contemplated in the Cresco Disclosure Letter, Cresco will, and will cause each of its Subsidiaries to conduct business only in the Ordinary Course and in accordance with Laws and use commercially reasonable efforts to maintain and preserve its and its subsidiaries’ business organization, properties, employees, goodwill and business relationships with Governmental Entities, customers, suppliers, partners and other Persons with which Cresco or any of its Subsidiaries has material business relations.
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Cresco has particularly covenanted and agreed that, during the Pre-Effective Date Period, and subject to the above noted exceptions, Cresco will not, and will not permit any of its Subsidiaries to, directly or indirectly:
(a)
amend its Constating Documents, or, in the case of any Subsidiary which is not a corporation, its similar organizational documents, in any manner;
(b)
split, combine or reclassify any shares of its authorized share structure or declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any Cresco Shares or amend or modify the terms of the Cresco Shares;
(c)
except for any obligation existing pursuant to any Contract on the date of the Arrangement Agreement, redeem, repurchase, or otherwise acquire or offer to redeem, repurchase or otherwise acquire any shares of its authorized share structure or the capital stock of its Subsidiaries;
(d)
issue, deliver or sell, or authorize the issuance, delivery or sale, of any shares of its authorized share structure or other equity or voting interests, other than (i) as contemplated by the Arrangement Agreement and the Arrangement, (ii) the issuance of awards under Cresco’s equity incentive plans, (iii) in connection with an arm’s length acquisition by Cresco, (iv) the issuance of voting or equity securities of Cresco (including any securities convertible or exchangeable into voting or equity securities of Cresco) pursuant prospectus offerings or private placements, provided that such issuances do not in the aggregate exceed 20% of Cresco’s outstanding voting or equity securities as of the date of the Arrangement Agreement, or (v) pursuant to the exercise or redemption of outstanding securities of Cresco or Cresco Labs, LLC in accordance with the terms thereof;
(e)
acquire or agree to acquire, by merging with or into or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or agree to acquire any assets, if the entering into of a definitive agreement relating to, or the consummation of such acquisition, merger or consolidation is reasonably expected to: (i) result in a Governmental Entity entering an order, decision or judgement prohibiting the consummation of the Arrangement or refusing to provide any Regulatory Approval; or (ii) materially delay or prevent the consummation of the Arrangement;
(f)
except as set out in the Cresco Disclosure Letter, in the Ordinary Course or as required in connection with obtaining any Regulatory Approval, sell, pledge, lease, transfer, license, mortgage, encumber or otherwise transfer or dispose of any of its assets the value of which in the aggregate exceed $5,000,000, except for inventory sold in the Ordinary Course;
(g)
reduce the capital of any of its securities;
(h)
reorganize, amalgamate or merge Cresco or any Subsidiary or adopt a plan of liquidation or resolution providing for the liquidation or dissolution of Cresco or any of its Subsidiaries;
(i)
make any change in Cresco’s accounting methods, principles or practices, except as required by concurrent changes in U.S. GAAP or as required by a Governmental Entity;
(j)
materially change its business or regulatory strategy;
(k)
abandon or intentionally fail to maintain in good standing any existing material licences, permits, Authorizations or registrations, or abandon or fail to diligently pursue any ongoing application for any material licences, permits, Authorizations or registrations;
(l)
take any action that would result in the need for shareholder approval of Cresco of the transactions contemplated by the Arrangement Agreement; or
(m)
authorize, agree, resolve or otherwise commit, whether or not in writing, to do any of the foregoing.
Key Regulatory Approvals
Promptly following the date of the Arrangement Agreement, each Party will use their respective best efforts and will cooperate fully with one another to obtain promptly the Key Regulatory Approvals, including
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the Antitrust Approvals. In furtherance of the foregoing, each Party agreed to (i) make any appropriate filing pursuant to the HSR Act and any other applicable Antitrust Laws with respect to the transactions contemplated by the Arrangement Agreement within fifteen (15) Business Days after the date of the Arrangement Agreement, such time period having been extended from ten (10) Business Days as mutually agreed by the Parties in writing, (ii) respond as promptly as practicable to any request for additional information and documentary material from any Governmental Entity pursuant to any Antitrust Law, and (iii) make such applications and submissions as may be required in order to obtain and maintain any other Key Regulatory Approvals as promptly as practicable after the date of the Arrangement Agreement, and (iv) take certain other actions as set forth in the Columbia Care Disclosure Letter. The Parties further agreed to reasonably cooperate with one another to submit such filings contemporaneously and will request that any filings for the Key Regulatory Approvals be processed by the applicable Governmental Entity on an expedited basis where possible and, to the extent that a public hearing is held, the Parties will request the earliest possible hearing date for the consideration of the Key Regulatory Approvals and provide reasonable cooperation to prepare for and participate in such hearing(s).
Prior to submitting or making any substantive correspondence, filing or communication to any Governmental Entity or members of their respective staffs, regarding the Antitrust Laws or any efforts to secure any Key Regulatory Approvals, to the extent permitted by applicable Law, the Parties will first provide the other Party with a copy of such correspondence, filing or communication in draft form and give such other Party a reasonable opportunity to discuss its content before it is submitted or filed with the relevant Governmental Entities, and will consider and take account of all reasonable comments timely made by the other Party with respect thereto. To the extent permitted by applicable Law, each of the Parties will ensure that the other Party is given the opportunity to attend any substantive meetings with or other appearances before any Governmental Entity relating to any Key Regulatory Approval.
Each of Cresco and the Company has agreed to pay 50% of all filing fees incurred in connection with obtaining any necessary or appropriate Antitrust Approvals.
The Parties will use best efforts to resolve any objections that a Governmental Entity may assert under any Law with respect to the Arrangement, and to avoid or eliminate each and every impediment under any Law that may be asserted by any Governmental Entity with respect to the Arrangement so as to enable the completion of the Arrangement to occur as promptly as practicable and in any event no later than the Outside Date. The Parties’ best efforts will include agreeing to propose, negotiate, commit to and effect, by consent decree or otherwise, the sale, divestiture, license, or disposition of any businesses, assets, equity interests, product lines or properties of Columbia Care or Cresco (or any of their respective Subsidiaries) identified in the Columbia Care Disclosure Letter, including by proposing, negotiating, committing to, and effecting, any ancillary agreements or arrangements reasonably necessary to effectuate such sale, divestiture, license, or disposition (including, but not limited to, any temporary, pre-divestiture hold separate order) as may be required in order to obtain all Key Regulatory Approvals or to avoid the commencement of any action to prohibit the Arrangement under any Law, or to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any action or proceeding seeking to prohibit the Arrangement or delay the completion of the Arrangement beyond the Outside Date. No Party will have any obligation to litigate or contest any administrative or judicial action or proceeding or any decree, judgment, injunction or other order, whether temporary, preliminary or permanent.
Pre-Acquisition Reorganization
Upon request of Cresco and at Cresco’s expense, the Company will be required to perform certain reorganizations of its corporate structure, capital structure, business, operations and assets or such other transactions and cooperate with Cresco and its advisors to determine the nature of such transactions that might be undertaken and the manner in which they would most effectively be undertaken, provided that such transactions:
(a)
can be implemented immediately prior to the Effective Date;
(b)
is not materially prejudicial to the Company or the Columbia Care Shareholders, as a whole, in any material respect;
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(c)
does not materially and unreasonably interfere with the ongoing operations of the Company and its Subsidiaries taken as a whole;
(d)
does not result in (i) any material breach by the Company of any Material Contract; (ii) a breach of any Law or (iii) a breach of the Company’s or any of its Subsidiaries’ Constating Documents;
(e)
does not require the approval of the Columbia Care Shareholders;
(f)
would not adversely impact any of the Regulatory Approvals in any material respect;
(g)
would not reasonably be expected to impede or delay the completion of the Arrangement in any material respect;
(h)
would not result in any Taxes being imposed on, or any adverse Tax or other consequences to any securityholder of the Company greater than the Taxes or other consequences to such party in connection with the Arrangement in the absence of any Pre-Acquisition Reorganization;
(i)
will not become effective unless Cresco has waived or confirmed in writing the satisfaction of all conditions in its favour under the Arrangement Agreement and will have confirmed in writing that it is prepared to promptly and without condition proceed to effect the Arrangement; and
(j)
can be unwound in the event the Arrangement is not consummated without adversely affecting the Company or any of its Subsidiaries in any material manner.
Cresco has agreed to indemnify the Company, its Subsidiaries and their respective officers, directors and employees for all costs or losses, liabilities, damages, claims, costs, expenses, interest awards, judgments and penalties, including any adverse Tax consequences, out of-pocket costs and expenses, including out-of-pocket legal fees and disbursements, suffered or incurred in connection with or as a result of any proposed reorganization transactions or the unwinding of any such transactions.
Indemnification and Insurance
The Arrangement Agreement provides that, prior to the Effective Date, the Company will purchase customary “tail” policies of directors’ and officers’ liability insurance providing protection no less favourable in the aggregate to the protection provided by the policies maintained by the Company and its Subsidiaries which are in effect immediately prior to the Effective Date and providing protection in respect of claims arising from facts or events which occurred on or prior to the Effective Date and Cresco will, or will cause Columbia Care and its Subsidiaries to maintain such tail policies in effect without any reduction in scope or coverage for six years from the Effective Date; provided that Cresco is not required to pay any amounts in respect of such coverage prior to the Effective Time and provided further that the cost of such policies will not exceed 300% of the Company’s current annual aggregate premium for directors’ and officers’ liability insurance policies maintained by the Company and its Subsidiaries as of the date of the Arrangement Agreement.
Cresco will, from and after the Effective Time, honour all rights to indemnification or exculpation now existing in favour of present and former employees, officers and directors of Columbia Care and its Subsidiaries to the extent that they are contained in the Constating Documents of the Company or disclosed in the Columbia Care Disclosure Letter, and acknowledges that such rights will survive unamended the completion of the Plan of Arrangement and will continue in full force and effect in accordance with their terms for a period of not less than six years from the Effective Date.
NEO and CSE Delisting
Subject to Laws, Cresco and Columbia Care will use their commercially reasonable efforts to cause Columbia Care Common Shares to be de-listed from the NEO, the CSE and any other stock exchange on which the Columbia Care Common Shares are listed or quoted with effect promptly following the acquisition by Cresco of the Columbia Care Shares pursuant to the Arrangement.
Appointment of Directors
On the Effective Date, in accordance with the steps set forth in the Plan of Arrangement, Cresco will (a) set the number of directors on its board of directors at thirteen, and (b) subject to the receipt of customary
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regulatory approvals, appoint to Cresco’s board of directors up to three individuals nominated by the Company (such group of three to include Nicholas Vita, who would also join the executive committee of Cresco’s board of directors), each of which must be acceptable to Cresco, acting reasonably.
Convertible Securities
To the extent permitted by applicable Law, Cresco will, as promptly as practicable following the Effective Date, cause a registration statement on Form S-8 to be filed with the SEC which registers the issuance of the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable. If Cresco is not permitted by applicable Law to file a Form S-8 registering the issuance of the Cresco Shares issuable upon exercise, vesting or settlement, as applicable, of the Replacement Options, Replacement PSUs and Replacement RSUs, Cresco will promptly file a registration statement on appropriate form to register the resale of the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable or otherwise take all necessary actions to cause the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable, to be issued without restrictive legends.
Indebtedness
The Company will use commercially reasonable efforts to provide information reasonably requested and required by Cresco in connection with the Company and its Subsidiaries becoming guarantors for Cresco’s senior secured credit facility and providing security over all, or substantially all, of the assets of the Company and its Subsidiaries as additional security for such senior secured credit facility.
Cresco has agreed to indemnify and hold harmless the Company, its Subsidiaries and their respective directors, officers, employees, agents and representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by any of them in connection with or as a result of their compliance with a request made by Cresco, except to the extent any of the foregoing arises from the bad faith, gross negligence or willful misconduct of the Company or any of its Subsidiaries or their respective directors, officers, employees, agents and representatives.
Purchase of Minority Interests
The Company will, and will cause its Subsidiaries to, use best efforts to purchase or otherwise acquire prior to the Effective Date the equity interests in its Subsidiaries held by each of those Persons listed in the Columbia Care Disclosure Letter, in each case on terms satisfactory to Cresco, acting reasonably.
gLeaf Amendments
The Company will use commercially reasonable efforts to amend the gLeaf Agreement, to provide that any Columbia Care Common Shares that may be become issuable to the parties thereto following completion of the Arrangement may be satisfied by the delivery of that number of Cresco Shares determined based on the Exchange Ratio.
Conditions for Completion of the Arrangement
Conditions in favour of Cresco and Columbia Care
The closing of the Arrangement is subject to the following outstanding terms and conditions for the mutual benefit of Cresco and Columbia Care, to be fulfilled or performed at or prior to the Effective Time:
(a)
The Arrangement Resolution has been approved and adopted by the Columbia Care Shareholders at the Meeting in accordance with the Interim Order and applicable Law.
(b)
The Interim Order and the Final Order have each been obtained on terms consistent with the Arrangement Agreement, and have not been set aside or modified in a manner unacceptable to either the Company or Cresco, each acting reasonably, on appeal or otherwise.
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(c)
The Antitrust Approval has been made, given or obtained on terms acceptable to Cresco, acting reasonably, and is in force and has not been modified or rescinded.
(d)
No Law is in effect that makes the consummation of the Arrangement illegal or otherwise prohibits or enjoins the Company or Cresco from consummating the Arrangement.
(e)
The distribution of the Cresco Shares pursuant to the Arrangement will be exempt from the registration requirements of applicable Securities Laws in Canada either by virtue of exemptive relief from the securities regulatory authorities of each of the provinces of Canada or by virtue of exemptions under applicable Securities Laws and will not be subject to resale restrictions in Canada under applicable Securities Laws (other than as applicable to control persons or pursuant to Section 2.6 of National Instrument 45-102 — Resale of Securities).
(f)
The issuance of the Cresco Shares, Replacement Options, Replacement RSUs and Replacement PSUs pursuant to the Arrangement will be exempt from the registration requirements of the U.S. Securities Act.
Conditions in favour of Cresco
The closing of the Arrangement is subject to the following outstanding terms and conditions for the exclusive benefit of Cresco, to be fulfilled or performed at or prior to the Effective Time:
(a)
The representations and warranties of the Company set forth in Section (b) [Organization and Qualification], Section (c) [Authority Relative to the Arrangement Agreement], Section (f) [Capitalization], Section (w) [Authorizations], and Section (cc) [Brokers] of Schedule “C” of the Arrangement Agreement were true and correct as of the date of the Arrangement Agreement and are true and correct as of the Effective Time other than for de minimis inaccuracies, and all other representations and warranties of the Company set forth in the Arrangement Agreement were true and correct as of the date of the Arrangement Agreement and are true and correct as of the Effective Time in all respects, except where any failure or failures of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Columbia Care Material Adverse Effect (disregarding any materiality or “Columbia Care Material Adverse Effect” qualification contained in any such representation and warranty for the purpose of determining whether any such failure or failures would not, individually or in the aggregate, reasonably be expected to result in such a Columbia Care Material Adverse Effect), in each case except for representations and warranties made as of a specified date, the accuracy of which will be determined as of such specified date, and the Company has delivered a certificate confirming same to Cresco, executed by two senior officers of the Company (in each case without personal liability) addressed to Cresco and dated the Effective Date.
(b)
The Company has fulfilled or complied in all material respects with each of the covenants of the Company contained in the Arrangement Agreement to be fulfilled or complied with by it on or prior to the Effective Time, and the Company has delivered a certificate confirming same to Cresco, executed by two senior officers of the Company (in each case without personal liability) addressed to Cresco and dated the Effective Date.
(c)
Each of the Key Regulatory Approvals has been made, given or obtained on terms acceptable to Cresco, acting reasonably, and each such Key Regulatory Approval is in force and has not been modified or rescinded.
(d)
Other than in connection with any Regulatory Approval, there is no action or proceeding (whether, for greater certainty, by a Governmental Entity or any other Person other than Cresco or a Subsidiary of Cresco) pending or threatened in any jurisdiction to: (a) cease trade, enjoin, prohibit, or impose any material limitations, damages or conditions on, Cresco’s ability to acquire, hold, or exercise full rights of ownership over, any Columbia Care Shares, including the right to vote the Columbia Care Shares; (b) prohibit or restrict the Arrangement, or the ownership or operation by Cresco or its Subsidiaries of a material portion of the business or assets of Cresco and its Subsidiaries, the Company or any of its Subsidiaries, or compel Cresco or its Subsidiaries to dispose
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of or hold separate any material portion of the business or assets of Cresco and its Subsidiaries, the Company or any of its Subsidiaries as a result of the Arrangement or the transactions contemplated by the Arrangement Agreement; or (c) prevent or materially delay the consummation of the Arrangement, or if the Arrangement is consummated, have a Columbia Care Material Adverse Effect or a material and adverse effect on Cresco.
(e)
Dissent Rights have not been exercised (excluding any Dissent Rights that have been exercised and subsequently withdrawn) with respect to more than 5.0% of the issued and outstanding Columbia Care Shares.
(f)
Since the date of the Arrangement Agreement, there will have not occurred or have been disclosed to the public (if previously undisclosed to the public) a Columbia Care Material Adverse Effect.
(g)
The Company will have acquired for no consideration the equity interests in its Subsidiaries held by each of the Persons listed in Section 4.16 of the Columbia Care Disclosure Letter, in each case on terms and conditions satisfactory to Cresco, acting reasonably.
Conditions in favour of the Company
The closing of the Arrangement is subject to the following terms and conditions for the exclusive benefit of the Company, to be fulfilled or performed at or prior to the Effective Time:
(a)
The representations and warranties of Cresco set forth in Section (a) Organization and Qualification, Section (b) Authority Relative to this Agreement, Section (e) Capitalization, Section (p) Authorizations, and Section (dd) Brokers of Schedule D of the Arrangement Agreement were true and correct as of the date of the Arrangement Agreement and are true and correct as of the Effective Time other than for de minimis inaccuracies, and all other representations and warranties of Cresco set forth in the Arrangement Agreement were true and correct as of the date of the Arrangement Agreement and are true and correct as of the Effective Time in all respects, except where any failure or failures of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Cresco Material Adverse Effect (disregarding any materiality or “Cresco Material Adverse Effect” qualification contained in any such representation and warranty for the purpose of determining whether any such failure or failures would not, individually or in the aggregate, reasonably be expected to result in such a Cresco Material Adverse Effect), in each case except for representations and warranties made as of a specified date, the accuracy of which will be determined as of such specified date, and Cresco has delivered a certificate confirming same to Columbia Care, executed by two senior officers of Cresco (in each case without personal liability) addressed to Columbia Care and dated the Effective Date.
(b)
Cresco has fulfilled or complied in all material respects with each of the covenants of Cresco contained in the Arrangement Agreement to be fulfilled or complied with by it on or prior to the Effective Time, and Cresco has delivered a certificate confirming same to Company, executed by two senior officers of Cresco (in each case without personal liability) addressed to Columbia Care and dated the Effective Date.
(c)
Since the date of the Arrangement Agreement, there will have not occurred or have been disclosed to the public (if previously undisclosed to the public) a Cresco Material Adverse Effect.
(d)
No delisting from the CSE or cease trade order issued by any Governmental Entity in respect of the Cresco Shares will have occurred since the date of the Arrangement Agreement that remains in effect.
Notice and Cure
The Arrangement Agreement provides that each Party will promptly notify the other Party of the occurrence, or failure to occur, of any event or state of facts which occurrence would, or would be reasonably like to:
(a)
cause any of the representations or warranties of such Party contained in the Arrangement
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Agreement to be untrue or inaccurate in any material respect at any time from the date of the Arrangement Agreement to the Effective Time if such failure to be true or accurate would cause any condition in Sections 6.2(1) [Company Reps and Warranties Conditions] or 6.3(1) [Purchaser Reps and Warranties Conditions] of the Arrangement Agreement, as applicable, to not be satisfied;
(b)
result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such Party under the Arrangement Agreement if such failure to comply would cause any condition in Sections 6.2(2) [Company Covenants Condition] or 6.3(2) [Purchaser Covenants Condition] of the Arrangement Agreement, as applicable, to not be satisfied; or
(c)
result in the failure to satisfy any of the conditions precedent in favour of the other Party contained in Sections 6.1, 6.2 and 6.3 of the Arrangement Agreement, as the case may be.
Cresco may not elect to exercise its right to terminate the Arrangement Agreement pursuant to Sections 7.2(1)(d)(i) or 7.2(1)(d)(iv) and Columbia Care may not elect to exercise its right to terminate the Arrangement Agreement pursuant to Sections 7.2(1)(c)(i) or 7.2(1)(c)(iii), unless the Terminating Party (as defined in the Arrangement Agreement) has delivered a Termination Notice (as defined in the Arrangement Agreement) to the Breaching Party (as defined in the Arrangement Agreement) specifying in reasonable detail all breaches of covenants, or incorrect representations and warranties or other matters which the Terminating Party asserts as the basis for termination. After delivering a Termination Notice, provided the Breaching Party is proceeding diligently to cure such matter and such matter is capable of being cured prior to the Outside Date (with any intentional breach being deemed to be incurable), the Terminating Party may not exercise such termination right until the earlier of (a) the Outside Date, and (b) if such matter has not been cured by the date that is 10 Business Days following receipt of such Termination Notice by the Breaching Party.
If the Terminating Party delivers a Termination Notice prior to the date of the Meeting, unless the Parties agree otherwise, the Company shall, to the extent permitted by Law, postpone or adjourn the Meeting to the earlier of (a) 10 Business Days prior to the Outside Date and (b) the date that is 10 Business Days following receipt of such Termination Notice by the Breaching Party. If such notice has been delivered prior to the making of the application for the Final Order, such application shall be postponed until the expiry of such period.
Additional Covenants Regarding Non-Solicitation
Except as expressly provided in the Arrangement Agreement, the Company and its Subsidiaries will not, directly or indirectly, through any officer, director, employee, representative (including any financial or other adviser) or agent of the Company or of any of its Subsidiaries, or otherwise, and will not permit any such Person to:
(a)
solicit, assist, initiate, knowingly encourage or otherwise knowingly facilitate (including by way of furnishing or providing copies of, access to, or disclosure of, any confidential information, properties, facilities, books or records of the Company or any Subsidiary) any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal;
(b)
enter into or otherwise engage or participate in any discussions or negotiations with any Person (other than Cresco or any of its affiliates) regarding any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal; or
(c)
make a Change in Recommendation other than following the occurrence of a Cresco Material Adverse Effect.
The Arrangement Agreement requires the Company to, and to cause its Subsidiaries and their respective Representatives to, immediately cease and terminate, and cause to be terminated, any solicitation, encouragement, discussion, negotiations, or other activities commenced on or prior to the date of the Arrangement Agreement with any Person (other than Cresco) with respect to any inquiry, proposal or offer that constitutes, or may reasonably be expected to constitute or lead to, an Acquisition Proposal, and in connection therewith the Company will:
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(a)
promptly discontinue access to and disclosure of all confidential information, including any data room and any confidential information, properties, facilities, books and records of the Company or any of its Subsidiaries; and
(b)
within two Business Days of the date of the Arrangement Agreement, to the extent it is permitted to do so, request, and use commercially reasonable efforts to exercise all rights it has to require (i) the return or destruction of all copies of any confidential information regarding the Company or any Subsidiary of Columbia Care provided to any such Person other than Cresco; and (ii) the destruction of such material including or incorporating or otherwise reflecting such confidential information regarding the Company or any Subsidiary of Columbia Care, to the extent that such information has not previously been returned or destroyed, using its commercially reasonable efforts to ensure that such requests are fully complied with in accordance with the terms of such rights or entitlements.
Notification of Acquisition Proposal
If the Company or any of its Subsidiaries receives any bona fide inquiry, proposal or offer that constitutes or could reasonably be expected to constitute or lead to an Acquisition Proposal, or any request for copies of, access to, or disclosure of, confidential information relating to the Company or any Subsidiary in relation to a possible Acquisition Proposal, the Company (a) will promptly notify Cresco, at first orally within 24 hours, and then, and in any event within 48 hours in writing, of such Acquisition Proposal, inquiry, proposal, offer or request, including a description of its material terms and conditions, the identity of all Persons making the Acquisition Proposal, inquiry, proposal, offer or request, and will provide Cresco with copies of all documents, correspondence or other material received in respect of, from or on behalf of any such Person and such other details of such Acquisition Proposal, inquiry, proposal, offer or request as Cresco may reasonably request in writing; and (b) may contact the Person making such Acquisition Proposal, inquiry, proposal, offer or request and its Representatives solely for the purpose of clarifying the terms and conditions of such Acquisition Proposal, inquiry, proposal, offer or request so as to determine whether such Acquisition Proposal, inquiry, proposal, offer or request is, or may reasonably be expected to constitute or lead to, a Superior Proposal.
Columbia Care will keep Cresco reasonably informed on a prompt basis of the status of material developments and negotiations with respect to any Acquisition Proposal, inquiry, proposal, offer or request, including any material changes, modifications or other amendments to any such Acquisition Proposal, inquiry, proposal, offer or request and will provide Cresco with copies of all material correspondence and documents if in writing or electronic form, and if not in writing or electronic form, a description of the material terms of such correspondence communicated to Columbia Care by or on behalf of any Person making such Acquisition Proposal, inquiry, proposal, offer or request.
Responding to an Acquisition Proposal
If at any time, prior to obtaining the Required Shareholder Approval at the Meeting, Columbia Care receives an unsolicited written Acquisition Proposal, Columbia Care and its Representatives may engage in or participate in discussions or negotiations with such Person regarding such Acquisition Proposal and may provide copies of, access to or disclosure of confidential information, properties, facilities, books or records of the Company or its Subsidiaries, if and only if:
(a)
the Columbia Care Board first determines in good faith, after consultation with its financial advisors and its outside legal counsel, that such Acquisition Proposal constitutes or could reasonably be expected to constitute or lead to a Superior Proposal (disregarding for such determination any due diligence or access condition);
(b)
such Person was not restricted from making such Acquisition Proposal pursuant to an existing confidentiality, standstill, non-disclosure, use, business purpose or similar agreement or restriction with the Company or its Subsidiaries;
(c)
the Acquisition Proposal did not arise as a result of a violation, in any material respect, by the Company of Article 5 [Additional Covenants Regarding Non-Solicitation] of the Arrangement Agreement;
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(d)
prior to providing copies of, access to or disclosure of confidential information, properties, facilities, books or records of the Company or its Subsidiaries, the Company enters into a confidentiality and standstill agreement with such Person on customary terms having a term not less than 12 months, provided that such confidentiality and standstill agreement may allow such Person to make an Acquisition Proposal and related communication confidentially to the Columbia Care Board; and
(e)
the Company promptly provides Cresco with:
(i)
prior written notice stating the Company’s intention to participate in such discussions or negotiations and to provide such copies, access or disclosure;
(ii)
prior to providing any such copies, access or disclosure, a true, complete and final executed copy of the confidentiality and standstill agreement referred to in subsection (d) above; and
(iii)
any non-public information concerning the Company and its Subsidiaries provided to such other Person which was not previously provided to Cresco.
Right to Match
If the Company receives an Acquisition Proposal that constitutes a Superior Proposal prior to obtaining the Required Shareholder Approval, the Columbia Care Board may, or may cause Columbia Care to make a Change in Recommendation or approve, recommend or enter into a definitive agreement with respect to such Superior Proposal, if and only if:
(a)
the Person making the Superior Proposal was not restricted from making such Superior Proposal pursuant to an existing confidentiality, standstill, non-disclosure or similar agreement or restriction;
(b)
the Acquisition Proposal did not arise as a result of a violation, in any material respect, by the Company of Article 5 [Additional Covenants Regarding Non-Solicitation] of the Arrangement Agreement;
(c)
the Company has delivered to Cresco a written notice of the determination of the Columbia Care Board that such Acquisition Proposal constitutes a Superior Proposal and of the intention of the Columbia Care Board to enter into such definitive agreement, together with a written notice from the Columbia Care Board regarding the value and financial terms that the Columbia Care Board, in consultation with its financial advisors, has determined should be ascribed to any non-cash consideration offered under such Superior Proposal (the “Superior Proposal Notice”);
(d)
the Company or its Representatives has provided Cresco a copy of the proposed definitive agreement for the Superior Proposal;
(e)
at least five Business Days (the “Matching Period”) have elapsed from the date that is the later of the date on which Cresco received the Superior Proposal Notice and the date on which Cresco received a copy of the proposed definitive agreement for the Superior Proposal from the Company;
(f)
during any Matching Period, Cresco has had the opportunity (but not the obligation) in accordance with the Arrangement Agreement to offer to amend the Arrangement Agreement and the Arrangement in order for such Acquisition Proposal to cease to be a Superior Proposal;
(g)
after the Matching Period, the Columbia Care Board has determined in good faith, after consultation with its outside legal counsel and financial advisors, that such Acquisition Proposal continues to constitute a Superior Proposal (and, if applicable, compared to the terms of the Arrangement as proposed to be amended by Cresco);
(h)
the Columbia Care Board has determined in good faith, after consultation with the Company’s outside legal counsel that the failure to take the relevant action would be inconsistent with its fiduciary duties; and
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(i)
prior to or concurrently with making a Change in Recommendation or entering into such definitive agreement, the Company terminates the Arrangement Agreement pursuant Section 7.2(1)(c)(ii) of the Arrangement Agreement and pays the Termination Fee pursuant to Section 8.2(3)(a) of the Arrangement Agreement.
During the Matching Period, or such longer period as the Company may approve in writing for such purpose (in its sole discretion): (a) the Columbia Care Board will review any offer made by Cresco to amend the terms of the Arrangement Agreement in good faith, in consultation with the Company’s outside legal counsel and financial advisors, in order to determine whether such proposal would, upon acceptance, result in the Acquisition Proposal previously constituting a Superior Proposal ceasing to be a Superior Proposal; and (b) if the Columbia Care Board determines such Acquisition Proposal would cease to be a Superior Proposal as a result of such amendment, the Company will negotiate in good faith with Cresco to make such amendments to the terms of the Arrangement Agreement as would enable Cresco to proceed with the transactions contemplated thereby on such amended terms. If the Columbia Care Board determines that such Acquisition Proposal would cease to be a Superior Proposal, the Company will promptly so advise Cresco and the Company and Cresco will amend the Arrangement Agreement to reflect such offer made by Cresco, and will take and cause to be taken all such actions as are necessary to give effect to the foregoing.
Each successive amendment or modification to any Acquisition Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the Columbia Care Shareholders or other material terms or conditions thereof will constitute a new Acquisition Proposal for the purposes of Section 5.4 of the Arrangement Agreement, and Cresco will be afforded a new five Business Day Matching Period from the later of the date on which Cresco received the new Superior Proposal Notice from the Company and the date on which Cresco received a copy of the proposed definitive agreement for the new Superior Proposal from the Company.
At Cresco’s reasonable request, the Columbia Care Board will promptly reaffirm the Columbia Care Board Recommendation by press release after any Acquisition Proposal which is not determined to be a Superior Proposal is publicly announced or if the Columbia Care Board determines that a proposed amendment to the terms of the Arrangement Agreement as contemplated under Section 5.4(2) of the Arrangement Agreement would result in an Acquisition Proposal which has been publicly announced no longer being a Superior Proposal. The Company will provide Cresco and its outside legal counsel with a reasonable opportunity to review the form and content of any such press release and will consider all reasonable comments to such press release as requested by Cresco and its outside legal counsel.
If the Company provides a Superior Proposal Notice to Cresco after a date that is less than five Business Days before the Meeting, the Company will either proceed with or will postpone or adjourn the Meeting to a date acceptable to both Columbia Care and Cresco (acting reasonably), that is not more than five Business Days after the scheduled date of the Meeting, but in any event to a date that is not less than six Business Days prior to the Outside Date.
Termination of Arrangement Agreement
The Arrangement Agreement may be terminated prior to the Effective Time (notwithstanding any approval of the Arrangement Agreement or the Arrangement Resolution by Columbia Care Shareholders or the approval of the Arrangement by the Court) by:
(a)
the mutual written agreement of the Parties; or
(b)
either the Company or Cresco if:
(i)
the Required Shareholder Approval is not obtained at the Meeting in accordance with the Interim Order, provided that a Party may not terminate the Arrangement Agreement if the failure to obtain the Required Shareholder Approval has been caused by, or is a result of, a breach by such Party of any of its representations or warranties or the failure of such Party to perform any of its covenants or agreements under the Arrangement Agreement;
(ii)
after the date of the Arrangement Agreement, any Law is enacted, made, enforced or amended, as applicable, that makes the consummation of the Arrangement illegal or otherwise
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permanently prohibits or enjoins the Company or Cresco from consummating the Arrangement, and such Law has, if applicable, become final and non-appealable, provided the Party seeking to terminate the Arrangement Agreement has used its commercially reasonable efforts to, as applicable, appeal or overturn such Law or otherwise have it lifted or rendered non-applicable in respect of the Arrangement; or
(iii)
the Effective Time does not occur on or prior to the Outside Date, provided that a Party may not terminate the Arrangement Agreement if the failure of the Effective Time to so occur has been caused by, or is a result of, a breach by such Party of any of its representations or warranties or the failure of such Party to perform any of its covenants or agreements under the Arrangement Agreement; or
(c)
the Company if:
(i)
a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Cresco under the Arrangement Agreement occurs that would cause any condition in Section 6.3(1) [Purchaser Reps and Warranties Condition] or Section 6.3(1) [Purchaser Covenants Condition] of the Arrangement Agreement not to be satisfied, and such breach or failure is incapable of being cured or is not cured on or prior to the Outside Date in accordance with the terms of Section 4.8(3) of the Arrangement Agreement; provided that the Company is not then in breach of the Arrangement Agreement so as to directly or indirectly cause any condition in Section 6.2(1) [Company Reps and Warranties Condition] or Section 6.2(2) [Company Covenants Condition] of the Arrangement Agreement not to be satisfied;
(ii)
prior to obtaining the Required Shareholder Approval, the Columbia Care Board makes a Change in Recommendation or the Company enters into a written agreement (other than a confidentiality agreement permitted by and in accordance with Section 5.4 of the Arrangement Agreement) with respect to a Superior Proposal in accordance with Section 5.4 of the Arrangement Agreement, provided the Company is then in compliance with Article 5 of the Arrangement Agreement, in all material respects, and that prior to or concurrent with such termination, the Company pays the Termination Fee in accordance with Section 8.2(1) of the Arrangement Agreement; or
(iii)
since the date of the Arrangement Agreement, there has occurred and is continuing a Cresco Material Adverse Effect which is incapable of being cured on or prior to the Outside Date; or
(d)
Cresco if:
(i)
a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company under the Arrangement Agreement occurs that would cause any condition in Section 6.2(1) [Company Reps and Warranties Condition] or Section 6.2(2) [Company Covenants Condition] of the Arrangement Agreement not to be satisfied, and such breach or failure is incapable of being cured on or prior to the Outside Date or is not cured in accordance with the terms of Section 4.8(3) of the Arrangement Agreement; provided that Cresco is not then in breach of the Arrangement Agreement so as to directly or indirectly cause any condition in Section 6.3(1) [Purchaser Reps and Warranties Condition] or Section 6.3(1) [Purchaser Covenants Condition] not to be satisfied;
(ii)
the Columbia Care Board or the Columbia Care Special Committee (A) fails to unanimously recommend or withdraws, amends, modifies or qualifies, or publicly proposes or states an intention to withdraw, amend, modify or qualify, in a manner adverse to Cresco, the Columbia Care Board Recommendation, (B) accepts, approves, endorses or recommends, or publicly proposes to accept, approve, endorse or recommend or takes no position or a neutral position, in each case with respect to a publicly announced, or otherwise publicly disclosed, Acquisition Proposal for more than five Business Days (or beyond the third Business Day prior to the date of the Meeting, if sooner), (C) enters into (other than a confidentiality agreement permitted by and in accordance with Section 5.3 of the Arrangement Agreement) or publicly proposes to enter into, any agreement, letter of intent, or Contract in respect of an Acquisition Proposal; (D) fails to publicly reaffirm the Columbia Care Board Recommendation (without
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qualification) within five Business Days after having been requested in writing by Cresco to do so, acting reasonably (collectively, a “Change in Recommendation”), or (E) the Company breaches Article 5 [Additional Covenants Regarding Non-Solicitation] of the Arrangement Agreement in any material respect;
(iii)
any event occurs as a result of which the condition set forth in Section 6.2(5) [Dissent Rights Condition] of the Arrangement Agreement is not capable of being satisfied by the Outside Date; or
(iv)
since the date of the Arrangement Agreement, there has occurred and is continuing a Columbia Care Material Adverse Effect, which is incapable of being cured on or prior to the Outside Date.
The Party desiring to terminate the Arrangement Agreement will give notice of such termination to the other Party, specifying in reasonable detail the basis for such Party’s exercise of its termination right.
Termination Fee
The Termination Fee is payable by the Company to Cresco in the event that:
(a)
Cresco terminates the Arrangement Agreement following a Change in Recommendation, or a breach by the Company of any of its covenants regarding non-solicitation in any material respect;
(b)
Columbia Care terminates the Arrangement Agreement following a Change in Recommendation or the entering by the Company into a written agreement (other than a confidentiality agreement permitted by and in accordance with Section 5.4 of the Arrangement Agreement) with respect to a Superior Proposal in accordance with Section 5.4 of the Arrangement Agreement;
(c)
the Company or Cresco terminates the Arrangement Agreement:
(i)
if the Required Shareholder Approval is not obtained;
(ii)
the Effective Time does not occur on or prior to the Outside Date; or
(iii)
Cresco terminates the Arrangement Agreement as a result of the Company’s breach of its representations or warranties;
in each circumstance if: (A) prior to such termination, an Acquisition Proposal is publicly announced or otherwise publicly disclosed by any Person (other than Cresco or any of its affiliates) or any Person (other than Cresco or any of its affiliates) will have publicly announced an intention to make an Acquisition Proposal; and (B) within twelve months following the date of such termination: (I) an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in (A) above) is consummated; or (II) the Company or one or more of its Subsidiaries, directly or indirectly, in one or more transactions, enters into a contract in respect of an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in (A) above) and such Acquisition Proposal is later consummated (whether or not within twelve months after such termination).
For purposes of the foregoing, the term “Acquisition Proposal” has the meaning assigned under Appendix A, except that references to “20% or more” will be deemed to be references to “50% or more”.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
Columbia Care is providing the unaudited pro forma condensed combined financial information under Appendix K to aid you in your analysis of the financial aspects of the Arrangement and related transactions. The unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of Columbia Care and Cresco, as adjusted to give effect to the Arrangement. The unaudited pro forma condensed combined balance sheets at March 31, 2022 and December 31, 2021 give effect to the Arrangement as if it had occurred on January 1, 2021. The unaudited pro forma condensed statement of operations for the three months ended March 31, 2022 and the year ended December 31, 2021 give effect to the Arrangement as if it had occurred on January 1, 2021.
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The pro forma financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the Arrangement occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial condition and results of operations of the combined company may differ significantly from the pro forma amounts reflected herein due to a variety of factors, including differences in accounting policies, elections, and estimates.
SECURITIES LAW MATTERS
The following is a brief summary of the Canadian and United States securities law considerations applying to the transactions contemplated herein not discussed elsewhere in this Circular.
Canadian Securities Laws
The following is only a general overview of certain requirements of Canadian Securities Laws relating to the Arrangement that may be applicable to Columbia Care securityholders. Each Columbia Care securityholder is urged to consult such person’s professional advisors to determine the Canadian conditions and restrictions applicable to trades in the securities issuable pursuant to the Arrangement.
The issuance of securities pursuant to the Arrangement will constitute a distribution of securities that is exempt from the prospectus requirement of applicable Canadian Securities Laws. Securities issued pursuant to the Arrangement may be resold, subject to the terms of such security, in each province and territory of Canada, provided: (i) that Cresco is a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade; (ii) the trade is not a “control distribution” as defined in NI 45-102; (iii) no unusual effort is made to prepare the market or create a demand for those securities; (iv) no extraordinary commission or consideration is paid in respect of that trade; and (v) if the selling securityholder is an “insider” or “officer” of Cresco (as such terms are defined by applicable Canadian Securities Laws), the insider or officer has no reasonable grounds to believe that Cresco is in default of applicable Canadian Securities Laws.
To the extent that a Columbia Care securityholder resides outside Canada, the securities received by such person may be subject to certain additional transfer restrictions under Securities Laws. All Columbia Care securityholders residing outside Canada are advised to consult their own legal advisors regarding such transfer restrictions.
Application of Multilateral Instrument 61-101
Columbia Care is a reporting issuer (or its equivalent) in all of the provinces of Canada except in Quebec and, accordingly, is subject to the applicable Securities Laws of such provinces, including MI 61-101 which has been adopted in Ontario and certain other provinces of Canada. MI 61-101 regulates transactions which raise the potential for conflicts of interest, including issuer bids, insider bids, related party transactions and business combinations.
MI 61-101 is intended to ensure the protection and fair treatment of all securityholders. MI 61-101 regulates certain transactions, generally requiring enhanced disclosure, approval by a majority of the minority securityholders excluding interested parties, related parties of interested parties and their joint actors and, in certain circumstances, independent valuations. The protections of MI 61-101 generally apply to “business combination” ​(as defined in MI 61-101) transactions in which the interests of securityholders may be terminated without their consent and where, inter alia, a “related party” of an issuer (as defined in MI 61-101 and including directors, executive officers and shareholders holding over 10% of outstanding voting shares of the issuer) is entitled to receive, inter alia, a “collateral benefit” ​(as defined in MI 61-101) in connection with an arrangement.
As previously described in this Circular, all of the outstanding Columbia Care Shares will be exchanged for Cresco Shares under the terms of the Plan of Arrangement. Unless no related party of Columbia Care is entitled to receive a “collateral benefit” ​(as defined in MI 61-101) in connection with the Arrangement, the transaction would be considered a “business combination” and subject to the minority approval requirements at the Meeting.
A collateral benefit (as defined in MI 61-101) includes any benefit that a related party of Columbia Care is entitled to receive as a consequence of the Arrangement, including an increase in salary, a lump sum
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payment, a payment for surrendering securities, or other enhancement in benefits related to services as an employee, director or consultant of Columbia Care. MI 61-101 excludes from the meaning of collateral benefit: (i) a payment per security that is identical in amount and form to the entitlement of the general body of holders in Canada of securities of the same class, as well as (ii) certain benefits to a related party received solely in connection with the related party’s services as an employee, director or consultant of an issuer, of an affiliated entity of such issuer or of a successor to the business of such issuer where: (A) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for securities relinquished under the transaction; (B) the conferring of the benefit is not, by its terms, conditional on the related party supporting the transaction in any manner; (C) full particulars of the benefit are disclosed in the disclosure document for the transaction; and (D) either: (I) at the time of the transaction the related party and his or her associated entities beneficially own, or exercise control or direction over, less than 1% of the outstanding securities of each class of equity securities of the issuer; or (II) the related party discloses to an independent committee of the issuer the amount of consideration that he or she expects to be beneficially entitled to receive, under the terms of the transaction, in exchange for the equity securities he or she beneficially owns and the independent committee acting in good faith determines that the value of the benefit, net of any offsetting costs to the related party, is less than 5% of the value of the consideration the related party will receive pursuant to the terms of the transaction for the equity securities it beneficially owns, and the independent committee’s determination is disclosed in the disclosure document for the transaction.
Minority Approval Requirements
Certain of the directors and executive officers of Columbia Care hold Columbia Care RSUs and Columbia Care PSUs. The terms governing the Columbia Care RSUs and PSUs held by officers of Columbia Care granted prior to 2022 contain “double trigger” change of control provisions which provide for accelerated vesting following a change of control where there has been a qualified termination of employment following a change of control. For awards granted in 2022, their terms provide for “single trigger” vesting upon a change of control. In respect of Columbia Care RSUs held by directors of Columbia Care, for awards granted in 2022, such awards vest upon a change of control, and for any awards granted prior to 2022, such awards vest upon a change of control if the director is no longer a director of Columbia Care following such change of control or the continuing entity. In addition, certain officers of Columbia Care have an employment agreement with Columbia Care which contain certain “double trigger” change of control provisions, under which the completion of the Arrangement will be considered a change of control of Columbia Care. Accordingly, such individuals may become entitled to change of control entitlements. The acceleration of the Columbia Care RSUs and Columbia Care PSUs and receipt of change of control entitlement following a change of control and a qualified termination of employment may be considered to be collateral benefits receivable by the applicable directors and executive officers of Columbia Care for purposes of MI 61-101. See “The Arrangement — Interests of Certain Persons in the Arrangement”.
As of the Record Date, each of the directors and executive officers of Columbia Care and their respective associated entities beneficially own, or exercise control or direction over, less than 1% of each class of the issued and outstanding Columbia Care Common Shares and Columbia Care PV Shares other than Nicholas Vita (Chief Executive Officer), who owns 9.43% of the Columbia Care Common Shares (in the aggregate, Mr. Vita owns 9.10% of the votes attached to the Columbia Care Shares voting as a single class), Philip Goldberg (director), who owns 2.02% of the Columbia Care Common Shares (in the aggregate, Mr. Goldberg owns 1.95% of the votes attached to the Columbia Care Shares voting as a single class), James A.C. Kennedy, who owns 13.37% of the Columbia Care PV Shares (in the aggregate, Mr. Kennedy owns 0.48% of the votes attached to the Columbia Care Shares voting as a single class) and Johnathan May (director), who owns 21.60% of the Columbia Care PV Shares (in the aggregate, Mr. Kennedy owns 0.76% of the votes attached to the Columbia Care Shares voting as a single class)
An independent committee, in accordance with the provisions of MI 61-101, considered whether the above mentioned directors and executive officers of Columbia Care will receive a “collateral benefit” as a consequence of the Arrangement. Such committee determined that the value of any benefit (i.e. the possible acceleration of vesting of Columbia Care RSUs), net of any offsetting costs, to be received by each of Messrs. Goldberg, Kennedy and May is, in each case, less than 5% of the total value of the consideration they expect to be entitled to receive under the Arrangement in respect of their Columbia Care Shares and, therefore, each of the foregoing individuals will not receive a “collateral benefit” as a consequence of the Arrangement.
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Mr. Vita may be considered to be entitled to a “collateral benefit” owing to the acceleration or potential acceleration of his Columbia Care RSUs and Columbia Care PSUs and his right in certain circumstances to receive change of control entitlements following completion of the Arrangement. See “The Arrangement — Interests of Certain Persons in the Arrangement”.
As a result of the foregoing analysis, the minority approval requirements for a business combination under MI 61-101 will apply in connection with the Arrangement. Accordingly, in addition to obtaining approval of the Arrangement Resolution by the affirmative vote of at least two-thirds (6623%) of the votes cast on the Arrangement Resolution by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting, for the Arrangement Resolution to be effective, the Arrangement Resolution must also be approved by the affirmative vote of at least a simple majority of the votes cast on the Arrangement Resolution by Columbia Care Shareholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote at the Meeting, excluding the votes of the persons whose votes may not be included under the minority approval requirements for a business combination under MI 61-101.
Mr. Vita is the only party whose votes will be excluded for the purposes of determining minority approval for the Arrangement under MI 61-101. As of the Record Date, Mr. Vita (including any related party or joint actor of Mr. Vita) beneficially owns, or exercises control or direction over, 36,283,801 Columbia Care Common Shares (representing approximately 9.43% of the Columbia Care Common Shares and 9.10% of the votes attaching to all of the outstanding Columbia Care Shares) which will be excluded for purposes of determining minority approval in accordance with MI 61-101.
Pursuant to an application made to the Ontario Securities Commission, as principal regulator, Columbia Care obtained an order from the Ontario Securities Commission dated May 11, 2022, exempting Columbia Care from the requirements in subsection 8.1(1) of MI 61-101 to obtain minority approval for the Arrangement from the holders of each affected class of Columbia Care Shares, in each case voting separately as a class. As a result of the granting of such order, the holders of Columbia Care Common Shares and Columbia Care PV Shares will vote together as a single class as set forth herein.
Formal Valuation
Columbia Care is not required to obtain a formal valuation under MI 61-101 as no interested party is, as a consequence of the Arrangement, directly or indirectly acquiring Columbia Care or its business and neither the Arrangement nor the transactions contemplated thereunder is a “related party transaction” ​(as defined in MI 61-101) for which Columbia Care would be required to obtain a formal valuation.
MI 61-101 also requires Columbia Care to disclose any “prior valuations” ​(as defined in MI 61-101) of Columbia Care or its material assets or securities made within the 24-month period preceding the date of this Circular. After reasonable inquiry, neither Columbia Care nor any director or officer of Columbia Care has knowledge of any such prior valuation. Disclosure is also required for any bona fide prior offer for the Columbia Care Shares during the 24 months before entry into the Arrangement Agreement. Other than as set forth herein, there has not been any such offer during such 24-month period.
U.S. Securities Laws
The following discussion is only a general overview of certain requirements of U.S. Securities Laws that may be applicable to Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders, Columbia Care PSU Holders and holders of Columbia Care Warrants and Columbia Care Convertible Notes. Each Columbia Care securityholder is urged to consult such person’s professional advisors to determine the U.S. conditions and restrictions applicable to trades in the Cresco Shares issuable pursuant to the Arrangement. Further information applicable to the holders of such securities resident in the United States is disclosed in this Circular under the heading “Notice to Securityholders in the United States”.
Exemption From U.S. Registration
The Cresco Shares, Replacement Options, Replacement RSUs and Replacement PSUs to be distributed to Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia
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Care PSU Holders, respectively, under the Arrangement have not been and will not be registered under the U.S. Securities Act or the securities laws of any state of the United States, and will be issued and exchanged in reliance upon the Section 3(a)(10) Exemption and exemptions under the securities laws of each of the respective U.S. states in which U.S. Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia Care PSU Holders reside. The Section 3(a)(10) Exemption exempts from registration a security that is issued in exchange for outstanding securities and other property where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange have the right to appear (and receive timely and adequate notice thereof), by a court or by a Governmental Entity expressly authorized by law to grant such approval. Such court or Governmental Entity must be advised before the hearing that the issuer will rely on the Section 3(a)(10) Exemption based on the court’s or Governmental Entity’s approval of the transaction.
Pursuant to the terms of the Arrangement Agreement, to the extent permitted by applicable Law, Cresco will, as promptly as practicable following the Effective Date, cause a registration statement on Form S-8 to be filed with the SEC which registers the issuance of the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement RSUs and Replacement PSUs, as applicable. In addition, if Cresco is not permitted by applicable Law to file a Form S-8 registering the issuance of the Cresco Shares issuable upon exercise, vesting or settlement, as applicable, of the Replacement Options, Replacement PSUs and Replacement RSUs, Cresco will promptly file a registration statement on appropriate form to register the resale of the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable or otherwise take all necessary actions to cause the Cresco Shares issuable upon exercise, vesting or settlement of the Replacement Options, Replacement PSUs and Replacement RSUs, as applicable, to be issued without restrictive legends.
The Court issued the Interim Order on June 6, 2022, and, subject to the approval of the Arrangement by the Columbia Care Shareholders, a hearing for a Final Order approving the Arrangement is currently scheduled to take place on July 14, 2022 at 9:45 a.m. (Vancouver time) in Vancouver, British Columbia. All Columbia Care Shareholders, Columbia Care Optionholders, Columbia Care RSU Holders and Columbia Care PSU Holders are entitled to appear and be heard at this hearing, provided that they satisfy the applicable conditions set forth in the Interim Order. The Final Order of the Court will, if granted, constitute the basis for the Section 3(a)(10) Exemption with respect to the securities to be issued under the Arrangement. Prior to the hearing on the Final Order, the Court will be informed of this effect of the Final Order.
Holders of Columbia Care Options, Columbia Care RSUs and Columbia Care PSUs are advised that the Section 3(a)(10) Exemption will not be available with respect to the Cresco Shares issuable upon exercise or vesting, as applicable, of the Replacement Options, Replacement RSUs or Replacement PSUs. In addition, unless and until the registration statement on Form S-8 (or other appropriate form as described above and in the Arrangement Agreement) is filed with the SEC, the Cresco Shares issuable upon the exercise of the Replacement Options will be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act, and may be issued only pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. In connection with any exercise or vesting, as applicable, of Replacement Options, Replacement RSUs or Replacement PSUs, that is not registered pursuant to a Form S-8 (or other appropriate form as described above and in the Arrangement Agreement), Cresco may require the delivery of reasonably satisfactory evidence, which may include, without limitation, an opinion of counsel of recognized standing, to the effect that such exercise does not require registration under the U.S. Securities Act.
The Cresco Shares to be issued under the Arrangement will be freely transferable for purposes of the U.S. Securities Act, except that the U.S. Securities Act imposes restrictions on the resale of Cresco Shares received pursuant to the Arrangement by Persons who are, become after consummation of the Arrangement or within 90 days of the Effective Time have been, “affiliates” of Cresco.
As defined in Rule 144 under the U.S. Securities Act, an “affiliate” of an issuer is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such issuer and may include certain officers and directors of such issuer as well as principal shareholders of such issuer. “Control” means the possession, direct or indirect, of the power to direct or cause direction of the management and policies of an issuer, whether through the ownership of voting securities, by contract or otherwise.
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An “affiliate” of Cresco is a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Cresco and may include certain executive officers and directors of Cresco, as well as principal shareholders of Cresco, directors or executive officers of Columbia Care who become directors or executive officers of Cresco after the Arrangement, and any person deemed to be an affiliate of Cresco within 90 days before the closing of the Arrangement.
Any Columbia Care Shareholder who, after consummation of the Arrangement is an “affiliate” ​(as defined in Rule 144 under the U.S. Securities Act) of Cresco or was, at any time during the 90 days immediately before the resale of any Cresco Shares received under the Arrangement, an “affiliate” of Cresco, may not resell such Cresco Shares, unless such shares are registered under the U.S. Securities Act or an exemption from registration, such as the exemptions contained in Rule 144 and Rule 904 of Regulation S (for transfers outside the United States), is available. This Circular does not cover resales of any Cresco Shares received by any person upon completion of the Arrangement, and no person is authorized to make any use of this Circular in connection with any resale.
Holders of Columbia Care Warrants and Columbia Care Convertible Notes, are advised that the Section 3(a)(10) Exemption will not be available with respect to the Cresco Shares issuable upon exercise or conversion, as applicable, of the Columbia Care Warrants and Columbia Care Convertible Notes. The Cresco Shares issuable upon the exercise or conversion of the Columbia Care Warrants and Columbia Care Convertible Notes will be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act, and may be issued only pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. In connection with any such exercise or conversion, Cresco may require the delivery of reasonably satisfactory evidence, which may include, without limitation, an opinion of counsel of recognized standing, to the effect that such exercise or conversion does not require registration under the U.S. Securities Act.
Affiliates — Rule 144
In general, under Rule 144, persons that are affiliates of Cresco after consummation of the Arrangement or were affiliates of Cresco within the 90 days immediately before the resale of the Cresco Shares or other Cresco securities received under the Arrangement will be entitled to sell such securities that they receive under the Arrangement in the United States, provided that the number of such shares sold, together with all other shares of the same class sold for their account during any three-month period, does not exceed the greater of 1% of the then outstanding securities of such class or, if such shares are listed on a U.S. securities exchange and/or reported through the automated quotation system of a U.S. registered securities association, the average weekly trading volume of such shares during the four calendar week period preceding the date of sale, subject to aggregation rules, specified restrictions on manner of sale, reporting requirements, and the availability of current public information about the relevant issuer. Persons that are affiliates of Cresco after the Arrangement will continue to be subject to the resale restrictions described in this paragraph for so long as they continue to be affiliates of Cresco, and for 90 days thereafter.
Affiliates — Regulation S
In general, pursuant to Rule 904 of Regulation S, persons who are affiliates of Cresco solely by virtue of their status as an officer or director of such company may sell Cresco Shares or other Cresco securities outside the United States in an “offshore transaction” ​(which would include a sale through the CSE, if applicable) if neither the seller nor any person acting on its behalf engages in “directed selling efforts” in the United States and no selling commission, fee or other remuneration is paid in connection with such sale other than a usual and customary broker’s commission. For purposes of Regulation S, “directed selling efforts” means, “any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the securities being offered” in the sale transaction. Pursuant to Rule 903 of Regulation S, certain additional restrictions are applicable to a holder of Cresco securities who is an affiliate of Cresco after the Arrangement other than solely by virtue of his or her status as an officer or director of Cresco.
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REGULATORY MATTERS
U.S. Antitrust Matters
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the related rules and regulations that have been issued by the U.S. Federal Trade Commission (the “FTC”), Cresco’s acquisition of all the outstanding shares of Columbia Care in exchange for shares of Cresco as contemplated by the Arrangement Agreement may not be consummated until the expiration or termination of a waiting period following the filing of required information and documentary material with the FTC and the Antitrust Division of the U.S. Department of Justice (the “