April 4, 2019—VANCOUVER—PRESS RELEASE—Harvest Health & Recreation, Inc., a vertically integrated cannabis company with one of the largest and deepest footprints in the U.S., has announced that it has entered into an engagement agreement for a brokered private sale of up to 500,000 convertible debentures of Harvest, at a price of US$1,000 per Debenture, for gross proceeds of US$500 million. The Offering is intended to be closed in five tranches of 100,000 Debentures per tranche, over a period of not more than 18 months. The net proceeds of the Offering will be used by Harvest for working capital and general corporate purposes. The first tranche of the Offering is expected to close on May 1, 2019 and subsequent tranches are issuable at the option of Harvest, subject to certain conditions. Concurrently with the engagement agreement, Harvest also entered into an agreement with a lead investor to subscribe for the full amount of the Offering. Pursuant to the Agreement with the Lead Investor, Harvest is entitled, in its discretion, to issue the additional tranches of Convertible Debentures not less than 60 days following the issuance of the immediately preceding tranche.

The Debentures will bear interest at a rate of 7.0 percent per annum from the closing date of each tranche, payable semi-annually in arrears on June 30 and December 30 of each year. The initial tranche of Debentures will be convertible at the option of the holder to Subordinate Voting Shares of Harvest at a price of $15.38 per Subordinate Voting Share, and each subsequent tranche will be convertible at the option of the holder at a 15 percent premium to the volume weighted average price of the Subordinate Voting Shares on the Canadian Securities Exchange for the five trading day period immediately preceding the closing of the relevant tranche. Each tranche will mature 36 months from the date of issuance of such tranche.  In addition, Harvest may require that any tranche of Debentures be converted if, at any time after the date that is four months and one day following the issuance of the applicable tranche of Debentures, the daily VWAP of the Subordinate Voting Shares is greater than a 40 percent premium to the applicable conversion price of a tranche for any 10 consecutive trading day period.

Commenting on the transaction, Harvest CEO Steve White said, “This transaction is fuel for growth to realize our vision of becoming one of the most valuable cannabis companies in the world. With the recent announcement of our acquisition of Verano Holdings, not only will we have the largest and deepest footprint of licenses in the U.S., we are equally well capitalized to ensure our growth ambitions as a company.”

Jason Vedadi, executive chairman of Harvest, addedm “We realize our position as one of the leaders in the fast-growing U.S. cannabis market and this agreement continues our march towards creating unparalleled shareholder value and building the first truly national cannabis company.”

Upon completion of each of Tranches 1, 2 and 3 warrants in an amount equal to 40 percent, 40 percent and 20 percent of the number of Subordinate Voting Shares issuable upon conversion of the first, second and third Tranche of Debentures, respectively, will be issued to the purchasers of such Debentures. Each Warrant will entitle the holder thereof to purchase one Subordinate Voting Share for a period of 36 months from the date of issue. Warrants issued pursuant to Tranche 1 will, subject to the policies of the CSE, have an exercise price equal to $18.17. Warrants issued pursuant to Tranche 2 and 3 will, subject to the policies of the CSE, have an exercise price equal to a 30 percent premium to the VWAP for the five trading day period immediately preceding the closing date of the relevant Tranche.

Eight Capital brokered the private placement for Harvest as the lead agent and sole bookrunner.

Closing is subject to conditions that are customary for a transaction of this nature and the engagement letter may be terminated by Eight Capital in certain circumstances. There can be no assurances that the private placement will be completed as proposed or at all.