FAF Fire and Flower Holdings Corporation

/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES/

Loan Agreement will result in $11 million of non-dilutive proceeds

Private Placement would result in $5 million of aggregate proceeds

Includes amendments to Series C Warrants

TORONTO, Oct. 18, 2022 /CNW/ - Fire & Flower Holdings Corp. ("Fire & Flower" or the "Company") (TSX: FAF) (OTCQX: FFLWF), today announced that it has entered into an amendment agreement (the "Amendment Agreement") with respect to certain amendments (the "Amendments") to the Series C common share purchase warrants of the Company (the "Series C Warrants") issued to an indirect wholly-owned subsidiary of Alimentation Couche-Tard Inc. ("ACT"). In connection with the Amendment Agreement, ACT and the Company have entered into: (a) a loan agreement (the "Loan Agreement") in respect of an $11,000,000 principal amount loan to the Company (the "Loan"); and (b) a subscription agreement (the "Subscription Agreement") to purchase common shares of the Company (the "Common Shares") for aggregate proceeds of approximately $5,000,000 (the "Private Placement" and collectively with the Amendments, the "Warrant and Share Transaction").

"These financings with our strategic partner, Alimentation Couche-Tard, provide Fire & Flower with access to capital on favorable terms and demonstrate continued strategic alignment between the two companies as we continue to execute our technology-enabled retail strategy," said Stéphane Trudel, Chief Executive Officer of Fire & Flower. "The Company will prudently use this capital to continue to grow the business and build upon the recent success we have seen through improvements in our retail, wholesale and logistics, and digital business segments."

"In addition to our co-located store program with Fire & Flower, Alimentation Couche-Tard has committed to advance these financings to enable Fire & Flower to execute upon its growth-oriented strategy," said Alex Miller, Executive Vice-President, Operations, North America, and Global Commercial Optimization of Alimentation Couche-Tard. "Fire & Flower continues to be our strategic partner in the growing cannabis retail market, and we look forward to continuing to work with Fire & Flower on other initiatives."

ACT is currently the holder of 17,796,284 Series C Warrants:

The Series C Warrants are currently exercisable at any time following October 1, 2022 and expire on June 30, 2023, subject to the terms of the Series C Warrants.

Pursuant to the terms of the Amendment Agreement, the Company and ACT propose to amend the terms of the Series C Warrants, which amendments include, but are not limited to, the following:

The IRA would also be amended to reflect the aforementioned Amendments to the Series C Warrants.

Pursuant to the terms of the Loan Agreement, ACT will loan $11,000,000 principal amount to the Company with an interest rate of 11.0% per annum and payable quarterly, provided that for the first six months of the term of the Loan, the Company may elect to increase the principal amount of the Loan by the amount of accrued interest during such period in lieu of paying such accrued interest to ACT. The Loan matures on December 31, 2023 and ACT will have first priority security on all of the assets of the Company and its subsidiaries including all intellectually property subject only to permitted liens. Pursuant to the Loan Agreement, the Company may prepay all or any portion of the Loan without bonus or penalty upon five business days' notice. Funding under the Loan Agreement is subject to the prior acceptance of the Toronto Stock Exchange (the "TSX"), with funding of the Loan expected to occur shortly thereafter.

Pursuant to the terms of the Subscription Agreement, ACT and the Company have agreed to complete a Private Placement, whereby ACT will subscribe for 3,034,017 Common Shares at a price of $1.64798 per Common Share, for aggregate proceeds of approximately $5,000,000. The Company is entitled to terminate the Subscription Agreement and enter into an agreement with respect to an unsolicited superior proposal, in which case the Loan shall become immediately due and payable.

The board of directors of the Company (the "Board"), based on a unanimous recommendation of a special committee comprised of independent directors (the "Special Committee") and after consultation with its legal and financial advisors, has unanimously determined that the Loan and the Warrant and Share Transaction are in the best interests of Fire & Flower.

The Special Committee was established by the Board to consider certain proposals made by ACT, as well as other alternatives available to the Company and, if deemed advisable, negotiate with ACT. Following comprehensive negotiations and the evaluation of alternatives available to the Company, the Special Committee unanimously recommended that the Board approve the Loan Agreement and the Warrant and Share Transaction. The Board (excluding conflicted directors), having received the unanimous recommendation of the Special Committee, unanimously approved the Loan and determined that the Warrant and Share Transaction are in the best interests of the Company and recommends that the shareholders of the Company, other than ACT and its affiliates (the "Minority Shareholders"), vote in favour of the Warrant and Share Transaction at the special meeting of shareholders to be held to approve the Warrant and Share Transaction.

The Special Committee retained Canaccord Genuity Corp. ("Canaccord Genuity") as financial advisor in connection with the Warrant and Share Transaction and obtained a fairness opinion from Canaccord Genuity which provides that, as of October 17, 2022, and based upon and subject to the assumptions, factors, limitations and qualifications set forth therein, the Warrant and Share Transaction is fair, from a financial point of view, to the Company.

The Warrant and Share Transaction is subject to customary conditions precedent and applicable regulatory approvals, including the receipt of the requisite approvals by the holders of Common Shares as required by applicable securities laws and the policies of the TSX. The Company intends to seek the requisite shareholder approval at a special meeting of shareholders expected to be held in December 2022. It is a condition of both the Amendments and the Private Placement that each transaction be approved by the Minority Shareholders prior to coming into effect. The Loan Agreement does not require Minority Shareholder approval.

ACT holds greater than 10% of the outstanding voting securities of the Company. As such, the Amendments, Loan and Private Placement all constitute a related-party transaction under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company has relied on the exemption from the formal valuation requirement of MI 61-101 contained in section 5.5(c) of MI 61-101 in respect of the Private Placement as the Common Shares to be issued are being distributed for cash consideration, neither the Company nor ACT have knowledge of any material information concerning the Company and the circular prepared for shareholders in connection with the meeting to approve the Private Placement will include the requisite disclosure contemplated by section 5.5(c) of MI 61-101. The Amendments and the Loan are not subject to the formal valuation requirements of MI 61-101.

The Company has also relied on the exemption from the minority shareholder approval requirements of MI 61-101 contained in section 5.7(1)(f) of MI 61-101 in respect of the Loan, as the Loan was obtained by the Company on reasonable commercial terms that are no less advantageous to the Company than if the Loan was obtained from an arm's length party and the Loan is not convertible into or repayable by the issuance of equity or voting securities of the Company. The Amendments and the Private Placement are not exempt under section 5.7 of MI 61-101, and as such, are subject to minority shareholder approval in accordance with MI 61-101. Further details will be included in a material change report to be filed by the Company, however, such material change report has not been filed 21 days before the entering into of the Loan Agreement, the Amendment Agreement and the Subscription Agreement as the terms thereof were not finalized and approved by all parties until immediately prior to the entering into of such agreements.

Dentons Canada LLP is acting as legal advisor to Fire & Flower. Canaccord Genuity Corp. is acting as financial advisor to the Special Committee and provided a fairness opinion to the Special Committee.

Davies Ward Phillips & Vineberg LLP is acting as legal advisor to ACT.

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

Fire & Flower is a cannabis consumer retail and technology platform with more than 90 corporate-owned stores in its network. The Company leverages its wholly-owned technology development subsidiary, Hifyre Inc., to continually advance its proprietary retail operations model while also providing additional independent high-margin revenue streams. Fire & Flower guides consumers through the complex world of cannabis through best-in-class retailing while the Hifyre™ digital and analytics platform empowers retailers to optimize their connections with consumers. The Company's leadership team combines extensive experience in the technology, cannabis and retail industries.

Through the strategic investment of ACT (owner of Circle K convenience stores), the Company has set its sights on global expansion as new cannabis markets emerge and is poised to expand into the United States when permitted through its strategic licensing agreement with Fire & Flower U.S. Holdings upon the occurrence of certain changes to the cannabis regulatory regime. To learn more about Fire & Flower, visit www.fireandflower.com.

Couche-Tard is a global leader in convenience and fuel retail, operating in 24 countries and territories, with almost 14,100 stores, of which approximately 10,700 offer road transportation fuel. With its well-known Couche-Tard and Circle K banners, it is one of the largest independent convenience store operators in the United States and it is a leader in the convenience store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, as well as in Ireland. It also has an important presence in Poland and Hong Kong Special Administrative Region of the People's Republic of China. Approximately 122,000 people are employed throughout its network.

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

This news release contains certain forward-looking information within the meaning of applicable Canadian securities laws ("forward-looking statements"). All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "could", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "project" and similar words, including negatives thereof, suggesting future outcomes or that certain events or conditions "may" or "will" occur. These statements are only predictions.

Forward-looking statements are based on the opinions and estimates of management of Fire & Flower at the date the statements are made based on information then available to Fire & Flower. Various factors and assumptions are applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Forward-looking statements are subject to and involve a number of known and unknown, variables, risks and uncertainties, many of which are beyond the control of Fire & Flower, which may cause Fire & Flower's actual performance and results to differ materially from any projections. Such factors, among other things, include: final regulatory and other approvals or consents (including shareholder approval).

No assurance can be given that the expectations reflected in forward-looking statements will prove to be correct. Although the forward-looking statements contained in this news release are based upon what management of the Company believes, or believed at the time, to be reasonable assumptions, the Company cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended. Readers should not place undue reliance on the forward-looking statements and information contained in this news release. Additional information regarding risks and uncertainties relating to the Company's business are contained under the headings "Risk Factors" in the Company's Annual Information Form dated April 26, 2022 and "Risks and Uncertainties" in the management discussion and analysis for the thirteen weeks ended July 30, 2022 filed on its issuer profile on SEDAR at www.sedar.com. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

SOURCE Fire & Flower Holdings Corp.