TABLE OF CONTENTS

 

NOTICE OF SPECIAL MEETING OF SENIOR NOTEHOLDERS			1
GLOSSARY OF TERMS			3
MANAGEMENT INFORMATION CIRCULAR			12
INFORMATION CONCERNING THE CANNABIST COMPANY HOLDINGS (CANADA) INC.			12
INFORMATION CONCERNING THE CANNABIST COMPANY HOLDINGS INC.			12
SUMMARY OF THE CIRCULAR			13
SOLICITATION OF PROXIES			18
INFORMATION AGENT			21
FEES AND EXPENSES			21
DOCUMENTS INCORPORATED BY REFERENCE			21
FORWARD-LOOKING STATEMENTS			22
NOTICE TO SENIOR NOTEHOLDERS IN THE UNITED STATES			23
DESCRIPTION OF THE ARRANGEMENT			24
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS			37
SUPPORT AGREEMENT			46
SECURITIES LAW MATTERS			57
ARRANGEMENT STEPS			59
ANTI - DILUTIVE WARRANTS			60
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION			61
NON-GAAP FINANCIAL PERFORMANCE MEASURES			61
PRIOR SALES			62
TRADING PRICE AND VOLUME			63
DESCRIPTION OF SECURITIES			63
RISK FACTORS			69
EXPERTS			73
INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON			73
PRINCIPAL HOLDERS OF SECURITIES			73
OTHER BUSINESS			73
ADDITIONAL INFORMATION			73
APPROVAL OF THE BOARD			74
CONSENT OF KOGER			75

APPENDIX A ARRANGEMENT RESOLUTION			A-1
APPENDIX B PLAN OF ARRANGEMENT			B-1
APPENDIX C FORM OF PROXY			C-1
APPENDIX D NOTICE OF APPLICATION			D-1
APPENDIX E INTERIM ORDER			E-1
APPENDIX F FAIRNESS OPINION			F-1
APPENDIX G FORM OF AMENDED AND RESTATED INDENTURE			G-1
APPENDIX H BLACKLINE TO EXISTING INDENTURE			H-1
APPENDIX I FORM OF FIRST SUPPLEMENTAL INDENTURE			I-1
APPENDIX J BLACKLINE TO 2027 NOTE INDENTURE			J-1
APPENDIX K FORM OF STANDSTILL AND LOCK-UP AGREEMENT			K-1

March 28, 2025

Dear Senior Noteholders:

On behalf of the board of directors of The Cannabist Company Holdings (Canada) Inc. (“Cannabist Canada”) and the board of directors (the “Board”) of The Cannabist Company Holdings Inc. (“Cannabist”, and together with Cannabist Canada, the “Companies”), I invite you to attend a special meeting (the “Meeting”) of holders (“Senior Noteholders”) of: (1) the 6.0% senior secured convertible notes due June 29, 2025 (the “2025 Notes”); (2) the 9.5% senior secured first-lien notes due February 3, 2026 (the “2026 Notes”); and (3) the 9.0% senior secured convertible notes due March 19, 2027 (the “2027 Notes”, and together with the 2025 Notes and the 2026 Notes, the “Senior Notes”) co-issued by the Companies, to be held at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, 53^rd Floor, Toronto, Ontario, Canada M5L 1B9 on April 29, 2025 at 10:00 a.m. (Eastern time).

At the Meeting, you will be asked to consider and vote on a special resolution of Senior Noteholders (the “Arrangement Resolution”) to approve a plan of arrangement (the “Arrangement”) under section 192 of the Canada Business Corporations Act (the “CBCA”) pursuant to which, among other things, the trust indenture dated May 14, 2020, as amended and supplemented, governing the Senior Notes (the “Existing Indenture”) will be amended and restated (the “Amended and Restated Indenture”) and: (1) each holder of 2025 Notes will exchange their 2025 Notes for (a) new senior notes (the “New Senior Notes”) issued by the Companies for an aggregate principal amount equal to the aggregate principal amount of the 2025 Notes and (b) its pro-rata amount of up to 118,209,105 newly issued common shares of Cannabist (the “New CBST Common Shares”); (2) each holder of 2026 Notes will exchange their 2026 Notes for (a) New Senior Notes for an aggregate principal amount equal to the aggregate principal amount of the 2026 Notes and (b) its pro-rata amount of the New CBST Common Shares; and (3) each holder of 2027 Notes will elect to exchange their 2027 Notes for either (a) (i) New Senior Notes for an aggregate principal amount equal to the aggregate principal amount of the 2027 Notes exchanged for such New Senior Notes and (ii) its pro-rata amount of the New CBST Common Shares, or (b) new convertible senior notes issued by the Companies (the “New Convertible Notes”, and together with the New Senior Notes, the “New Notes”) for an aggregate principal amount equal to the aggregate principal amount of the 2027 Notes exchanged for New Convertible Notes (collectively, the “Transaction”). The New Notes will be guaranteed by certain subsidiaries of the Companies pursuant to the Amended and Restated Indenture in accordance with the terms of the Arrangement.

As part of the Transaction, those Senior Noteholders (the “Supporting Senior Noteholders”) who entered into the support agreement (the “Support Agreement”) dated February 27, 2025 with the Companies and certain of their subsidiaries, as well as those Senior Noteholders who executed a joinder to the Support Agreement prior to 5:00 p.m. (Eastern time) on March 10, 2025 (or such later date as agreed between the Companies and the requisite Senior Supporting Noteholders), in each case, who receive New Senior Notes in connection with the Transaction (collectively, “Early Supporting Noteholders”) will also receive their pro-rata share of $1,500,000 in early consent consideration payable by Cannabist to such Early Supporting Noteholders on Closing (the “Early Consent Consideration”) as additional consideration for their Senior Notes. The Early Consent Consideration shall be payable by the Companies either: (1) in cash; or (2) by the transfer of common shares in the capital of Verano Holdings Corp. owned by Cannabist, equal to such value as measured by the 30-day volume-weighted average price of such shares, at the option of the Companies. Holders of 2027 Notes who elect or are deemed to elect to receive New Convertible Notes will not be entitled to any portion of the Early Consent Consideration or the New CBST Common Shares.

Early Supporting Noteholders will be entitled to their pro-rata share of additional cash consent consideration in the amount of $1,500,000, which will be payable by Cannabist in cash at the maturity of the New Senior Notes, except that such payment will be accelerated and made upon the occurrence of certain milestones, as follows: (1) $750,000 shall be paid on the date on which Cannabist has received aggregate proceeds for certain pre-approved asset sales disclosed to the Early Supporting Noteholders in writing (the “Approved Sales”) equal to or greater than $15 million; and (2) $750,000 shall be paid on the date on which Cannabist has received aggregate proceeds for Approved Sales equal to or greater than $20 million, with, for greater certainty, any balance remaining payable at maturity of the New Senior Notes. Holders of 2027 Notes who elect or are deemed to elect to receive New Convertible Notes will not be entitled to any portion of this additional cash consent consideration.

 

i

Existing Cannabist shareholders (excluding recipients of the New CBST Common Shares) will receive new warrants (the “Anti-Dilutive Warrants”) to acquire an aggregate of 118,246,947 newly issued common chares of Cannabist (“CBST Common Shares”). The Anti-Dilutive Warrants will be exercisable for two years from Closing at an exercise price of C$0.14 per CBST Common Share.

Each registered Senior Noteholder is requested to submit an executed and completed Form of Proxy (attached as Appendix “C” to the management information circular of the Companies (the “Circular”)) to the Companies, by sending such Form of Proxy to: Odyssey Trust Company, Attn: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8. See “Solicitation of Proxies – Appointment of Proxies” for additional information regarding the completion and submission of the Form of Proxy. If you are a non-registered Senior Noteholder and you receive these materials through your broker, custodian, nominee or other intermediary (an “Intermediary”), you should follow the instructions provided by your Intermediary on the enclosed Voting Instruction Form in order to vote your Senior Notes.

Koger Valuations Inc. (“Koger”) has been engaged as a financial advisor to Cannabist and the Board in connection with the Transaction. Koger has delivered a written fairness opinion (the “Fairness Opinion”) to the Board dated as of February 26, 2025, which concludes that, as of the date thereof, and subject to the qualifications set out therein, the Transaction, if implemented, is fair from a financial point of view to the Senior Noteholders and to shareholders of Cannabist (“CBST Shareholders”).

In addition, following the delivery of a submission regarding the Transaction to the CBOE accompanied by a detailed outline of the Arrangement and proposed transactions thereunder, the CBOE confirmed to Cannabist that the CBOE does not require the approval of CBST Shareholders to implement the Transaction.

After careful consideration of various factors and alternatives and consultation with Stikeman Elliott LLP and Dorsey & Whitney LLP, the Companies’ legal advisors, and Moelis & Company LLC, the Companies’ financial advisor, the Board unanimously determined that the Arrangement is in the best interests of the Companies and is fair, from a financial point of view, to the Senior Noteholders (and to CBST Shareholders) and unanimously recommends that Senior Noteholders VOTE FOR the Arrangement Resolution and the Transaction contemplated thereby.

The Board and management of Cannabist believe that it is beneficial and important that the Transaction be implemented. Exchanging the Senior Notes for the New Notes, which do not mature until December 31, 2028 (subject to extension in certain circumstances) and New CBST Common Shares treats all Senior Noteholders equally and fairly. The maturity deferral represented by the New Notes is expected to bring greater stability to the Companies’ capital structure and allow the Companies to execute on their long-term business plan. The Transaction offers substantial benefits to the Companies.

Enclosed are a Notice of Meeting and the Circular. These documents are also available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. The Circular and the appendices attached thereto, which we urge you to read carefully in consultation with your tax, financial, legal or other professional advisors, describe the Transaction and include certain other information (including the full text of the Fairness Opinion) to assist you in considering the Arrangement.

In order for the Transaction to be implemented, the Arrangement must be approved by the affirmative vote of at least 66^2/3% of the votes cast by Senior Noteholders present in person or by proxy at the Meeting and entitled to vote on the Arrangement Resolution. All Senior Noteholders will vote as one class under the Arrangement. Each Senior Noteholder will have one vote for each $1.00 of principal amount of the Senior Notes held by such Senior Noteholder as of the record date (which was 5:00 p.m. (Eastern Time) on March 7, 2025). As of the date hereof, Senior Noteholders representing approximately 71% of the aggregate principal amount of Senior Notes have executed the Support Agreement (or joinders thereto) pursuant to which they have agreed, among other things, to support the terms of the Transaction and to vote in favour of the Arrangement Resolution at the Meeting.

 

 

ii

In addition to Senior Noteholder approval, completion of the Arrangement is subject to a number of conditions, including approval by the Ontario Superior Court of Justice and any required regulatory approvals. Pending receipt of such approvals and satisfaction of all conditions precedent, the Companies anticipate that completion of the Arrangement will occur in the second quarter of 2025.

 

Yours very truly,

(Signed) “David Hart”

David Hart Director, The Cannabist Company Holdings (Canada) Inc. CEO and Director, The Cannabist Company Holdings Inc.

 

iii

NOTICE OF SPECIAL MEETING OF SENIOR NOTEHOLDERS

 

TO:		Holders of: (1) 6.0% Senior Secured Convertible Notes due June 29, 2025 (the “2025 Notes”); (2) 9.5% Senior Secured First-Lien Notes due February 3, 2026 (the “2026 Notes”); and (3) 9.0% Senior Secured Convertible Notes due March 19, 2027 (the “2027 Notes” and together with the 2025 Notes and the 2026 Notes, the “Senior Notes”) of The Cannabist Company Holdings (Canada) Inc. (“Cannabist Canada”) and The Cannabist Company Holdings Inc. (“Cannabist”, and together with Cannabist Canada, the “Companies”)

NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of the holders of the Senior Notes (the “Senior Noteholders”) will be held at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, 53^rd Floor, Toronto, Ontario, Canada M5L 1B9 on April 29, 2025 at 10:00 a.m. (Eastern time) for the following purposes:

 

(a)

pursuant to an order (the “Interim Order”) of the Ontario Superior Court of Justice (Commercial List) (the “Court”) dated March 28, 2025, to consider at the Meeting and, if deemed advisable, to pass, a special resolution (the “Arrangement Resolution”), the full text of which is set out in Appendix “A” to the accompanying management information circular of the Companies (the “Circular”), approving a plan of arrangement (the “Arrangement”) pursuant to section 192 of the Canada Business Corporations Act, which Arrangement is more particularly described in the Circular; and

 

(b)

to transact such other business as may properly come before the Meeting or any postponement or adjournment thereof.

AND NOTICE IS HEREBY GIVEN that the Court has been advised that its order approving the Arrangement, if granted, will constitute the basis for an exemption from the registration requirements of the United States Securities Act of 1933, as amended, as provided by Section 3(a)(10) thereof, with respect to the issuance of the New Notes, the New CBST Common Shares and the New Guarantees (as such terms are defined in the Circular) to be issued pursuant to the Arrangement.

The record date (the “Record Date”) for entitlement to vote at the Meeting has been set by the Court as 5:00 p.m. (Eastern time) on March 7, 2025, subject to any further order of the Court.

Quorum for the Meeting is the presence, in person or by proxy, of Senior Noteholders representing at least 25% of the principal amount of outstanding Senior Notes. Subject to any further order of the Court, the vote required to pass the Arrangement Resolution at the Meeting is the affirmative vote of at least 66^2/3% of the votes cast by Senior Noteholders present in person or by proxy at the Meeting and entitled to vote on the Arrangement Resolution.

Each Senior Noteholder will have one vote for each $1.00 of principal amount of the Senior Notes held by such Senior Noteholder as of the Record Date. All Senior Noteholders will vote as one class under the Arrangement.

In addition to Senior Noteholder approval, the implementation of the Arrangement is subject to the approval of the Court and required regulatory authorities. The matter is currently scheduled to be heard at the Ontario Superior Court of Justice (Commercial List) on May 12, 2025.

In addition to the Arrangement Resolution, copies of the Plan of Arrangement, the Notice of Application and the Interim Order, as such terms are defined in the Circular, are attached to the Circular as Appendices “B”, “D” and “E”, respectively.

 

1

If you are a non-registered Senior Noteholder and you receive these materials through your broker, custodian, nominee or other intermediary, you should follow the instructions provided by your broker, custodian, nominee or other intermediary in the enclosed Voting Instruction Form in order to vote your Senior Notes. If you are a registered Senior Noteholder, whether or not you are able to attend the Meeting, you are requested to complete, execute and deliver the enclosed Form of Proxy in accordance with the instructions set forth on the Form of Proxy to the Companies, c/o Odyssey Trust Company, Attn: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8, by no later than 10:00 a.m. (Eastern time) on April 25, 2025 or, if the Meeting is adjourned or postponed, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to any adjournment or postponement thereof. The time limit for the deposit of proxies may be waived or extended by Cannabist Canada at its sole discretion without notice.

The Form of Proxy or Voting Instruction Form to be delivered to Senior Noteholders in connection with the Meeting nominates David Sirolly and, failing him, David Hart, each, a director of the Companies, as proxyholder in connection with the voting at the Meeting, with full power of substitution. A Senior Noteholder may attend the Meeting in person or may appoint another person as proxyholder.

Non-registered Senior Noteholders who wish to appoint themselves or another person to attend the Meeting on their behalf should follow the instructions provided by your broker, custodian, nominee or other intermediary in the enclosed Voting Instruction Form. Non-registered holders in the U.S. that request a legal proxy from their broker, custodian, nominee or other intermediary, will need to deliver the legal proxy to the Companies, by email to: corptrust@odysseytrust.com, by no later than 10:00 a.m. (Eastern time) on April 25, 2025 or, if the Meeting is adjourned or postponed, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to any adjournment or postponement thereof. Persons appointed as proxyholders need not be Senior Noteholders.

The Board unanimously recommends that Senior Noteholders VOTE FOR the Arrangement Resolution.

DATED at Toronto, Ontario this 28^th day of March, 2025.

THE CANNABIST COMPANY HOLDINGS (CANADA) INC.

 

BY ORDER OF BOARD

(Signed) “David Hart”

David Hart

Director

 

2

GLOSSARY OF TERMS

“2024 AGM Circular” has the meaning ascribed thereto under the heading “Documents Incorporated by Reference”;

“2024 Annual Report” has the meaning ascribed thereto under the heading “Documents Incorporated by Reference”;

“2024 Financial Statements” has the meaning ascribed thereto under the heading “Documents Incorporated by Reference”;

“2024 MD&A” has the meaning ascribed thereto under the heading “Documents Incorporated by Reference”;

“2024 Notes” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“2025 Noteholder” means a Holder of 2025 Notes;

“2025 Notes” has the meaning ascribed thereto under the heading “Management Information Circular”;

“2026 Noteholder” means a Holder of 2026 Notes;

“2026 Notes” has the meaning ascribed thereto under the heading “Management Information Circular”;

“2027 Note Indenture” means the seventh supplemental trust indenture dated as of March 19, 2024 between Cannabist and the Indenture Trustee;

“2027 Noteholder” means a Holder of 2027 Notes;

“2027 Notes” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Ad Hoc Group” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Additional Early Consent Consideration” has the meaning ascribed thereto under the heading “Additional Early Consent Consideration”;

“Advisors” has the meaning ascribed thereto in the Support Agreement;

“AHC Nominees” has the meeting ascribed thereto under the heading “Governance Rights”;

“Allowable Capital Loss” has the meaning ascribed thereto under the heading “Taxation of Capital Gains and Capital Losses ”;

“Amended and Restated Indenture” means the amended and restated trust indenture to be entered into among the Companies, the Existing Guarantors, the New Guarantors, and the Indenture Trustee on the Effective Date, in substantially the form attached as Appendix “G” to this Circular, which shall amend and restate the Existing Indenture and govern the New Notes upon the Plan becoming effective on the Effective Date, including the First Supplemental Indenture;

“Anti-Dilutive Warrants” means the 118,246,947 warrants to purchase CBST Common Shares for a period of two (2) years from the Effective Date at an exercise price per share of C$0.14 issued on the Effective Date pursuant to the Warrant Agency Agreement and the Plan to existing CBST Shareholders as of the Warrant Record Date;

“Applicants” means, collectively, Cannabist Canada and Cannabist Canada 2;

 

 

3

“Approved Sales” means those certain pre-approved asset sales disclosed by the Companies to the Supporting Senior Noteholders in writing;

“Arrangement” means the arrangement under section 192 of the CBCA on the terms and subject to the conditions set out in the Plan, subject to any amendments, modifications and/or supplements made thereto in accordance with the terms of the Plan or made at the discretion of the Court in the Final Order with the prior written consent of the Companies and the Requisite Supporting Senior Noteholders;

“Arrangement Agreement” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Arrangement Resolution” means the special resolution of the Senior Noteholders to approve the Plan to be considered at the Meeting, the full text of which is attached as Appendix “A” to this Circular;

“BCBCA” means the Business Corporations Act (British Columbia);

“Beneficial Senior Noteholder” has the meaning ascribed thereto under the heading “Solicitation of Proxies – Advice to Beneficial Senior Noteholders”;

“Board” means the board of directors of Cannabist;

“Business Combination” has the meaning ascribed thereto under the heading “Information Concerning the Cannabist Company Holdings Inc.”;

“Business Day” means any day, other than a Saturday or a Sunday, on which commercial banks are generally open for business in Toronto, Ontario and New York, New York;

“Cannabist” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Cannabist Canada” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Cannabist Canada 2” means 16834434 Canada Inc.;

“Cannabist Canada Amalco” means The Cannabist Company Holdings (Canada) Inc., the corporation that will result from the amalgamation of the Applicants, in accordance with Section 2.2(i) of the Plan;

“Cannabist Entities” means, collectively, the Companies and their direct or indirect subsidiaries;

“Cannabist Proxyholder” has the meaning ascribed thereto under the heading “Appointment of Proxies”;

“CBCA” means the Canada Business Corporations Act, R.S.C. 1985, c. C-44 and the regulations thereto, as now in effect and as it may be amended from time to time prior to the Effective Date;

“CBCA Director” means the director appointed under section 260 of the CBCA;

“CBCA Proceedings” means the proceedings commenced by the Applicants under the CBCA on March 20, 2025 in connection with the Plan;

“CBOE” means Cboe Canada Inc.;

“CBST Common Shares” means common shares in the capital of Cannabist;

“CBST Proportionate Voting Shares” means proportionate voting shares in the capital of Cannabist;

 

 

4

“CBST Shareholders” means the Holders of CBST Shares;

“CBST Shares” means, collectively, the CBST Common Shares and CBST Proportionate Voting Shares;

“CDS” means CDS & Co., the nominee of CDS Clearing and Depository Services Inc.;

“Certificate of Arrangement” means the certificate giving effect to the Arrangement, to be issued by the CBCA Director pursuant to section 192(7) of the CBCA upon receipt of the Articles of Arrangement in respect of the Applicants in accordance with section 262 of the CBCA;

“Circular” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Claim” means any right or claim of any Person that may be asserted or made in whole or in part against the applicable Persons, or any of them, in any capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, whether at law or in equity, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including, any legal, statutory, equitable or fiduciary duty), by reason of any right of setoff, counterclaim or recoupment, or by reason of any equity interest, right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and together with any security enforcement costs or legal costs associated with any such claim, and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, perfected, unperfected, present or future, known or unknown, by guarantee, warranty, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any claim made or asserted against the applicable Persons, or any of them, through any successor, assignee, affiliate, subsidiary, associated or related Person, or any right or ability of any Person to advance a claim for an accounting, reconciliation, contribution, indemnity, restitution or otherwise with respect to any matter, grievance, action (including any class action or proceeding before an administrative or regulatory tribunal), cause or chose in action, whether existing at present or commenced in the future;

“Closing” means the closing of the Transaction;

“Companies” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Compliance Provisions” has the meaning ascribed thereto under the heading “Compliance Provisions”;

“Consolidated Net Leverage Ratio” has the meaning ascribed thereto in the Amended and Restated Indenture;

“Convertible Notes” has the meaning ascribed thereto under the heading “Taxation of Interest on Convertible Notes”;

“Court” means the Ontario Superior Court of Justice (Commercial List);

“CRA” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations”;

“CSA” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Definitive Documents” means, collectively, all of the definitive documents necessary or advisable to implement the Transaction, including, without limitation: (1) the Plan and this Circular and other related proxy materials; (2) the New Notes Documents; (3) the formation documents of the Applicants; (4) the Interim Order; (5) the Final Order; (6) all security agreement and collateral documents in connection with the New Notes; (7) the Warrant Agency Agreement; (8) the Lock-Up and Standstill Agreement; and (9) any other agreements and documentation necessary or advisable to consummate and document or achieve the Transaction, and in each case, any amendments, modifications, and supplements thereto and any related notes, certificates, agreements, documents, and instruments;

 

5

“Depositary” means Odyssey Trust Company or any other trust company, bank or equivalent financial institution agreed to in writing by the Companies and appointed to carry out any of the duties of the Depositary hereunder;

“Discount” has the meaning ascribed thereto under the heading “Interest on the New Notes”;

“DRS Advice” means an advice issued by the Transfer Agent, the Warrant Agent or the Indenture Trustee evidencing the securities held by a Holder of CBST Proportionate Voting Shares, CBST Common Shares, Anti-Dilutive Warrants, Senior Notes and/or New Notes, as applicable, in lieu of a physical certificate;

“Early Consent Consideration” means consideration in the aggregate amount of $1,500,000, payable by the Companies either: (1) in cash; or (2) by the transfer of common shares in the capital of Verano Holdings Corp. owned by Cannabist, equal to such value as measured by the 30-day VWAP of such shares, at the option of the Companies;

“Early Consent Consideration Deadline” means 5:00 p.m. (Eastern time) on March 10, 2025 or such later date as agreed between the Companies and the Requisite Supporting Senior Noteholders;

“Early Supporting Noteholders” means the Supporting Senior Noteholders as of the Early Consent Consideration Deadline, excluding New Convertible Note-Electing Noteholders;

“Eastern Virginia and Arizona Divestiture” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“EDGAR” means the U.S. Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval system;

“Effective Date” means the date shown on the Certificate of Arrangement issued by the CBCA Director;

“Effective Time” means such time as may be specified by Cannabist, in writing, on the Effective Date;

“Excess” has the meaning ascribed thereto under the heading “Taxation of Interest on Convertible Notes”;

“Existing Guarantors” means collectively, Patriot Care Corp, Curative Health LLC, Columbia Care DC LLC, Mission Bay, LLC, Columbia Care Pennsylvania LLC, Columbia Care Industrial Hemp LLC, Curative Health Cultivation LLC, Columbia Care NY LLC, Focused Health LLC, Columbia Care New Jersey LLC, Columbia Care WV Industrial Hemp LLC, CCPA Industrial Hemp LLC, CC OH Realty LLC, CC California LLC, Columbia Care – Arizona, Prescott, LLC, Columbia Care MD LLC, Columbia Care DE Management LLC, Columbia Care Delaware, LLC (non-profit), Columbia Care – Arizona, Tempe, LLC, Columbia Care LLC, Columbia Care Illinois LLC, Columbia Care Maryland LLC, CC VA Holdco LLC, Columbia Care – Arizona, Tempe DE, L.L.C., Columbia Care – Arizona, Prescott DE, L.L.C., Columbia Care – Arizona LLC, Columbia Care PR LLC, CA Care LLC, Beacon Holdings, LLC, MJ Brain Bank, LLC, The Green Solution, LLC, Rocky Mountain Tillage, LLC, Infuzionz LLC, PHC Facilities, Inc., The Healing Center of San Diego, Green Leaf Extracts, LLC, Time for Healing, LLC, Columbia Care OH LLC, Corsa Verde, LLC, Green Leaf Medicals, LLC, Green Leaf Medical of Virginia, LLC, Green Leaf Medical, LLC, Resource Referral Services, Inc., The Wellness Earth Energy Dispensary, Inc., VentureForth LLC, VentureForth Holdings LLC, Columbia Care CO Inc., Futurevision, Ltd., Wellness Institute of Maryland, LLC, Cannascend Alternative, LLC, Cannascend Alternative Logan, L.L.C., Columbia Care WV LLC, Oveom, LLC;

 

6

“Existing Indenture” means the trust indenture dated as of May 14, 2020 (as amended, restated and/or supplemented from time to time) between Cannabist and the Indenture Trustee, pursuant to which the Senior Notes were issued;

“Fairness Opinion” means the fairness opinion of Koger attached as Appendix “F” to this Circular and described under the heading “Description of the Arrangement – Fairness Opinion”;

“February 27 MCR” has the meaning ascribed thereto under the heading “Documents Incorporated by Reference”;

“Final Order” means the final order of the Court approving the Arrangement under section 192 of the CBCA, which shall include such terms as may be necessary or appropriate to give effect to the Arrangement and the Plan, in form and substance satisfactory to the Companies and the Requisite Supporting Senior Noteholders, as such final order may be amended from time to time in a manner acceptable to the Companies and the Requisite Supporting Senior Noteholders;

“Financial Advisor” has the meaning ascribed thereto under the heading “Other Material Provisions”;

“First Supplemental Indenture” means the first supplemental indenture to the Amended and Restated Indenture to be entered into among the Companies, the Existing Guarantors, the New Guarantors, and the Indenture Trustee on the Effective Date, in substantially the form attached as Appendix “I” to this Circular, which shall govern the New Convertible Notes upon the Plan becoming effective on the Effective Date;

“Florida Ballot Measure” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Form of Proxy” means the form of proxy to be completed by registered Senior Noteholders, pursuant to which registered Senior Noteholders may indicate their vote in respect of the Arrangement Resolution;

“Forward-Looking Statements” has the meaning ascribed thereto under the heading “Forward-Looking Statements”;

“FPI Condition” has the meaning ascribed thereto under the heading “Conversion Conditions”;

“GAAP” has the meaning ascribed thereto under the heading “Non-GAAP Financial Performance Measures”;

“Governmental Entity” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization (including any stock exchange and the Canadian Investment Regulatory Organization) or entity: (1) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (2) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power;

“HHS” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Holder” means a Person in whose name a note, warrant or share is registered, as the context requires;

“Indenture Trustee” means Odyssey Trust Company, as trustee under the Existing Indenture and the Amended and Restated Indenture, and its successors and assigns;

“Interim Order” means the interim order of the Court dated March 28, 2025 pursuant to section 192 of the CBCA, which, among other things, approves the calling of, and the date for, the Meeting, and as may be amended from time to time in a manner acceptable to the Companies and the Requisite Supporting Senior Noteholders, and which is attached as Appendix “E” to this Circular;

 

7

“Intermediary” means a broker, custodian, investment dealer, nominee, bank, trust company or other intermediary;

“Koger” means Koger Valuations Inc.;

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States or any other country, or any domestic or foreign state, county, province, city or other political subdivision or of any Governmental Entity, and includes any stock exchange requirement (including any requirement of CBOE);

“Letter of Transmittal and Election Form” means the letter of transmittal and election form in connection with the Arrangement forwarded by Cannabist to registered Senior Noteholders for use in connection with the Arrangement;

“Meeting” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Moelis” means Moelis & Company LLC;

“Murchinson” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Murchinson Proposal” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Name Change” has the meaning ascribed thereto under the heading “Information Concerning the Cannabist Company Holdings Inc.”;

“New CBST Common Shares” means a total of 118,209,105 CBST Common Shares to be issued to the 2025 Noteholders, 2026 Noteholders and the New Senior Note-Electing Noteholders;

“New Convertible Note-Electing Noteholder” means a 2027 Noteholder that has validly made, or has been deemed to have made, a New Convertible Note Election in accordance with Sections 2.3(a)(ii) or 2.3(c) of the Plan, respectively;

“New Convertible Note Election” has the meaning ascribed thereto in Section 2.3(a)(ii) of the Plan;

“New Convertible Notes” means the new 9.0% senior secured convertible senior notes due December 31, 2028 (subject to extension in certain circumstances) to be issued by the Companies, as co-issuers, and guaranteed by the Existing Guarantors and the New Guarantors, in each case, pursuant to the Amended and Restated Indenture and the Plan;

“New Convertible Notes Extension Notice” has the meaning ascribed thereto under the heading “Interest and Maturity”;

“New Guarantees” means the new guarantees of the New Notes to be provided by the New Guarantors, including, for greater certainty, all general, collateral and other security agreements entered into by the New Guarantors;

“New Guarantors” means the Cannabist Entities other than the Companies and the Existing Guarantors;

“New Notes” means, collectively, the New Senior Notes and the New Convertible Notes;

“New Notes Documents” means, collectively, the Amended and Restated Indenture, the New Notes, the New Guarantees and the guarantees to be provided by the Existing Guarantors pursuant to the Amended and Restated Indenture, and the existing and new security agreements (as applicable) to be entered into by the Existing Guarantors and the New Guarantors, in each case, in a form acceptable to the Companies and the Requisite Supporting Senior Noteholders;

 

8

“New Senior Note-Electing Noteholder” means a 2027 Noteholder that has validly made a New Senior Note Election in accordance with Section 2.3(a)(i) of the Plan;

“New Senior Notes” means the new 9.25% senior notes due December 31, 2028 (subject to extension in certain circumstances) to be issued by the Companies, as co-issuers, and guaranteed by the Existing Guarantors and the New Guarantors, in each case, pursuant to the Amended and Restated Indenture and the Plan;

“New Senior Notes Extension Notice” has the meaning ascribed thereto under the heading “Interest and Maturity”;

“Non-Resident Holder” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations – Non-Residents of Canada”;

“Note Issuer” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations – Non-Residents of Canada”;

“Noteholder” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations”;

“Notice of Application” means the Notice of Application, attached as Appendix “D” to this Circular;

“Notice of Meeting” has the meaning ascribed thereto under the heading “Management Information Circular”;

“OBCA” has the meaning ascribed thereto under the heading “Information Concerning the Cannabist Company Holdings Inc.”;

“Odd Lot” has the meaning ascribed thereto under the heading “Take-Over Bid Protection”;

“Old Columbia Care” has the meaning ascribed thereto under the heading “Information Concerning the Cannabist Company Holdings Inc.”;

“Order” means any order of the Court relating to the Arrangement including, without limitation, the Interim Order and the Final Order;

“Owning or Controlling” has the meaning ascribed thereto under the heading “Compliance Provisions”;

“Person” includes any individual, firm, partnership, limited partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate (including a limited liability company and an unlimited liability company), corporation, unincorporated association or organization, governmental authority, syndicate or other entity, whether or not having legal status;

“Plan” means the plan of arrangement pursuant to section 192 of the CBCA and the schedules thereto, substantially in the form attached as Appendix “B” to this Circular and any amendments or variations thereto made in accordance with the provisions of the Plan or Arrangement or made by an Order, in each case to be in form and substance acceptable to the Companies and the Requisite Supporting Senior Noteholders;

“Preferred Shares” has the meaning ascribed thereto under the heading “Dividend Rights”;

 

 

9

“Pro Rata Share” means, a Person’s respective proportionate share of the aggregate relevant Senior Notes or aggregate relevant CBST Shares, as applicable, and identified and set forth in the Plan;

“PVS Offer” has the meaning ascribed to it under the heading “Take-Over Bid Protection”;

“Record Date” means March 7, 2025;

“Regulation S” means Regulation S under the U.S. Securities Act;

“Releases” has the meaning ascribed thereto under the heading “Conditions to the Arrangement”;

“Requisite Supporting Senior Noteholders” has the meaning ascribed thereto in the Support Agreement;

“Resident Holder” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations – Residents of Canada”;

“Retained Proceeds” has the meaning ascribed thereto under the heading “Other Material Provisions”;

“Section 280(e)” has the meaning ascribed thereto under the heading “Background to the Arrangement”;

“Securities” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations”;

“Security” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations”;

“Securityholder” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations”;

“SEDAR+” means the System for Electronic Data Analysis and Retrieval;

“Senior Noteholders” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Senior Notes” has the meaning ascribed thereto under the heading “Management Information Circular”;

“Special Committee” means the special committee of independent directors of the Board;

“Standstill and Lock-Up Agreement” means the standstill and lock-up agreement to be entered into or deemed entered into by the Companies and the Senior Noteholders as of the Effective Date, substantially in the form attached as Appendix “K” to this Circular;

“Stikeman” means Stikeman Elliott LLP;

“Support Agreement” means the support agreement dated February 27, 2025 among, inter alios, the Companies and the Supporting Senior Noteholders and all schedules thereto;

“Supporting Senior Noteholders” means the Senior Noteholders that are signatories to the Support Agreement (or their permitted assigns);

“Tax Act” means the Income Tax Act (Canada) and the regulations thereto, as amended;

“Tax Proposals” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations”;

 

10

“Taxable Capital Gain” has the meaning ascribed thereto under the heading “Taxation of Capital Gains and Capital Losses ”;

“Term Sheet” has the meaning ascribed thereto in the Support Agreement;

“Third Party Proxyholder” has the meaning ascribed thereto under the heading “Appointment of Proxies”;

“Transaction” means, collectively, the transactions contemplated by the Plan;

“Transfer Agent” means Odyssey Trust Company, the transfer agent for the CBST Shares;

“Treaty” has the meaning ascribed thereto under the heading “Certain Canadian Federal Income Tax Considerations – Holding and Disposing of CBST Common Shares – Dividends on CBST Common Shares”;

“U.S. Person” means a U.S. person as defined in Rule 902(k) under Regulation S under the U.S. Securities Act, including, but not limited to, any natural person resident in the United States;

“U.S. Securities Act” means the United States Securities Act of 1933, as amended;

“United States” or “U.S.” means the United States, as defined in Rule 902(1) under Regulation S under the U.S. Securities Act;

“Unsuitable Person” has the meaning ascribed thereto under the heading “Compliance Provisions”;

“Verano Shares” means the common shares in the capital of Verano Holdings Corp. owned by Cannabist;

“Voting Instruction Form” means the voting instruction form provided to non-registered Senior Noteholders, pursuant to which non-registered Senior Noteholders may indicate their vote in respect of the Arrangement Resolution;

“VWAP” means volume-weighted average price on the securities exchange maintained by CBOE;

“Warrant Agency Agreement” has the meaning ascribed thereto under the heading “Anti-Dilutive Warrants”;

“Warrant Agent” has the meaning ascribed thereto under the heading “Anti-Dilutive Warrants”; and

“Warrant Record Date” means the date that is two Business Days prior to the Effective Date.

 

11

MANAGEMENT INFORMATION CIRCULAR

This management information circular (this “Circular”) is furnished in connection with the solicitation by management of The Cannabist Company Holdings Inc. (“Cannabist”) and The Cannabist Company Holdings (Canada) Inc. (“ Cannabist Canada” and together with Cannabist, the “Companies”) of proxies for use at the special meeting (the “Meeting”) of holders (“Senior Noteholders”) of: (1) the 6.0% senior secured convertible notes due June 29, 2025 (the “2025 Notes”); (2) the 9.5% senior secured first-lien notes due February 3, 2026 (the “2026 Notes”); and (3) the 9.0% senior secured convertible notes due March 19, 2027 (the “2027 Notes”, and together with the 2025 Notes and the 2026 Notes, the “Senior Notes”) issued by the Companies, to be held at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, 53^rd Floor, Toronto, Ontario, Canada M5L 1B9 on April 29, 2025 at 10 a.m. (Eastern time) and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Special Meeting of Senior Noteholders (the “Notice of Meeting”). Information in this Circular is given as at March 27, 2025 unless otherwise indicated.

INFORMATION CONCERNING THE CANNABIST COMPANY HOLDINGS (CANADA) INC.

Cannabist Canada is a direct, wholly-owned subsidiary of Cannabist. Cannabist Canada was incorporated on January 31, 2025 under CBCA. The registered office of Cannabist Canada is located at 199 Bay Street, Commerce Court West, 53rd Floor, Toronto, Ontario, Canada M5L 1B9.

INFORMATION CONCERNING THE CANNABIST COMPANY HOLDINGS INC.

Cannabist was incorporated under the Business Corporations Act (Ontario) (the “OBCA”) on August 13, 2018 under the name “Canaccord Genuity Growth Corp.” as a special purpose acquisition corporation for the purpose of effecting an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization or any other similar business combination.

On October 17, 2018, Cannabist announced that it had entered into a letter of intent with Columbia Care LLC (“Old Columbia Care”) to exclusively negotiate a business combination between the two companies. On November 21, 2018, Cannabist announced that it had entered into a definitive agreement with Old Columbia Care pursuant to which, among other things, Cannabist would acquire all of the membership interests of Old Columbia Care by way of a merger between Old Columbia Care and a newly-formed Delaware subsidiary of Cannabist (the “Business Combination”). The Business Combination constituted Cannabist’s qualifying transaction.

The Business Combination was completed on April 26, 2019, at which point Old Columbia Care became a 100% wholly-owned subsidiary of Cannabist. In connection with the closing of the Business Combination, Cannabist was continued out of the jurisdiction of Ontario under the OBCA and into the jurisdiction of British Columbia under the Business Corporations Act (British Columbia).

Effective September 19, 2023, Cannabist changed its name from “Columbia Care Inc.” to “The Cannabist Company Holdings Inc.” (the “Name Change”).

In connection with the Name Change, on September 21, 2023, the CBST Common Shares and CBST Common Share purchase warrants began trading under the ticker symbols “CBST” and “CBST.WT”, respectively, on the CBOE. The CBST Common Shares began trading under ticker symbol “CBSTF” on the OTCQX on September 26, 2023.

Additional information about Cannabist is set out in the 2024 Annual Report, the 2024 Financial Statements, the 2024 MD&A, the 2024 AGM Circular and the February 27 MCR.

 

12

 

13

 

14

 

15

 

16

 

17

SOLICITATION OF PROXIES

While it is expected that the solicitation will be primarily by mail, proxies may also be solicited personally, or by telephone, email or other electronic means, by directors, officers and employees of the Companies who will not be specifically remunerated for such efforts.

In addition, the Companies have retained Carson Proxy Advisors for proxy solicitation and information agent services in connection with the Meeting. If you have any questions, or require assistance completing the Form of Proxy or other voting instruction form, please contact Carson Proxy Advisors, by phone at 1-800-530-5189 (collect 416-751-2066) or by email at info@carsonproxy.com. No person has been authorized to give any information or make any representation in connection with the Plan or any other matters to be considered at the Meeting other than those contained in this Circular and, if given or made, any such information or representation must not be relied upon as having been authorized by Cannabist, the Indenture Trustee or Carson Proxy Advisors.

As used herein, the term “Senior Noteholder” means each person that is shown on the records of the Indenture Trustee as a registered Senior Noteholder, other than any Affiliates of Cannabist (as such term is defined in the Existing Indenture), as of 5:00 p.m. (Eastern time) on the Record Date.

Voting Rights

As at the date hereof, $270,050,000 aggregate principal amount of Senior Notes are issued and outstanding. Each $1.00 principal amount of Senior Notes entitles the Senior Noteholder of record as of the Record Date to one vote at the Meeting.

Appointment of Proxies

The person named as proxyholder in the enclosed Form of Proxy is a director of the Companies (the “Cannabist Proxyholder”). Each Senior Noteholder has the right to appoint a person other than the Cannabist Proxyholder to represent such Senior Noteholder at the Meeting (including Beneficial Senior Noteholders (as defined below) who wish to appoint themselves as proxyholder to participate or vote at the Meeting). In order to appoint such other person (a “Third Party Proxyholder”), the Senior Noteholder must submit his, her or its Form of Proxy or Voting Instruction Form (as applicable) appointing such third party proxyholder.

 

•

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 and follow the instructions for submitting such form of proxy or voting instruction form.

If you are a Beneficial Senior Noteholder (other than one located in the United States) and wish to 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 and follow all of the applicable instructions provided by your Intermediary. 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.

If you are a Beneficial Senior Noteholder located in the United States and wish to participate or vote at the Meeting or, if permitted, appoint a third party as your proxyholder, you must obtain a valid legal proxy from your Intermediary. Follow the instructions from your Intermediary included with the Voting Instruction Form sent to you or contact your Intermediary to request 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 the Indenture Trustee. Requests for registration from Beneficial Senior Noteholders located in the United States who wish to participate or vote at the Meeting or, if permitted, appoint a third party as their proxyholder must be sent by email to corptrust@odysseytrust.com and received by no later than 10:00 a.m. (Eastern time) on April 25, 2025.

 

18

A proxy will not be valid unless the completed Form of Proxy is received by the Indenture Trustee (Odyssey Trust Company, Attn: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8) by 10:00 a.m. (Eastern Time) on April 25, 2025. The deadline for deposit of proxies may be waived or extended by the chairperson of the Meeting at his or her discretion, without notice. The chairperson of the Meeting is under no obligation to accept or reject any particular late proxy.

Exercise of Discretion by Proxies

The person named in the enclosed Form of Proxy or Voting Instruction Form will vote the Senior Notes in respect of which he is appointed as proxy in accordance with the instructions of the Senior Noteholders appointing him. If a Senior Noteholder specifies a choice with respect to any matter to be acted upon, the Senior Notes will be voted accordingly. If no instructions are given as to how to vote on a particular issue to be decided at the Meeting, or if both choices have been specified by the Senior Noteholder, the Senior Notes will be voted FOR the Arrangement Resolution (as defined below and as set out in Appendix “A”).

The enclosed Form of Proxy or Voting Instruction Form confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice of Meeting, and with respect to other business which may properly come before the Meeting or any adjournment(s) or postponement(s) thereof. If any such amendment or other business properly comes before the Meeting, or any postponement(s) or adjournment(s) thereof, the person named in the enclosed Form of Proxy or Voting Instruction Form will vote in accordance with their best judgment on such matters or business. As of the date hereof, management of Cannabist knows of no such amendment, variation or other business to come before the Meeting.

Voting of Proxies

Senior Noteholders may vote by proxy before the Meeting or vote at the Meeting, as described below:

Voting by Proxy before the Meeting

Senior Noteholders may vote before the Meeting by completing the Form of Proxy or Voting Instruction Form in accordance with the instructions provided therein. Beneficial Senior Noteholders should also carefully follow all instructions provided by their intermediaries to ensure that their Senior Notes are voted at the Meeting. Voting by proxy is the easiest way to vote. It means you are giving someone else the authority to virtually attend the Meeting and vote on your behalf.

The Cannabist Proxyholder named in the enclosed Form of Proxy or Voting Instruction Form will vote the Senior Notes in respect of which he is appointed as proxy in accordance with your instructions, including on any ballot that may be called. If there are changes to the items of business or new items properly come before the Meeting, or any adjournment(s) or postponement(s) thereof, a proxyholder can vote as he or she sees fit.

You can appoint someone else to be your proxy. This person does not need to be a Senior Noteholder. See the section above entitled “Appointment of Proxies”.

There are two ways for registered Senior Noteholders to vote by proxy before the Meeting:

 

(a)

EMAIL – You may vote by completing, signing and returning the Form of Proxy by email to corptrust@odysseytrust.com; or

 

19

(b)

Return your Form of Proxy or Voting Instruction Form by mail – You may vote by completing, signing and returning the Form of Proxy or Voting Instruction Form in the envelope provided, with applicable postage.

Proxies, whether submitted through email or by mail as described above, must be received by the Indenture Trustee (Odyssey Trust Company, Attn: Proxy Department, 67 Yonge Street, Suite 702, Toronto, Ontario M5E 1J8) by no later than 10:00 a.m. (Eastern time) on April 25, 2025 or, if the Meeting is adjourned or postponed, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to any adjournment or postponement thereof. Persons appointed as proxyholders need not be Senior Noteholders. Your Senior Notes will be voted in accordance with your instructions as indicated on the proxy. The deadline for the deposit of proxies may be waived or extended by the chairperson of the Meeting at his or her discretion, without notice. Voting Instruction Forms may be subject to earlier deadlines imposed by intermediaries.

The Companies may also utilize the Broadridge QuickVote service to assist Senior Noteholders with voting. Certain Beneficial Senior Noteholders may be contacted by Carson Proxy Advisors to conveniently vote directly over the phone. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Senior Notes to be represented at the Meeting.

Information contained in this Circular is given as of March 27, 2025, unless otherwise specifically stated.

Advice to Beneficial Senior Noteholders

If you hold a beneficial interest in Senior Notes (referred to herein as a “Beneficial Senior Noteholder”) you should promptly contact your broker or other Intermediary and obtain and follow their instructions with respect to voting.

Applicable regulatory policy requires brokers and other intermediaries to seek voting instructions from Beneficial Senior Noteholders in advance of meetings. Every broker and Intermediary has its own mailing procedures and provides its own return instructions, which should be carefully followed by Beneficial Senior Noteholders in order to ensure that their Senior Notes are voted at the Meeting. You should contact your broker or other Intermediary to obtain instructions and a voting instruction form to complete and return to your broker or other Intermediary.

A Beneficial Senior Noteholder receiving a voting instruction form from its broker or other Intermediary cannot use that voting instruction form to vote Senior Notes directly at the Meeting. Although Beneficial Senior Noteholders may not be recognized directly at the Meeting for the purposes of voting Senior Notes, a Beneficial Senior Noteholder may attend the Meeting as a proxyholder and vote Senior Notes in that capacity. If a Beneficial Senior Noteholder wishes to attend the Meeting to vote in person, such Beneficial Senior Noteholder must do so as proxyholder for the registered Senior Noteholder. See “Appointment of Proxies”.

A Beneficial Senior Noteholder may revoke a voting instruction form provided by its broker or other Intermediary in accordance with the instructions provided therein.

Quorum

A quorum at the Meeting is Senior Noteholders of at least 25% of the aggregate principal amount of Senior Notes then outstanding present in person or represented by proxy. If a quorum is not present within 30 minutes from the time fixed for the holding of the Meeting, the Meeting may be adjourned to the second following Business Day (as defined in the Existing Indenture) at the same time and place and no notice shall be required to be given in respect of such adjourned meeting. At the adjourned Meeting, the Senior Noteholders present in person or by proxy shall form a quorum and may transact the business for which the Meeting was originally convened, notwithstanding that less than 25% of the aggregate principal amount of Senior Notes then outstanding may not be present at the adjourned Meeting. Any business may be brought before or dealt with at an adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.

 

20

Amendment, Cancellation or Termination of the Meeting

Cannabist Canada reserves the right to amend or vary the terms of the solicitation of proxies and voting instructions at any time prior to the Meeting by notifying Senior Noteholders by making a public announcement by press release relating to such amendment or variation.

Cannabist Canada also reserves the right to cancel or terminate the Meeting, in its sole discretion, for any reason whatsoever by making a public announcement by press release relating to such decision.

Without limiting the manner in which any public announcement may be made, the Companies shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release through a newswire service.

INFORMATION AGENT

Carson Proxy Advisors has been appointed as proxy solicitation and information agent in connection with the Meeting and will provide customary services in connection with such appointment.

Carson Proxy Advisors does not assume any responsibility for the accuracy or completeness of the information concerning Cannabist or its affiliates contained herein and other related documents or for any failure by Cannabist to disclose events that may have occurred and may affect the significance or accuracy of such information.

FEES AND EXPENSES

Cannabist will pay the Indenture Trustee and Carson Proxy Advisors customary fees for their services in connection with the Meeting and will reimburse the Indenture Trustee and Carson Proxy Advisors for their reasonable out-of-pocket expenses in connection therewith.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents which have been publicly filed on SEDAR+ at www.sedarplus.ca or with the securities commission or similar regulatory authority in each of the provinces and territories of Canada, are specifically incorporated by reference into, and form an integral part of this Circular:

 

(a)

the annual report for the fiscal year ended December 31, 2024 (the “2024 Annual Report”);

 

(b)

the management information circular dated June 4, 2024 in respect of Cannabist’s annual meeting of shareholders held on June 26, 2024 (the “2024 AGM Circular”);

 

(c)

the consolidated financial statements of Cannabist for the fiscal year ended December 31, 2024 and the auditor’s report thereon (the “2024 Financial Statements”);

 

(d)

the annual management’s discussion and analysis of Cannabist for the fiscal year ended December 31, 2024 (the “2024 MD&A”); and

 

(e)

the material change report of Cannabist dated February 27, 2025 (the “February 27 MCR”).

Material change reports (other than confidential reports), business acquisition reports, interim financial statements and all other documents of the type referred to above after the date of this Circular and before completion or withdrawal of the Transaction will be deemed to be incorporated by reference into this Circular.

 

21

Any statement contained in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for the purposes of this Circular to the extent that a statement contained in this Circular or in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded will not constitute a part of this Circular, except as so modified or superseded. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of such a modifying or superseding statement will not be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Copies of documents incorporated herein by reference may be obtained upon request made via email to investor@cannabistcompany.com and are also available electronically on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov or on Cannabist’s website at www.cannabistcompany.com.

FORWARD-LOOKING STATEMENTS

This Circular and the documents incorporated by reference herein contain certain “forward-looking statements” and “forward-looking information” within the meaning of applicable securities laws, including Canadian securities laws and United States securities laws (collectively, “Forward-looking Statements”). All information, other than statements of historical facts, included in this Circular and the documents incorporated by reference herein, including estimates, plans, expectations, opinions, forecasts, projections, targets and guidance, constitutes forward-looking information. Forward-looking Statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “pro forma”, “expects”, “anticipates”, “plans”, “believes”, “estimates”, “intends”, “targets”, “projects”, “forecasts”, “seeks”, “likely” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”.

By their nature, Forward-looking Statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of material factors, many of which are beyond Cannabist’s control, could affect operations, business, financial condition, performance and results of Cannabist that may be expressed or implied by such Forward-looking Statements and could cause actual results to differ materially from current expectations of estimated or anticipated events or results.

These factors include, but are not limited to, the following:

•

the timing of, and matters to be considered at, the Meeting as well as with respect to voting at the Meeting;

•

Cannabist’s filings with the Court and the ability to obtain the Final Order;

•

failure to timely satisfy the conditions of the Transaction or to otherwise complete the Transaction;

•

the expected process for implementing the Transaction;

•

the effect of the Transaction on Cannabist’s financial condition and business operations;

•

Cannabist’s future liquidity and financial capacity;

•

Cannabist’s ability to comply with its debt covenants;

•

Cannabist’s ability to secure further equity or debt financing, if required;

•

Cannabist’s ability to service its debt or to amend or refinance its indebtedness and the terms of any such amendment or refinancing;

•

the dilution arising from the issuance of the New CBST Common Shares;

•

assumptions and expectations described in Cannabist’s critical accounting policies and estimates;

•

Cannabist’s future financial and operating performance;

 

22

•

future performance, results and terms of strategic initiatives, strategic agreements, and supply agreements;

•

Cannabist’s ability to grow its business;

•

general regulatory and legal risks, including the risk of legal, regulatory and political change;

•

other events or conditions that may occur in the future; and

•

management’s success in anticipating and managing the foregoing factors, as well as the risks described in the 2024 Annual Report.

No assurance can be given that Cannabist’s expectations will prove to be correct and such forward-looking information included in this Circular should not be unduly relied upon, and Cannabist does not undertake any obligation to revise or update any forward-looking information or statements other than as expressly required by applicable law. In making these statements, in addition to those described above and elsewhere herein, Cannabist has made assumptions with respect to, without limitation, the ability to complete the Transaction, the ability to comply with its debt covenants and service or refinance its debt, receipt and/or maintenance of required licenses and third-party consents in a timely manner, no unplanned materially adverse changes to its facilities, assets, customer base, licenses and the economic conditions affecting Cannabist’s current and proposed operations. These assumptions, although considered reasonable by Cannabist at the time of preparation, may prove to be incorrect. In addition, Cannabist has assumed that there will be no material adverse change to the current regulatory landscape affecting the cannabis industry and has also assumed that Cannabist will remain compliant in the future with all state and local laws, regulations and rules imposed upon it by law. Cannabist’s forward-looking information is expressly qualified in its entirety by this cautionary statement.

NOTICE TO SENIOR NOTEHOLDERS IN THE UNITED STATES

NONE OF THE NEW NOTES, NEW CBST COMMON SHARES OR NEW GUARANTEES HAVE BEEN OR WILL BE REGISTERED UNDER THE U.S. SECURITIES ACT. THE NEW NOTES, THE NEW CBST COMMON SHARES AND THE NEW GUARANTEES WILL BE ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT PROVIDED BY SECTION 3(a)(10) THEREUNDER.

NONE OF THE NEW NOTES, THE NEW CBST COMMON SHARES OR THE NEW GUARANTEES HAVE BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”) OR ANY U.S. STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY U.S. STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE OFFER AND CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Arrangement is being made in accordance with the disclosure requirements of Canadian securities laws. Senior Noteholders should be aware that such requirements are different from those of the United States.

Senior Noteholders in the United States should be aware that the Arrangement as described herein may have tax consequences both in the United States and in Canada. Such consequences in the United States have not been described herein and Senior Noteholders are encouraged to consult their tax advisors.

The solicitation of proxies contemplated hereby are being effected in accordance with Canadian corporate and securities laws. The proxy solicitation rules under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) are not applicable to this solicitation. Senior Noteholders should be aware that proxy solicitation and disclosure requirements under Canadian laws are different from those requirements under U.S. securities laws.

It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. securities laws, since Cannabist is incorporated pursuant to the laws of British Columbia and its articles include British Columbia-based forum selection provisions, and Cannabist Canada is incorporated under the federal laws of Canada.

 

23

DESCRIPTION OF THE ARRANGEMENT

The Arrangement contemplates a series of steps and transactions that are designed to lead to the successful extension of the maturity date of $270 million of secured senior obligations of Cannabist until December 31, 2028 (subject to extension in certain circumstances). The Arrangement contemplates, among other things, the following:

 

1)

the exchange of the Senior Notes for (a) New Senior Notes, New CBST Common Shares and, in the case of Early Supporting Noteholders, the Early Consent Consideration and the right to receive the Additional Early Consent Consideration or (b) in the case of the 2027 Notes, at the election of each 2027 Noteholder, the New Convertible Notes, as applicable; and

 

2)

the issuance of the Anti-Dilutive Warrants to existing CBST Shareholders (excluding recipients of the New CBST Common Shares).

Assuming the Arrangement is completed, there will be, based on the securities issued and outstanding as of the date of this Circular: (1) $270,050,000 aggregate principal amount of New Notes outstanding pursuant to the Amended and Restated Indenture; and (2) 591,141,075 issued and outstanding CBST Common Shares assuming the conversion of all CBST Proportionate Voting Shares and including the New CBST Common Shares and 709,388,022 issued and outstanding CBST Common Shares assuming the exercise of all the Anti-Dilutive Warrants and including the New CBST Common Shares. The Plan will be filed in respect of the Applicants, each, a newly formed, wholly-owned, subsidiary of Cannabist incorporated under the CBCA. The Arrangement is proposed to be completed pursuant to section 192 of the CBCA subject to being approved pursuant to the Final Order and the satisfaction or waiver of all other conditions in the Support Agreement and the Plan.

Background to the Arrangement

Purpose of the Arrangement

The principal purpose of the Arrangement is to give Cannabist additional runway to avoid failure in June 2025, and achieve success by extending the maturity date of the Senior Notes, all of which are currently governed by a single, common trust indenture, being the Existing Indenture, with common and equal collateral. As noted above, all Senior Notes will be exchanged for New Notes which are due December 31, 2028 (subject to extension in certain circumstances) on a dollar-for-dollar basis. The Arrangement is of paramount importance given Cannabist’s expected shortfall in liquidity to repay the 2025 Notes at their upcoming maturity in June 2025, which would result in a cross-default under the other series of Senior Notes.

The resulting enforcement actions would be value-destructive to Cannabist’s business and operations and likely foreclose the possibility of Cannabist achieving the benefit of its operational restructuring initiatives, which will take time to implement and realize. The Companies are proactively pursuing the Transaction under the CBCA in respect of the Senior Notes for the benefit the Companies and all of their stakeholders and in order to avoid a value-destructive and chaotic outcome.

The Arrangement will also align the Senior Notes’ maturity dates with Cannabist’s long-term business plan and provide time needed to implement the ongoing initiatives described below.

Challenges in the Cannabis Industry

Cannabist, through its subsidiaries, directly and indirectly engages in the cannabis industry in the United States, where local and state laws permit such activities. In the United States, cannabis is largely regulated at the state level. Notwithstanding the permissive regulatory environment of cannabis at the state level in certain jurisdictions, cannabis continues to be categorized as a Schedule I controlled substance under the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”), and, as such, cultivation, distribution, sale and possession of cannabis violates federal law in the United States.

 

24

The disconnect between U.S. federal and state cannabis laws has created structural challenges for industry participants, particularly in accessing capital markets and banking services. Due to cannabis remaining illegal at the federal level, businesses are unable to list on U.S. stock exchanges and most major financial institutions, along with large institutional investors, refrain from engaging with the industry to avoid violating federal financial regulations.

Importantly, U.S. federal law prevents cannabis businesses from deducting ordinary business expenses as a result of cannabis being categorized as a Schedule I substance under the CSA pursuant to Section 280(e) of the Internal Revenue Code (“Section 280(e)”). Section 280(e) effectively requires cannabis companies to pay federal tax on the basis of recognized revenue rather than profit as is the case with almost all other businesses and industries. In August 2023, the U.S. Department of Health and Human Service (“HHS”) recommended to the Drug Enforcement Agency that cannabis be rescheduled from Schedule I to Schedule III under the CSA, which would have removed the Section 280(e) restriction and permitted cannabis companies to deduct ordinary course expenses like any other legal business. However, despite the recommendation of HHS, reclassification has not yet occurred, and the review process associated with reclassification remains uncertain without a definitive timeline.

In connection with the 2024 U.S. presidential election, Florida, which is a significant cannabis market in the United States given its population and tourism industry, included an adult-use cannabis ballot measure (the “Florida Ballot Measure”), which proposed amending the state constitutional to legalize recreational cannabis for adults. The Florida Ballot Measure failed to pass, securing only 56% approval, which was less than the required 60% supermajority needed for adoption. The failure of the Florida Ballot Measure constituted a significant market setback as Florida had been the largest potential adult use conversion market on the cannabis industry’s horizon and polling demonstrated a reasonable probability that the Florida Ballot Measure would pass in spite of the supermajority standard. Almost immediately following the failure of the Florida Ballot Measure and the election of Donald Trump as President of the United States, cannabis capital markets deteriorated significantly with stock prices of major multi-state operators generally falling across the industry. For example, MSOS, a broad-based exchange traded fund exclusively holding shares of various U.S. based cannabis companies, fell by approximately 30%. The market price of the CBST Common Shares decreased with other industry participants by approximately 50%, from $0.21 on November 1, 2024, to $0.10 on November 11, 2024. This general deterioration in cannabis capital markets also materially affected the possibility of potentially refinancing the 2025 Notes at maturity.

The cannabis market sell-off also had a direct negative impact on Cannabist’s liquidity outlook. Cannabist had recently divested certain of its Eastern Virginia and Arizona businesses (the “Eastern Virginia and Arizona Divesture”) to another multi-state operator that has a significant operating presence in Florida, Verano Holdings Corp. $40,000,000 of the consideration received by Cannabist in connection with the Eastern Virginia and Arizona Divestiture was satisfied by Verano by the issuance of the Verano Shares. The Verano Shares were subject to certain restrictions preventing them from being sold prior to spring 2025. Upon expiry of these restrictions, the Verano Shares were forecasted to be available to assist liquidity. However, the share price of the Verano Shares fell by approximately 53%, from $3.35 on November 1, 2024, to $1.53 on November 11, 2024. As of March 14, 2025, the share price for each Verano Share was approximately $0.65 per Verano Share, which represents a 84% price decrease since such shares were issued in connection with the Virginia and Arizona Divesture, and an aggregate decrease in value of $31 million from their value of $40,000,000 when originally issued.

Operational Restructuring Initiatives

To address the challenging operating environment and its liquidity challenges, Cannabist has made several structural changes to its operations with a focus on simplification across all areas of its business. In particular, throughout 2024, Cannabist: (1) divested and closed underperforming assets in various jurisdictions which were unprofitable; (2) restructured and grew its wholesale business and engaged in a number of brand partnerships with third-party product providers; (3) reduced overall headcount by more than 20%, resulting in approximately $23 million of annual savings; (4) implemented enhanced purchasing and pricing standard operating procedures; and (5) simplified its product selection by reducing categories and product SKUs by approximately 50%.

 

25

Cannabist also focused its retail footprint on key markets and closed various underperforming stores. Cannabist had 86 active retail locations at the end of 2023, which has been reduced to 56 active retail locations as of the end of February 2025. Cannabist is focused on incremental growth in its retail business in growing markets, particularly, certain markets where adult-use cannabis is expected to become legal in 2025.

The foregoing initiatives have already showed early signs of success. Cannabist experienced increased profits despite revenue being down approximately 11% over the past year and its overall operating margins have improved. The full potential value of Cannabist’s operational initiatives to drive profits and grow strategically will take additional time to implement and realize upon, and will not be sufficient to permit Cannabist to repay or refinance the 2025 Notes on maturity. However, with the benefit of the additional time provided by the Transaction, Cannabist believes these initiatives will achieve a more sustainable economic model, meaningfully enhance cash flow generation and ultimately, allow Cannabist to repay or refinance the Senior Notes in the future.

Prior Transactions to Address Debt Maturities and Liquidity

Between March 2022 and the end of July 2023, Cannabist was constrained from proactively working to improve its balance sheet, as it had entered into an arrangement agreement pursuant to which all of its issued and outstanding shares were to be acquired by an arm’s length third party (the “Arrangement Agreement”), which contained customary covenants that, among other things, required approval from the counterparty with respect to funding and debt repayment.

Following the termination of the Arrangement Agreement on July 31, 2023, Cannabist immediately turned its focus to maintaining stability of its business operations and proactively exploring strategic options to manage its balance sheet and improve liquidity.

As part of these strategic efforts, between August 2023 to mid-2024, among other things, Cannabist: (1) raised approximately $25,000,000 in equity funding pursuant to an opportunistic private placement, and allocated a portion of the proceeds from such private placement to redeeming its 13% senior secured notes due May 14, 2024 (the “2024 Notes”); (2) entered into a debt exchange agreement with one of the principal 2025 Noteholders in January 2024, pursuant to which such Holder was required to exchange $10,000,000 of 2025 Notes for equity securities of Cannabist and, upon fulfilment of certain conditions, was required to exchange an additional $15,000,000 for additional equity securities of Cannabist; (3) raised approximately $19,500,000 of new money through issuance of the 2027 Notes and concurrently exchanged approximately $5,000,000 of 2025 Notes for 2027 Notes, of which Cannabist allocated a portion to repay the remaining principal amount of 2024 Notes upon maturity; (5) divested of non-core businesses, including its Florida operations; and (6) engaged a nationally recognized investment bank in May of 2024 to explore a further debt or equity financing to add additional liquidity to the balance sheet.

Despite these efforts, Cannabist experienced further liquidity strains when it was unable to complete a subsequent debt or equity offering. Under the 2026 Notes, Cannabist was required to make an interest payment of $8,797,500 on August 3, 2024, which was expected to be challenging without placing undue strain on Cannabist’s operations. In light of these challenges, Cannabist engaged Moelis as financial advisor and investment banker in June 2024. With the assistance of Moelis and Cannabist’s legal advisor, Stikeman, Cannabist explored additional options to shore up liquidity to make the required interest payment and improve its balance sheet. As part of these efforts, Cannabist engaged in discussions with an ad hoc group of Senior Noteholders (the “ Ad Hoc Group”), with certain debt capital providers, and with Verano, among others, regarding potential transactions.

Ultimately, after evaluating the options available to Cannabist, with the assistance of Moelis and Stikeman, the Special Committee and the Board determined that the Eastern Virginia and Arizona Divesture was in the best interests of Cannabist. The Eastern Virginia and Arizona Divesture provided consideration of $35,000,000 in cash, a $30,000,000 promissory note from Verano and $40,000,000 of Verano Shares as set out above. The Eastern

 

26

Virginia and Arizona Divesture allowed Cannabist to make the interest payment on the 2026 Notes and was expected to assist with Cannabist’s liquidity throughout 2025. However, as set out above, the value of the Verano Shares fell significantly following the failure of the Florida Ballot Measure, meaning that such transaction failed to serve as a long-term solution to Cannabist’s liquidity issues.

Strategic Process Leading to the Transaction

After the further deterioration of the cannabis capital markets in November 2024, Cannabist accelerated the ongoing strategic review of potential alternatives in light of the impact on the value of the Verano Shares and diminished possibility of completing any refinancing of the 2025 Notes.

On November 18, 2024, Cannabist received an exchange proposal from the Ad Hoc Group, which contemplated: (1) the exchange of the 2025 Notes and the 2026 Notes for new senior secured notes due 2028 and a springing maturity in January 2027 (to the extent the remaining 2027 Notes were not retired or extended); (2) the issuance of CBST Common Shares representing 30% of the post-closing pro forma equity securities of Cannabist; (3) additional modifications to the Existing Indenture; and (4) the right to nominate two independent directors to the Board.

On December 9, 2024, the Board authorized Moelis and Stikeman to continue discussions with the Ad Hoc Group and pursue a transaction to extend maturity dates of Cannabist’s indebtedness. Concurrently, the Board authorized the Special Committee to, among other things, negotiate and enter into definitive agreements with counterparties for any transaction it deemed to be in the best interests of Cannabist.

On December 13, 2024, the Ad Hoc Group and the Advisors executed non-disclosure agreements with Cannabist. Diligence materials, including management’s latest business plan and the schedule of potential asset divestitures, were shared with the Advisors on a professionals-only basis.

Cannabist delivered an initial restructuring counterproposal, incorporating key elements of the initial proposal, but with the following structural adjustments: (1) inclusion of the 2027 Notes to the Senior Notes subject to the arrangement in the transaction; (2) reduction of the equity allocation to the Senior Noteholders; (3) the issuance of the Anti-Dilutive Warrants to existing CBST Shareholders for purposes of minimizing the dilution resulting from the issuance of the New CBST Common Shares to certain Senior Noteholders; and (4) creating flexibility to equitize a portion of the Senior Notes in the case of an increased market capitalization.

The Ad Hoc Group and Cannabist continued to negotiate terms, including the fees payable, interest rates of the new debt instruments, equity allocation to Senior Noteholders, pro-forma governance and go-forward financial and incurrence covenants. Several principal and advisor calls were held to discuss these issues and other key transaction terms. During this period, Cannabist’s advisors and the Advisors exchanged approximately 20 proposals.

In parallel with the discussions with the Ad Hoc Group, the Special Committee also considered various other alternatives, including raising new equity or debt financing to refinance the 2025 Notes or further asset divesture or M&A opportunities. The Special Committee, with the assistance of Moelis and Stikeman, explored such opportunities, including, in one case, engaging in advanced discussions with a counterparty to a potential divesture transaction. However, following the review and considering the advice of Moelis and Stikeman, the Special Committee determined that such options were not actionable alternatives and the potential for a transaction extending the maturity of the Senior Notes was the best available executable opportunity for the Cannabist and its stakeholders. Accordingly, Cannabist and its advisors continued the negotiations with the Ad Hoc Group in order to finalize the terms of the Arrangement.

On or about February 14, 2025, Cannabist and its advisors believed an agreement in principle had been reached with the Ad Hoc Group on the terms of the Transaction. However, on the same day, Cannabist also learned that Murchinson Ltd. (“Murchinson”), an investment manager whose offshore affiliated funds hold 2025 Notes, did not support the Transaction. While Murchinson delivered a proposal, such proposal (the “Murchinson Proposal”) was an attempt to re-order the existing priorities of the Senior Notes such that the 2025 Notes would effectively rank senior to the other series of Senior

 

27

Notes following their proposed transaction. The Advisors subsequently indicated the economic terms of the Murchinson Proposal were not attractive, and subordinating the 2026 Notes and 2027 Notes was a non-starter given the overall financial condition of Cannabist and the equal ranking of the Senior Notes in terms of the collateral secured under the Senior Notes. Murchinson has never indicated how such a transaction could be implemented without the support or consent of the other Senior Noteholders.

On February 27, 2025, following extensive negotiations over the course of the preceding three months as described above, Cannabist entered into the Support Agreement with the Supporting Senior Noteholders. The Transaction contemplated by the Support Agreement was unanimously approved by the Board following the advice from Moelis and Stikeman and a recommendation from the Special Committee and considering the options available for Cannabist in the circumstances. The Board also received the Fairness Opinion on February 26, 2025, which provided that the proposed was fair, from a financial perspective, to the Senior Noteholders and CBST Shareholders.

Reasons for the Arrangement

The following is a summary of the principal reasons for the recommendation of Board that Senior Noteholders VOTE FOR the Arrangement Resolution. In view of the variety of factors and the amount of information considered in connection with the Transaction, the Board did not quantify or otherwise attempt to assign any relative weight to each of the specific factors considered in reaching its conclusions and recommendations. Individual members of the Board may have assigned different weights to different factors.

 

•

Failure to Complete the Arrangement: The 2025 Notes, which in aggregate have a principal amount of $59.5 million outstanding, are due June 29, 2025. At this time, Cannabist does not have sufficient cash on its balance sheet to repay the 2025 Notes on maturity and it is unlikely to generate cash by maturity that would allow for both repayment and continuity of business operations. In order to repay the 2025 Notes, Cannabist would likely be required to divest assets in an expediated manner with current unfavourable market conditions, if even possible. Such unfavourable divestures would likely result in realizations below fair market value to the detriment of Cannabist, the Senior Noteholders, and Cannabist’s stakeholders generally;

 

•

Upcoming 2026 Maturity: The 2026 Notes, which in aggregate have a principal amount of $185 million outstanding, are due February 3, 2026, approximately seven months following the maturity of the 2025 Notes. Cannabist requires a comprehensive solution to address all Senior Notes given the close-dated maturities, which the Arrangement provides.

 

•

Runway Extension: The Arrangement provides Cannabist with an additional three years of runway to implement its business plan given the maturity extensions across the Senior Notes;

 

•

Enhanced Covenants: The terms of the New Notes provide Senior Noteholders with enhanced covenant protections and increase Cannabist’s reporting obligations as compared to the covenants and reporting obligations under the Existing Indenture, while providing Cannabist with the additional time and operational flexibility to execute on its business plan;

 

•

Fiduciary Out: The Support Agreement provides Cannabist with a fiduciary out if it is able to enter into a transaction (including a refinancing) that would, when consummated: (1) result in a higher or better outcome for both Cannabist and Senior Noteholders; or (2) repay in full in cash all obligations under the Senior Notes;

 

•

Opportunity to Participate in Share Price Upside: In connection with the Arrangement, 2025 Noteholders, 2026 Noteholders and each New Senior Note-Electing Noteholder will receive the New CBST Common Shares;

 

•

Fairness Opinion: The Fairness Opinion concludes that, as of the date thereof, and subject to the qualifications set out therein, the Transaction, if implemented, is fair from a financial point of view to the Senior Noteholders and to CBST Shareholders. A copy of the Fairness Opinion is attached at Appendix “F” of this Circular; and

 

28

•

Court Approval of Arrangement: The Arrangement is subject to a determination of the Court that the terms of the Arrangement are fair and reasonable, both procedurally and substantively.

The Transaction

The Transaction will be implemented pursuant to the Plan pursuant to section 192 of the CBCA and, subject to approval pursuant to the Final Order, pursuant to which, and subject to the specific terms thereof, the Senior Notes will be surrendered by the Senior Noteholders and at the Effective Time, as part of the Arrangement:

 

1)

each 2025 Noteholder will exchange their 2025 Notes for (a) New Senior Notes with an aggregate principal amount equal to the aggregate principal amount of its 2025 Notes, (b) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Senior Noteholders pursuant to Section 2.2(d) of the Plan) of the New CBST Common Shares, and (c) if such 2025 Noteholder is an Early Supporting Noteholder, (i) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of the Early Consent Consideration either in cash, or by transfer of such number of Verano Shares equal such portion of the Early Consent Consideration divided by the 30-day VWAP of the Verano Shares and (ii) the right to receive its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of the Additional Early Consent Consideration;

 

2)

each 2026 Noteholder will exchange their 2026 Notes for (a) New Senior Notes with an aggregate principal amount equal to the aggregate principal amount of its 2026 Notes, (b) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Senior Noteholders pursuant to Section 2.2(d) of the Plan) of the New CBST Common Shares, and (c) if such 2026 Noteholder is an Early Supporting Noteholder, (i) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of the Early Consent Consideration either in cash, or by transfer of such number of Verano Shares equal to such portion of the Early Consent Consideration divided by the 30-day VWAP of the Verano Shares and (ii) the right to receive its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of the Additional Early Consent Consideration;

 

3)

each 2027 Noteholder will elect to exchange their 2027 Notes for, at the election of such 2027 Noteholder, either:

 

a)

(i) New Senior Notes with an aggregate principal amount equal to the aggregate principal amount of its 2027 Notes, (ii) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Senior Noteholders pursuant to Section 2.2(d) of the Plan) of the New CBST Common Shares, and (iii) if such 2027 Noteholder is an Early Supporting Noteholder, (A) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of the Early Consent Consideration either in cash, or by transfer of such number of Verano Shares equal to its portion of the Early Consent Consideration divided by the 30-day VWAP of the Verano Shares and (B) the right to receive its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of the Additional Early Consent Consideration; or

 

b)

the New Convertible Notes for an aggregate principal amount equal to the aggregate principal amount of its 2027 Notes;

 

29

provided, that, any 2027 Noteholder who does not make an election by the election deadline will be deemed to have made a New Convertible Note Election;

 

4)

the New Notes will be guaranteed by each of the Existing Guarantors and New Guarantors and secured by all or substantially all of the assets and properties of the Companies and certain of the direct and indirect subsidiaries of the Companies;

 

5)

the New CBST Common Shares will be listed on the CBOE, and although the New CBST Common Shares will not be subject to resale restrictions under applicable Canadian and United States securities laws, Senior Noteholders receiving the New CBST Common Shares will be deemed to have entered into the Standstill and Lock-Up Agreement, pursuant to which:

 

a)

100% of the New CBST Common Shares will be subject to a 6-month contractual lock-up and 50% of the New CBST Common Shares will be subject to a 12-month contractual lock-up; and

 

b)

the recipient of the New CBST Common Shares will agree not to, for a period of six months from Closing, among other things, directly or indirectly: (i) effect, seek, offer or propose, or in any way assist, advise or encourage any other person to effect, seek, offer or propose, in each case whether publicly or otherwise, any acquisition of any equity securities or rights or options to acquire any equity securities of the Companies or (ii) form, join, or in any way participate in a group to attempt to influence the conduct of the holders of voting securities of the Companies or take any other action to seek to control or influence the directors, management or policies of the Companies or to obtain representation on the boards of directors of the Companies; and

 

6)

Cannabist Canada and Cannabist Canada 2 will amalgamate to form Cannabist Canada Amalco.

The New Notes will have additional covenants, events of default and an enhanced collateral package in comparison to the Senior Notes.

The implementation of the Arrangement is subject to and conditional upon all required Court approvals and the satisfaction or waiver of the other conditions included in the Support Agreement. CBST Shareholder approval is not required by the CBOE or under CBOE rules and is not a condition of Closing.

Pursuant to the Support Agreement, it is a condition to the completion of the Arrangement that the New CBST Common Shares not be subject to a restricted period (other than the six-month and twelve-month contractual lock-up on 100% of the New CBST Common Shares and 50% of the New CBST Common Shares, respectively, as agreed to in the Support Agreement) or to a statutory hold period under Canadian or U.S. securities laws, or to any resale restriction under the rules, policies or requirements of the CBOE.

Additional Early Consent Consideration

Early Supporting Noteholders will entitled to their Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders) of additional early consent consideration in the aggregate amount of $1,500,000 (the “Additional Early Consent Consideration”), which will be payable by Cannabist in cash at the maturity of the New Senior Notes, except that such payment will be accelerated and made upon the occurrence of certain milestones, as follows: (1) $750,000 shall be paid on the date on which Cannabist has received aggregate proceeds for Approved Sales equal to or greater than $15 million; and (2) $750,000 shall be paid on the date on which Cannabist has received aggregate proceeds for Approved Sales equal to or greater than $20 million, with, for greater certainty, any balance remaining payable at maturity of the New Senior Notes. New Convertible Note-Electing Noteholders will not be entitled to any portion of the Additional Early Consent Consideration.

 

30

Anti-Dilutive Warrants

In order to reduce the dilutive effect of the issuance of the New CBST Common Shares in connection with the Transaction on existing CBST Shareholders, at Closing, but prior to the issuance of the New CBST Common Shares, CBST Shareholders (excluding, for greater certainty, the recipients of the New CBST Common Shares) will be granted the Anti-Dilutive Warrants with an exercise price of C$0.14 per CBST Common Share and a term of two years from the Closing. The Anti-Dilutive Warrants will represent the right to acquire an aggregate of 118,246,947 million newly issued CBST Common Shares. The Anti-Dilutive Warrants will only be exercisable: (1) outside the United States pursuant to Regulation S under the U.S. Securities Act; (2) inside the United States pursuant to available exemptions from registration requirements under the U.S. Securities Act and in compliance with any applicable U.S. state securities laws; or (3) pursuant to an effective registration statement under the U.S. Securities Act, and, in each case, in compliance with any applicable local securities laws. 40% of the proceeds from any exercise of the Anti-Dilutive Warrants will be used to make an offer to pay down the New Notes, which shall be conducted through an appropriate broker, and where offered at par, shall be offered to each series of New Notes ratably, thus reducing Cannabist’s debt, and 60% of any such proceeds will be used for general corporate purposes. The Supporting Senior Noteholders are supportive of the issuance of the Anti-Dilutive Warrants.

Governance Rights

At Closing, Cannabist will select two qualified directors with no affiliation to competitors of Cannabist and who are “independent” (as defined in National Instrument 52-110 – Audit Committees) of Cannabist (the “AHC Nominees”) from a slate of candidates (which slate shall be no less than three candidates) that will be provided to Cannabist by the Supporting Senior Noteholders to be added to the Board. Until the New Notes are refinanced or repaid in full, the Supporting Senior Noteholders shall have the right to nominate two such directors, beginning as of Cannabist’s 2025 annual general meeting; provided, that the Closing has occurred on or before the date that is 14 days prior to the date of mailing of the management information circular for such meeting, or if Closing has not occurred as of such date, as soon as feasible after Closing; provided, further, that if not appointed by the CBST Shareholders at such meeting, the nominees will be appointed by the Board promptly thereafter.

Four of Cannabist’s director positions will be eliminated as of Cannabist’s 2025 annual general meeting if Closing has occurred on or before such meeting, resulting in a seven-person Board (pro forma for the addition of the AHC Nominees), and Cannabist is not permitted to increase the size of the Board above seven directors without the consent of the Supporting Senior Noteholders for as long as the Supporting Senior Noteholders have the right to nominate the AHC Nominees.

The Chair of the Board shall be subject to approval by a majority of the independent directors of Cannabist.

Upon Closing, the AHC Nominees will be entitled to participate as observers in meetings of the Board until the later of: (1) the date of their appointment to the Board: and (2) the date on which the AHC Nominees have received applicable regulatory approval(s) under U.S. state Law, at which time they will be able to act in their full authority as directors of Cannabist.

Payment of Accrued and Unpaid Interest

All accrued but unpaid interest on the Senior Notes up to but excluding the Effective Date shall be paid to Senior Noteholders in accordance with the standing instructions and customary practices of the Indenture Trustee. From and after the Effective Date, all interest payable on the Senior Notes shall accrue to the Companies as Senior Noteholder following completion of the Arrangement.

 

31

Conditions to the Arrangement

The Arrangement is subject to the following conditions, among others:

 

1)

the Interim Order, the Plan and the Final Order shall have been approved by (a) the Court, and (b) the requisite majorities of affected stakeholders as and to the extent required by the Court;

 

2)

the CBOE shall have consented to or not objected to the Transaction;

 

3)

all filings, consents, and approvals required under applicable Law to consummate the Transaction (including, without limitation, required state and municipal cannabis regulatory approvals) shall have been made or obtained, as applicable, and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated, in each case on terms reasonably satisfactory to Cannabist and the Requisite Supporting Senior Noteholders;

 

4)

the Plan and all Definitive Documents shall be in form and substance consistent with the Support Agreement and the Term Sheet and otherwise reasonably acceptable to Cannabist and the Requisite Supporting Senior Noteholders;

 

5)

the conditions precedent to implementation of the Plan shall have been satisfied or waived in accordance with the terms of the Plan;

 

6)

the conditions precedent in each of the Definitive Documents shall have been satisfied or waived in accordance with the terms of the applicable Definitive Document;

 

7)

there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, that restrains, impedes or prohibits the Transaction or the Plan or any material part thereof or requires or purports to require a material variation of the Term Sheet;

 

8)

there shall be usual and customary releases in connection with the implementation of the Transaction under the CBCA to be effective as of the Effective Date (the “Releases”) pursuant to the Plan and the Final Order, and pursuant to contractual releases entered into among the parties to the Support Agreement;

 

9)

the CBCA Director shall have issued a Certificate of Arrangement giving effect to the articles of arrangement in respect of the Plan; and

 

10)

the reasonable and documented invoiced fees and expenses of the Advisors in accordance with and subject to the engagement letters and fee letters entered into by Cannabist and the Advisors shall have been paid, provided that the Advisors shall have provided Cannabist with invoices for all such fees and expenses at least one (1) calendar day prior to the Effective Date (it being understood that failure to provide such invoice prior to the Effective Date shall not preclude the applicable Advisor’s right to payment following the Effective Date).

Releases

As of the Effective Date, each of the Released Parties (as defined in the Plan) shall be released and discharged from all actions, causes of action, damages, judgments, executions, obligations, liabilities and Claims of any kind or nature whatsoever arising on or prior to the Effective Date in connection with the Senior Notes, the Senior Notes Documents, the New CBST Common Shares, the Anti-Dilutive Warrants, the Support Agreement, the Arrangement, the Plan, the CBCA Proceedings and any other proceedings commenced with respect to or in connection with the Plan, the transactions contemplated hereunder, and any other actions or matters related directly or indirectly to the foregoing; provided that nothing in this paragraph shall release or discharge the following (1) any of the Released Parties from or in respect of their respective obligations under

 

32

the Plan, the New Notes (including the Amended and Restated Indenture and the other New Notes Documents solely as they relate to the New Notes), the New Guarantees, the Warrant Agency Agreement, the Anti-Dilutive Warrants, or any Order or document ancillary to any of the foregoing, (2) any director or officer of the Companies or any other Cannabist Entity of their right to indemnity, insurance claims, and employment related rights or claims, (3) any inter-company obligations between or among the Companies or any other Cannabist Entity on or before the Effective Date or (4) any act or omission arising out of any Released Party ’s gross negligence, actual and intentional fraud, willful misconduct, or criminal acts (as determined by a final non-appealable order from a court of competent jurisdiction). The foregoing release shall not be construed to prohibit a party in interest from seeking to enforce the terms of the Plan or any contract or agreement entered into pursuant to, in connection with or contemplated by the Plan.

Procedures

Issuance of New Notes

The New Notes to be issued to the Senior Noteholders pursuant to the Plan shall be made by way of issuance by the Companies on the Effective Date of one or more global notes in respect of the New Notes, authenticated by the Indenture Trustee, and issued in the name of CDS (or its nominee) in respect of the Senior Noteholders, other than certain Holders of New Notes (or their Intermediaries (as defined in the Plan)), who will receive DRS Advices or definitive certificates representing the New Notes from the Indenture Trustee. Any definitive certificates shall be held by the Depositary until such time as the applicable Senior Noteholder delivers a duly completed Letter of Transmittal and Election Form and surrenders its Senior Notes in accordance with Section 3.2 of the Plan.

Surrender of Senior Notes

On the Effective Date, CDS (or its nominee) as a registered Senior Noteholder on behalf of certain of the Senior Noteholders shall surrender, or cause the surrender of, the Senior Notes it holds in exchange for the portion of the consideration payable to it as a Senior Noteholder pursuant to the Arrangement. At the Effective Time, each Senior Noteholders whose Senior Notes are represented by a DRS Advice shall be deemed to have surrendered and transferred (free and clear of all liens and encumbrances), without any further action by the Senior Noteholders, the Senior Notes represented by DRS Advice to the Companies in exchange for the portion of the consideration payable to it as a Senior Noteholders pursuant to the Arrangement. On the Effective Date, each Senior Noteholder holding a certificate representing Senior Notes shall surrender, or cause the surrender of, the certificate(s) representing the Senior Notes to the Depositary (with a duly completed Letter of Transmittal and Election Form) in exchange for the portion of the consideration payable to the Senior Noteholder under the Arrangement. For greater clarity, only Senior Noteholders whose Senior Notes are represented by physical certificates are required to submit a duly completed Letter of Transmittal and Election Form when surrendering such Senior Notes. Senior Noteholder’s whose Senior Notes are represented by a DRS Advice are not required to surrender their DRS Advice or a Letter of Transmittal and Election Form prior to receiving their New Notes as such Senior Noteholder will be deemed to have transferred title to the Senior Notes to the Companies at the Effective Time in accordance with the Plan and will be issued a new DRS Advice representing an equivalent amount of New Notes without any further action required on its part.

Issuance of New CBST Common Shares

The New CBST Common Shares to be issued pursuant to the Plan shall be deemed to be duly authorized, validly issued, fully paid and non-assessable.

Prior to the filing by the Applicants of the Articles of Arrangement, Cannabist shall deliver or cause to be delivered a treasury direction to the Transfer Agent, for the benefit of the applicable Senior Noteholders, that directs the Transfer Agent to issue the New CBST Common Shares to be distributed under the Plan and directs the Transfer Agent to cause the New CBST Common Shares to be distributed, subject to the provisions of the Standstill and Lock-Up Agreement and Sections 3.3(c) and 3.7 of the Plan.

 

33

The New CBST Common Shares to be issued under the Plan will be deposited with the Depositary and, subject to Section 3.2 of the Plan, made either (1) through the facilities of CDS who, in turn, will make delivery of the New CBST Common Shares to the ultimate beneficial recipients thereof pursuant to standing instructions and customary practices of CDS, as applicable, or (2) by providing DRS Advices or confirmations in the name of the applicable recipient thereof (or its Intermediary) and registered in Cannabist’s records which will be maintained by the Transfer Agent, following surrender of the Senior Notes in accordance with Section 3.2 and Section 3.6 of the Plan.

Payment of the Early Consent Consideration

Prior to the filing by the Applicants of the Articles of Arrangement, Cannabist shall deposit or cause to be deposited with the Depositary, for the benefit of the Early Supporting Noteholders, the Early Consent Consideration, and the Depositary shall, subject to Section 3.2 of the Plan, deliver the Early Consent Consideration either: (1) through the facilities of CDS who, in turn, will make delivery to the ultimate beneficial recipients thereof pursuant to standing instructions and customary practices of CDS, as applicable; and/or (2) by delivering cheques, or in the case where the Early Consent Consideration is satisfied by the transfer of Verano Shares, certificates or DRS Advices representing such Verano Shares, in the name of the applicable recipient thereof (or its Intermediary) and registered in Cannabist’s records which will be maintained by the Transfer Agent. New Convertible Note-Electing Noteholders will not be entitled to any portion of the Early Consent Consideration.

Issuance of Anti-Dilutive Warrants

Prior to the filing by the Applicants of the articles of arrangement, Cannabist shall deliver or cause to be delivered: (1) a direction to the Warrant Agent, for the benefit of the CBST Shareholders (excluding recipients of the New CBST Common Shares), instructing the Warrant Agent to issue the Anti-Dilutive Warrants, to be distributed under the Plan; and (2) a reservation order to the Transfer Agent such that the number of CBST Common Shares issuable upon exercise of the Anti-Dilutive Warrants are reserved for issuance. Thereafter, the Warrant Agent shall distribute the Anti-Dilutive Warrants (a) through the facilities of CDS who, in turn, will make delivery of the Anti-Dilutive Warrants to the ultimate beneficial recipients thereof pursuant to standing instructions and customary practices of CDS, as applicable, and/or (b) by providing DRS Advices or confirmations in the name of the applicable recipient thereof (or its Intermediary) that is a CBST Shareholder in Cannabist’s records which are maintained by the Transfer Agent.

The Anti-Dilutive Warrants will only be exercisable: (1) outside the United States pursuant to Regulation S under the U.S. Securities Act; (2) inside the United States pursuant to available exemptions from registration requirements under the U.S. Securities Act and in compliance with any applicable U.S. state securities laws; or (3) pursuant to an effective registration statement under the U.S. Securities Act, and in each case, in compliance with any applicable local securities laws.

Withholding Rights

The Companies, the Indenture Trustee, the Transfer Agent, the Warrant Agent and the intermediaries shall be entitled to deduct and withhold from any consideration or other amount deliverable or otherwise payable to any Person hereunder such amounts as they may be required to deduct or withhold with respect to such payment under the Tax Act, or any provision of any applicable federal, provincial, state, local or foreign tax law or treaty, in each case, as amended, provided that any such right to deduct or withhold shall not otherwise change or modify their obligations in respect of withholding taxes under the terms of the Existing Indenture or Amended and Restated Indenture and any and all other documents. To the extent that amounts are so deducted or withheld, such deducted or withheld amounts shall be treated for all purposes hereof as having been paid to the relevant Person in respect of which such deduction and withholding was made. Any such deducted or withheld amounts shall be remitted to the appropriate Governmental Entity.

As more particularly described in the Plan (and subject to the exceptions and limitations described therein), the Companies are required to pay to Senior Noteholders such additional amounts in cash as necessary so that after making or allowing for all required deductions and withholdings (if any), the Senior Noteholders receive what they would have received (as an amount in cash, property or otherwise) had no such deductions or withholdings been required.

 

34

Fairness Opinion

Koger was asked by Cannabist to provide an opinion to the Board as to the fairness of the Transaction, from a financial point of view, to the Senior Noteholders and CBST Shareholders. Koger rendered an oral fairness opinion to the Board on February 26, 2025 and delivered its written fairness opinion to the Board as of February 26, 2025. Based upon and subject to the various considerations set forth in the Fairness Opinion, the Transaction, if implemented, is fair, from a financial point of view, to the Senior Noteholders and CBST Shareholders. Services provided by Koger relating to the Transaction were on a flat fee basis and are not subject to a success fee.

The full text of the Fairness Opinion is attached as Appendix “F” to this Circular and should be read carefully and in its entirety. The Fairness Opinion describes the scope of the review undertaken by Koger, the assumptions made by Koger, the limitations on the use of the Fairness Opinion, and the basis of Koger’s fairness analysis for the purposes of the Fairness Opinion, among other matters.

The summary of the Fairness Opinion set forth in this Circular is qualified in its entirety by reference to the full text of the Fairness Opinion. Koger has provided its written consent to the inclusion of the Fairness Opinion in this Circular. The Fairness Opinion states that it may not be quoted, summarized, paraphrased, excerpted, referred to or relied upon by any person or entity other than the Board or for any other purpose without the express prior written consent of Koger.

Assumptions

In preparing the Fairness Opinion, Koger assumed that all of the information supplied to it by the management of Cannabist was accurate and complete. They further assumed that all significant factors, contracts or agreements in effect at the date of the Fairness Opinion that would have an impact as to the conclusions arrived at in such Fairness Opinion have been disclosed to Koger and there are no material undisclosed liabilities. They have further assumed that all licenses, consents and required authorizations have been obtained and are in force for Cannabist. They have also assumed that Cannabist does not have any material contingent liabilities other than those disclosed in their financial statements and/or by management that no material litigation (other than as disclosed) is pending or threatened which may have an impact on the Fairness Opinion.

Independence of Koger

The analyses and research used in preparing the Fairness Opinion were carried out solely by Thomas A. Koger, the President of Koger, as an independent and neutral expert. No one has put any restriction on the scope of his work, opinion or conclusions. Koger and Mr. Koger, in his personal capacity, also confirmed that they were independent for the purposes of this engagement and, without limiting the foregoing, have no financial interest or future expected financial interest in any entity involved in the Transaction.

Approach to Fairness

The analyses Koger prepared in issuing the Fairness Opinion must be considered as a whole. In assessing the fairness of the Transaction, from a financial point of view to CBST Shareholders and Senior Noteholders, Koger considered a number of factors including, but not limited to, the following:

 

•

The environment for companies operating in the cannabis industry has deteriorated at the date of the Fairness Opinion compared to when the Senior Notes were originally issued. Accordingly, the terms of the New Notes issued as part of the Transaction would be less favorable to Cannabist than when the Senior Notes were originally issued. The better terms to the holders of the New Notes would nevertheless be fair given the present high interest rate environment.

 

35

•

Although the underlying principal amounts of the Senior Notes and the New Senior Notes are the same (if the New Convertible Note Election is not made), the New Senior Notes have improved covenants and security, and those improvements are a consideration in determining whether the Transaction is fair overall.

 

•

The New Senior Notes have an interest rate of 9.25% compared to 6% with the 2025 Notes, 9.5% with the 2026 Notes and 9.0% with the 2027 Notes. The interest rate of 9.25% by itself is insufficient to compensate the present Senior Noteholders in the present volatile cannabis industry. The Senior Noteholders will receive the New CBST Common Shares and additional improved terms (such as independent board seats and improved corporate governance protections) that are required to make the Transaction fair, and the Early Supporting Noteholders will be entitled to the Early Consent Consideration.

 

•

The interest rate of 9.25% payable on the New Senior Notes represents an appropriate premium over the estimated risk-free rate represented by 10 year US bond yields presently of approximately 4.5%.

 

•

Potential additional capital may be raised by Cannabist from the exercise of the Anti-Dilutive Warrants. The provisions for the repurchase of New Senior Notes from any such capital raised is an improved feature to the Senior Noteholders supporting the fairness of the Transaction.

 

•

100% of the New CBST Common Shares issued as part of the Transaction will be subject to a 6-month contractual lock-up and 50% of the New CBST Common Shares will be subject to a 12-month contractual lock up upon completion of the Transaction to help create an orderly trading market for all CBST Shareholders and is a contributing factor in the Transaction being fair.

 

•

The New Convertible Notes retain the same conversion price and features as the 2027 Notes and rank pari passu to the New Senior Notes contributing to the fairness of the Transaction to the 2027 Noteholders making a New Convertible Note Election.

 

•

The terms of the Transaction, considered independently, are dilutive to existing CBST Shareholders. This issue was addressed through the issuance of the Anti-Dilutive Warrants to existing CBST Shareholders (excluding recipients of the New CBST Common Shares to be issued as part of the Transaction). The issuance of the Anti-Dilutive Warrants ensures the existing CBST Shareholders can participate in future share value post execution of the Transaction.

 

•

Cannabist and its financial advisor, Moelis, attempted to identify possible sources of capital and possibilities to refinance the Senior Notes. No executable transactions were found with better terms as those contained in the Transaction.

 

•

At the of each fiscal quarter end starting March 31, 2026, Cannabist must adhere to a Net Consolidated Leverage Ratio providing protection to the Holder of New Senior Notes.

 

•

The number of series of the existing Senior Notes (all of which are secured by the same collateral and rank equally as between them) will be reduced with the issuance of the New Senior Notes, which will provide Cannabist with an extended and uniform maturity profile;

 

•

Inclusion of extension provisions in the Amended and Restated Indenture is of benefit to all parties, as it ensures stability for Cannabist for a longer time period.

 

•

Should the Verano Shares be used in financing the Early Consent Consideration, it will be based on the 30-day VWAP of those shares, eliminating a short-term fluctuation in the price of Verano Shares and contributing to fairness.

 

36

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the principal Canadian federal income tax considerations generally applicable as of the date hereof to: (1) a Beneficial Senior Noteholder who disposes of Senior Notes to Cannabist and Cannabist Canada pursuant to the Arrangement in exchange either for either (a) consideration that includes New Senior Notes and New CBST Common Shares, or (b) New Convertible Notes; and (2) a current CBST Shareholder who is the beneficial owner of CBST Shares and that receives Anti-Dilutive Warrants pursuant to the Arrangement; in each case, who (x) holds their Senior Notes or CBST Shares (as applicable) as capital property, and will hold New Notes, New CBST Common Shares, Anti-Dilutive Warrants, and CBST Common Shares (as applicable) as capital property, (y) in the case of Senior Notes and New Notes, is entitled to all payments under such notes, and (z) deals at arm’s length with, and is not affiliated with, Cannabist or Cannabist Canada (a “Securityholder”).

Generally, the Senior Notes, the CBST Shares, the New Notes, the New CBST Common Shares, the Anti-Dilutive Warrants and the CBST Common Shares issuable upon exercise of the Anti-Dilutive Warrants (collectively, the “Securities” and individually a “Security”) will be considered to be capital property to a Securityholder provided that the Securityholder does not hold the applicable Security in the course of carrying on a business or as part of an adventure or concern in the nature of trade. Certain Securityholders who are resident in Canada for purposes of the Tax Act and whose Securities (other than Anti-Dilutive Warrants) might not otherwise qualify as capital property may, in certain circumstances, be entitled to make an irrevocable election pursuant to subsection 39(4) of the Tax Act the effect of which is to deem such Securities and every other “Canadian security” (as defined in the Tax Act) owned by such Securityholder in the taxation year of the election and all subsequent taxation years to be capital property. This election is not available in respect of Anti-Dilutive Warrants.

This summary does not apply to a Securityholder: (1) that is a “financial institution” within the meaning of section 142.2 of the Tax Act; (2) that is a “specified financial institution” as defined in the Tax Act; (3) that reports its “Canadian tax results” within the meaning of the Tax Act in a currency other than Canadian currency; (4) an interest in which is a “tax shelter investment” for the purposes of the Tax Act; or (5) that has entered into, or will enter into, a “derivative forward agreement” or “synthetic disposition arrangement” within the meaning of the Tax Act with respect to a Security. Such Securityholders should consult their own tax advisors.

This summary does not address the possible application of the “foreign affiliate dumping” rules in the Tax Act that may be applicable to a Securityholder that is a corporation resident in Canada (for purposes of the Tax Act) and is or becomes, or does not deal at arm’s length with, a corporation resident in Canada that is or becomes, as part of a transaction or event or series of transactions or events that includes the acquisition of the Securities, controlled by a non-resident person or a group of non-resident persons not dealing with each other at arm’s length, in each case for purposes of the rules in section 212.3 of the Tax Act. Securityholders for which this summary does not apply should consult their own tax advisors.

Additional considerations, not discussed herein, may apply to Beneficial Senior Noteholders who receive the Early Consent Consideration or Additional Early Consent Consideration, and such holders are urged to consult their own tax advisors in that regard.

This summary is based upon the current provisions of the Tax Act and counsel’s understanding of the current administrative policies and practices of the Canada Revenue Agency (the “CRA”) made publicly available prior to the date hereof. This summary also takes into account all specific proposals to amend the Tax Act and the regulations thereunder that have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes that all of the Tax Proposals will be enacted in the form proposed. No assurance can be given that the Tax Proposals will be enacted as proposed or at all. This summary does not otherwise take into account or anticipate any changes in law or in the administrative policies or practices of the CRA, whether by legislative, governmental or judicial action, nor does it take into account any other federal or any provincial, territorial or foreign tax considerations.

 

37

This summary is based on the understanding that Cannabist Canada will not participate in servicing the principal, interest or other amounts required to be paid on the New Notes, and Cannabist will have the responsibility to service all of the principal, interest and other amounts required to be paid on the New Notes.

This summary is of a general nature only, is not exhaustive of all Canadian federal income tax consequences and is not intended to be, nor should it be construed as, legal or tax advice to any particular Securityholder. Securityholders are urged to consult their own tax advisors concerning the tax consequences to them of the Arrangement having regard to their own particular circumstances.

Foreign Currency

Generally, for purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of a Security must be converted into Canadian dollars using the rate of exchange quoted by the Bank of Canada on the date such amounts arose, or such other rate of exchange as is acceptable to the CRA. Securityholders may, as a consequence, realize capital gains or capital losses by virtue of changes in the value of the U.S. dollar relative to the Canadian dollar.

Residents of Canada

This portion of the summary is applicable to a Securityholder that, at all relevant times for purposes of the Tax Act, is (or is deemed to be) resident in Canada (a “Resident Holder”).

Exchange of Senior Notes for New Notes pursuant to the Arrangement

On a disposition of a Senior Note by a Resident Holder pursuant to the Arrangement, the Resident Holder will generally be required to include in computing its income for the taxation year in which the disposition occurs an amount equal to the interest that has accrued on the Senior Note to the date of the disposition, to the extent that such amount was not otherwise included in computing the Resident Holder’s income for that taxation year or a preceding taxation year.

In addition, on a disposition of a Senior Note pursuant to the Arrangement, a Resident Holder will realize a capital gain (or a capital loss) to the extent that the proceeds of disposition of the Senior Note, net of any amount included in the Resident Hold er’s income as interest as well as any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of the Senior Note to the Resident Holder immediately before the disposition. A Resident Holder’s proceeds of disposition of its Senior Notes will be an amount equal to the aggregate fair market value at the Effective Time of the consideration received by such Resident Holder pursuant to the Arrangement in exchange for such Senior Notes.

The cost of the New Notes and the New CBST Common Shares received by a Resident Holder pursuant to the Arrangement will generally be equal to the fair market value of such New Notes and New CBST Common Shares, respectively. For the purposes of determining the adjusted cost base to a Resident Holder of the New CBST Common Shares acquired pursuant to the Arrangement, the cost of such New CBST Common Shares will be averaged with the adjusted cost base of all other CBST Common Shares of the same class owned by the Resident Holder as capital property immediately before that time.

Generally, a portion of any capital loss realized on the disposition of Senior Notes pursuant to the Arrangement may be denied in certain circumstances under the Tax Act. Resident Holders should consult a tax advisor with respect to any potential loss denial.

The income tax treatment of capital gains (and capital losses) is generally described below under “Taxation of Capital Gains and Capital Losses”.

 

38

Holding and Disposing of New Notes

Interest on the New Notes

A Resident Holder of New Notes that is a corporation, partnership, unit trust or trust of which a corporation or a partnership is a beneficiary will be required to include in computing its income for a taxation year any interest on a New Note that accrued or is deemed to accrue to it to the end of the taxation year or that became receivable or was received by it before the end of the taxation year, except to the extent that such interest was otherwise included in computing its income for a preceding taxation year.

Any other Resident Holder of New Notes, including an individual (other than certain trusts), will be required to include in computing the Resident Holder’s income for a taxation year any amount that was received or became receivable by such Resident Holder in the taxation year as interest on such notes, depending upon the method regularly followed by the Resident Holder in computing income, to the extent that such amount was not included in computing the Resident Holder’s income for a preceding taxation year.

If a New Note is acquired by a Resident Holder at a discount from its face value (a “Discount ”) and such Discount is (or is deemed to be) interest to the Resident Holder, such Resident Holder will be required to include in income annually the portion of such interest (or deemed interest) that accrues to the Resident Holder in the manner prescribed by the Tax Act, notwithstanding that the Discount will not be received or receivable until maturity. Resident Holders are urged to consult their own tax advisors as to the Canadian income tax treatment of the Discount.

Any premium paid by Cannabist and/or Cannabist Canada to a Resident Holder on the redemption or repurchase of a New Note before its maturity (other than in the open market in the manner any such obligation would normally be purchased in the open market by any member of the public) will generally be deemed to be interest received by such Resident Holder at the time of the payment to the extent that it can reasonably be considered to relate to, and does not exceed the value at that time of, the interest that would have been paid or payable by Cannabist and/or Cannabist Canada on the New Note for a taxation year of Cannabist and/or Cannabist Canada ending after that time. Such interest will be required to be included in computing the Resident Holder’s income in the manner described above.

A Resident Holder may be subject to United States withholding tax on interest received on the New Notes. A foreign tax credit under the Tax Act in respect of tax (including withholding tax) paid to a foreign country is, in general terms, limited to the Canadian tax otherwise payable in respect of income from sources in that foreign country, and is subject to the other requirements of the Tax Act. However, interest received on the New Notes by a Resident Holder may not be treated as income from a source in the United States for these purposes, such that a foreign tax credit under the Tax Act may not be available. Resident Holders should consult their own tax advisors with respect to the availability of any foreign tax credits or deductions under the Tax Act in respect of any United States withholding tax applicable to interest on the New Notes.

Conversion of New Convertible Notes

A Resident Holder of New Convertible Notes who converts a New Convertible Note into CBST Common Shares (or CBST Common Shares and cash in lieu of a fraction of a CBST Common Share) pursuant to the conversion privilege will be deemed not to have disposed of the New Convertible Note, and accordingly, will not be considered to realize a capital gain (or capital loss) on such conversion.

Under the current administrative practice of the CRA, a Resident Holder who, upon conversion of a New Convertible Note, receives cash not in excess of C$200 in lieu of a fraction of a CBST Common Share may either treat this amount as proceeds of disposition of a portion of the New Convertible Note, thereby realizing a capital gain (or a capital loss), or reduce the adjusted cost base of the CBST Common Shares that the Resident Holder receives upon conversion of its New Convertible Notes by the amount of the cash received.

 

39

The aggregate cost to a Resident Holder of the CBST Common Shares acquired upon exercise of such Resident Holder’s right to convert a New Convertible Note generally should be equal to the aggregate of the adjusted cost base to the Resident Holder of the New Convertible Note immediately before the conversion, minus any reduction of adjusted cost base for cash received in lieu of fractional shares as discussed above. Generally, the adjusted cost base to a Resident Holder of CBST Common Shares acquired on conversion of a New Convertible Note should be determined by averaging the cost of such CBST Common Shares with the adjusted cost base of all other CBST Common Shares of the same class owned by the Resident Holder as capital property immediately before such time.

Upon a conversion of a New Convertible Note, interest accrued thereon to but excluding the date of conversion will be included in computing the income of the Resident Holder as described above under the heading “Interest on the New Notes”, except to the extent that it was included in computing the Resident Holder’s income for that or a preceding taxation year.

Disposition of New Notes

On a disposition or deemed disposition of a New Note by a Resident Holder, such Resident Holder will generally be required to include in computing its income for the taxation year in which the disposition occurs an amount equal to the interest that has accrued on such New Note to the date of the disposition to the extent that such amount was not otherwise included in computing such Resident Holder’s income for that taxation year or a preceding taxation year.

In addition, on a disposition or deemed disposition of a New Note, a Resident Holder will realize a capital gain (or a capital loss) to the extent that the proceeds of disposition of the New Note, net of any amount included in such Resident Holder’s income as interest as well as any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of such note to such Resident Holder immediately before the disposition or deemed disposition. The tax treatment of such capital gains (or capital losses) is described below under the heading “Taxation of Capital Gains and Capital Losses”.

Holding and Disposing of CBST Common Shares

Dividends on CBST Common Shares

Dividends received or deemed to be received on CBST Common Shares by a Resident Holder that is an individual (other than certain trusts) will be included in computing the individual’s income and will be subject to the gross up and dividend tax credit rules normally applicable to taxable dividends received by an individual from a taxable Canadian corporation. Taxable dividends received or deemed to be received by such individual which are designated by Cannabist as “eligible dividends” in accordance with the Tax Act will be subject to enhanced gross-up and dividend tax credit rules under the Tax Act.

Taxable dividends received by an individual (including certain trusts) may give rise to a liability for alternative minimum tax as calculated under the detailed rules set out in the Tax Act.

Dividends received or deemed to be received on CBST Common Shares by a Resident Holder that is a corporation will be included in computing the corporation’s income and generally will be deductible in computing the taxable income of the corporation. A corporation that is a “private corporation” or a “subject corporation” for purposes of the Tax Act may be liable to pay a refundable tax on dividends received or deemed to be received by it, to the extent such dividends are deductible in computing the corporation’s taxable income. In certain circumstances, subsection 55(2) of the Tax Act may treat a taxable dividend received (or deemed to be received) by a Resident Holder that is a corporation as a gain from the disposition of capital property or proceeds of disposition.

 

40

A Resident Holder may be subject to United States withholding tax on dividends received on the CBST Common Shares. Any United States withholding tax paid by or on behalf of a Resident Holder in respect of dividends received on the CBST Common Shares by a Resident Holder may be eligible for foreign tax credit or deduction treatment where applicable under the Tax Act. Generally, a foreign tax credit in respect of a tax paid to a particular foreign country is limited to the Canadian tax otherwise payable in respect of income sourced in that country. Dividends received on the CBST Common Shares by a Resident Holder may not be treated as income sourced in the United States for these purposes, such that a foreign tax credit under the Tax Act may not be available. Resident Holders should consult their own tax advisors with respect to the availability of any foreign tax credits or deductions under the Tax Act in respect of any United States withholding tax applicable to dividends on the CBST Common Shares.

Disposition of CBST Common Shares

On a disposition or a deemed disposition of a CBST Common Share (other than in a disposition to Cannabist that is not a sale in the open market in the manner in which shares would normally be purchased by any member of the public in an open market), a Resident Holder generally will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the CBST Common Share exceeds (or are exceeded by) such Resident Holder’s adjusted cost base thereof and any reasonable costs of disposition. The tax treatment of any such capital gain (or capital loss) is described below under the heading “Taxation of Capital Gains and Capital Losses”.

The amount of any capital loss realized on the disposition or deemed disposition of a CBST Common Share by a Resident Holder that is a corporation may be reduced by the amount of dividends received or deemed to have been received by it on such CBST Common Share (or on a share for which such CBST Common Share has been substituted), to the extent and in the circumstances prescribed by the Tax Act. Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns CBST Common Shares directly or indirectly through a partnership or a trust. Resident Holders to which these rules may be relevant should consult their own tax advisors.

Taxation of Anti-Dilutive Warrants

Acquisition of Anti-Dilutive Warrants

A Resident Holder that receives an Anti-Dilutive Warrant pursuant to the Arrangement will not be required to include the value of such warrant in computing the Resident Holder’s income for purposes of the Tax Act. Anti-Dilutive Warrants received by a Resident Holder pursuant to the Arrangement will have an adjusted cost base of nil.

Exercise of Anti-Dilutive Warrants

The exercise of an Anti-Dilutive Warrant will not constitute a disposition of such warrant for purposes of the Tax Act and, accordingly, a Resident Holder will not realize a gain or loss on such exercise.

The aggregate cost to a Resident Holder of the CBST Common Shares acquired on the exercise of an Anti-Dilutive Warrant will be equal to the amount of the exercise price for the CBST Common Shares so acquired. The adjusted cost base to a Resident Holder at any time of CBST Common Shares received on the exercise of Anti-Dilutive Warrants will be determined by averaging the cost of such CBST Common Shares with the adjusted cost base of all other CBST Common Shares of that class owned by the Resident Holder as capital property immediately before that time.

Expiry of Anti-Dilutive Warrants

The expiry or termination of an unexercised Anti-Dilutive Warrant held by a Resident Holder will result in a capital loss to the Resident Holder equal to the adjusted cost base, if any, of the Anti-Dilutive Warrant immediately before its expiry or termination. Any such capital loss will be subject to the treatment described below under the heading “Taxation of Capital Gains and Capital Losses”.

 

41

Other Dispositions of Anti-Dilutive Warrants

A Resident Holder that disposes of or is deemed to dispose of an Anti-Dilutive Warrant (other than as a result of the exercise thereof) generally will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the Anti-Dilutive Warrant exceed (or are exceeded by) the aggregate of such Resident Holder’s adjusted cost base thereof and any reasonable costs of disposition. The tax treatment of any capital gain (or capital loss) realized on the disposition of an Anti-Dilutive Warrant (otherwise than by the exercise of such warrant) is described below under the heading “Taxation of Capital Gains and Capital Losses”.

Taxation of Capital Gains and Capital Losses

A Resident Holder will generally be required to include in computing its income for a taxation year one-half of the amount of any capital gain (a “Taxable Capital Gain”) realized by such Resident Holder in that taxation year. Subject to and in accordance with the provisions of the Tax Act, a Resident Holder will generally be required to deduct one-half of the amount of any capital loss realized by such Resident Holder in a taxation year from Taxable Capital Gains realized by such Resident Holder in that taxation year (an “Allowable Capital Loss”). Allowable Capital Losses in excess of Taxable Capital Gains realized by a Resident Holder in a particular taxation year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net Taxable Capital Gains realized by such Resident Holder in any such taxation year, subject to and in accordance with the detailed rules contained in the Tax Act.

Capital gains realized by a Resident Holder that is an individual (other than certain trusts) may increase such Resident Holder’s liability for alternative minimum tax.

If a Resident Holder is subject to United States federal income tax on a gain realized in respect of a disposition of a Security, such gain may not be treated as income from a source in the United States for purposes of a foreign tax credit under the Tax Act, and such foreign tax credit under the Tax Act may not be available. Generally, a foreign tax credit in respect of a tax paid to a particular foreign country is limited to the Canadian tax otherwise payable in respect of income sourced in that country. Resident Holders should consult their own tax advisors with respect to the availability of a foreign tax credit or deduction, having regard to their own particular circumstances.

Additional Refundable Tax

A Resident Holder that is a “Canadian-controlled private corporation” (as defined in the Tax Act) throughout a taxation year or a “substantive CCPC” (as defined in the Tax Act) at any time in the taxation year may be liable to pay an additional refundable tax on its “aggregate investment income” (as defined in the Tax Act) for the taxation year, including interest income and Taxable Capital Gains.

Non-Residents of Canada

This portion of the summary is applicable to a Securityholder that at all relevant times, for purposes of the Tax Act and any applicable tax treaty or convention: (1) is neither resident nor deemed to be resident in Canada; and (2) does not and is not deemed to use or hold the Securities in carrying on business in Canada (a “Non-Resident Holder”). Special rules, which are not discussed in this summary, may apply to a Holder not resident in Canada that is an insurer that carries on business in Canada and elsewhere. In addition, this summary does not apply to a Non-Resident Holder of Senior Notes or New Notes in respect of a disposition of such notes to a Holder resident or deemed to be resident in Canada for the purposes of the Tax Act with whom the Non-Resident Holder does not deal with at arm’s length for the purposes of the Tax Act, and such Non-Resident Holders should consult their own tax advisors.

 

42

The following portion of this summary is also not applicable to a Non-Resident Holder of Senior Notes or New Notes that is at any relevant time, for purposes of the Tax Act and any applicable tax treaty or convention: (1) a “specified shareholder” (as defined in subsection 18(5) of the Tax Act) of either Cannabist or Cannabist Canada (each a “Note Issuer”) or not dealing at arm’s length (within the meaning of the Tax Act) with a “specified shareholder” (as defined in subsection 18(5) of the Tax Act) of any Note Issuer (and, where such Non-Resident Holder is a partnership, the following portion of the summary does not apply if the partnership or any person who has a direct or indirect interest in the partnership is a specified shareholder of a Note Issuer or does not deal at arm’s length with a specified shareholder of a Note Issuer); (2) an entity in respect of which a Note Issuer is a “specified entity” (within the meaning of section 18.4 of the Tax Act); or (3) an “authorized foreign bank”. Such Non-Resident Holders should consult their own tax advisors.

Disposition of Senior Notes to the Companies pursuant to the Arrangement

2026 Notes

A Non-Resident Holder will not be subject to Canadian withholding tax under the Tax Act in respect of amounts paid or credited by a Note Issuer as, on account or in lieu of payment of, or in satisfaction of, interest (including any amount deemed to be interest), principal or premium on the 2026 Notes.

A Non-Resident Holder of 2026 Notes will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition of a 2026 Note pursuant to the Arrangement.

2025 Notes and 2027 Notes

A Non-Resident Holder of 2025 Notes or 2027 Notes will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition of a 2025 Note or 2027 Note (as applicable) pursuant to the Arrangement unless the 2025 Note or the 2027 Note (as applicable) is or is deemed to be “taxable Canadian property” (as defined in the Tax Act) to the Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief under an applicable tax treaty between Canada and the country of residence of the Non-Resident Holder.

The 2025 Notes and 2027 Notes will generally only be “taxable Canadian property” of a Non-Resident Holder if the CBST Common Shares that would have been issued upon the exercise of the conversion privilege would be “taxable Canadian property” of the Non-Resident Holder, as described below under the heading “Holding and Disposing of CBST Common Shares - Disposition of CBST Common Shares”.

The treatment of the payment of interest accrued on the 2025 Notes and the 2027 Notes to the Effective Time (and any amount deemed to be interest) is discussed below in the section entitled “Holding and Disposing of New Convertible Notes – Taxation of Interest on Convertible Notes”.

Holding and Disposing of New Senior Notes

A Non-Resident Holder of New Senior Notes will not be subject to Canadian withholding tax under the Tax Act in respect of amounts paid or credited by Cannabist or Cannabist Canada as, on account or in lieu of payment of, or in satisfaction of, interest, principal or premium on the New Senior Notes.

Generally, there are no other Canadian federal income taxes that would be payable by a Non-Resident Holder as a result of holding or disposing of a New Senior Note, including any capital gain realized by a Non-Resident Holder on a disposition of a New Senior Note.

Holding and Disposing of New Convertible Notes

Taxation of Interest on Convertible Notes

A Non-Resident Holder of a New Convertible Note (together with the 2025 Notes and the 2027 Notes, “Convertible Notes”) will generally not be subject to Canadian withholding tax in respect of amounts paid or credited by the Companies as, on account or in lieu of payment of, or in satisfaction of, interest, principal or

 

43

premium on the Convertible Notes unless such amounts are “participating debt interest” for purposes of the Tax Act. “Participating debt interest” is generally defined in the Tax Act as interest that is paid on an obligation where all or any portion of such interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.

Under the Tax Act, when a debenture or other debt obligation issued by a person resident in Canada is assigned or otherwise transferred by a non-resident person to a person resident in Canada (which would include a conversion of the obligation, and a redemption or payment on maturity), the amount, if any, by which the price for which the obligation was assigned or transferred exceeds the price for which the obligation was issued is deemed to be a payment of interest on that obligation made by the person resident in Canada to the non-resident (an “Excess”). The deeming rule does not apply in respect of certain “excluded obligations” (as defined in the Tax Act), although it is not clear whether a particular Convertible Note would qualify as an “excluded obligation”. If a Convertible Note is not an “excluded obligation”, issues that arise include whether any Excess would be considered to exist, whether any such Excess which is deemed to be interest is “participating debt interest”, and if the Excess is participating debt interest, whether that results in all interest on the obligation being considered to be participating debt interest.

The CRA has stated that it would not consider an Excess to be participating debt interest, provided, that, the Convertible Note in question satisfied the requirements of a “standard convertible debenture” (as that term was defined in a letter from the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants dated May 10, 2010) and therefore, there would generally be no withholding tax in such circumstances (provided that the payor and payee deal at arm’s length for purposes of the Tax Act). The Convertible Notes should generally meet the criteria set forth in the CRA’s statement. However, the application of the CRA’s published guidance to the Convertible Notes is uncertain and there is a risk that the CRA could take the position that amounts paid or payable to a Non-Resident Holder of Convertible Notes on account of interest or any Excess may be subject to Canadian withholding tax at a rate of 25% (subject to any reduction in accordance with any applicable income tax treaty or convention). The Existing Indenture contains, and the Amended and Restated Indenture will contain, a requirement that Cannabist generally increase the amount of interest to holders of Convertible Notes in the event that it is required to withhold Canadian withholding tax on the payment of interest (including any excess that may be considered to be participating debt interest).

Exercise of Conversion Privilege

Generally, a Non-Resident Holder that converts a New Convertible Note into CBST Common Shares pursuant to its right of conversion under the terms of the New Convertible Note and only receives CBST Common Shares on such conversion (other than cash delivered in lieu of a fraction of a New Convertible Note), will be deemed not to have disposed of the New Convertible Note and, accordingly, will not be considered to realize a capital gain (or capital loss) upon such conversion.

On the conversion of a New Convertible Note by a Non-Resident Holder into CBST Common Shares and cash in lieu of a fraction of such CBST Common Shares, if such CBST Common Shares constitute “taxable Canadian property” to the Non-Resident Holder, as discussed below, and if the value of such cash does not exceed C$200, under the current administrative practice of the CRA, the Non-Resident Holder may choose to (1) treat this amount as proceeds of disposition and calculate and report a gain or loss and pay tax in Canada subject to relief under the tax treaty, or (2) reduce, by the amount of cash received, the adjusted cost base of such CBST Common Shares received.

Upon conversion of a New Convertible Note, interest accrued thereon to the date of conversion, or any deemed payment of interest, will be subject to the Canadian federal tax considerations described above under ‘‘Non-Residents of Canada—Holding and Disposing of New Convertible Notes—Taxation of Interest on Convertible Notes”.

 

44

Disposing of New Convertible Notes

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition or deemed disposition of a New Convertible Note unless the Non-Resident Holder’s New Convertible Notes are, or are deemed to be, “taxable Canadian property” to such Non-Resident Holder at the time of disposition and such Non-Resident Holder is not entitled to relief under an applicable tax treaty between Canada and the country of residence of the Non-Resident Holder.

The New Convertible Notes will generally only be “taxable Canadian property” of a Non -Resident Holder if the CBST Common Shares to be issued upon the exercise of the conversion privilege would be “taxable Canadian property” of the Non-Resident Holder, as described below under the heading “Non-Residents of Canada - Holding and Disposing of CBST Common Shares - Disposition of CBST Common Shares”.

Holding and Disposing of CBST Common Shares

Dividends on CBST Common Shares

Dividends on CBST Common Shares paid or credited, or deemed to be paid or credited, to a Non-Resident Holder will generally be subject to non-resident withholding tax under the Tax Act at a rate of 25%, subject to potential reduction under the provisions of an applicable income tax treaty or convention between Canada and the country where the Non-Resident Holder is resident. For example, under the Canada-United States Income Tax Convention (1980) (the “Treaty”), the withholding tax rate in respect of a dividend paid to a person who is the beneficial owner of the dividend and is resident in the United States for purposes of, and entitled to the full benefits under, the Treaty, is generally reduced to 15%. Non-Resident Holders are urged to consult their own tax advisors to determine their entitlement to relief under an applicable income tax treaty or convention.

Disposition of CBST Common Shares

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any gain realized on a disposition of CBST Common Shares unless the CBST Common Shares disposed of constitute “taxable Canadian property” of the Non-Resident Holder and the Non-Resident Holder is not entitled to relief under an applicable income tax treaty or convention.

Generally, a CBST Common Share will not be “taxable Canadian property” of a Non-Resident Holder at a particular time provided the CBST Common Shares are listed on a “designated stock exchange” (as defined in the Tax Act), which currently includes the CBOE, unless, at any time during the 60-month period preceding the particular time, (1) the CBST Common Share derived more than 50% of its fair market value directly or indirectly from one or any combination of real or immovable properties situated in Canada, “Canadian resource properties” or “timber resource properties” (each as defined in the Tax Act), or options in respect of, interests in, or civil law rights in, any of the foregoing, and (2) at such time 25% or more of the issued shares of any class or series of Cannabist’s shares were owned by one or any combination of (a) the Non-Resident Holder, (b) persons with whom the Non-Resident Holder did not deal at “arm’s length” (within the meaning of the Tax Act), and (c) partnerships in which the Non-Resident Holder or a person described in (b) held a membership interest directly or indirectly through one or more partnerships. A Non-Resident Holder’s CBST Common Shares can also be deemed to be taxable Canadian property in certain circumstances set out in the Tax Act.

Taxation of Anti-Dilutive Warrants

Acquisition of Anti-Dilutive Warrants

The issuance of Anti-Dilutive Warrants to a Non-Resident Holder pursuant to the Arrangement will not be subject to Canadian withholding tax.

 

45

Exercise of Anti-Dilutive Warrants

The exercise of an Anti-Dilutive Warrant by a Non-Resident Holder will not constitute a disposition of that warrant for purposes of the Tax Act and, consequently, a Non-Resident Holder will not realize a gain or loss on such exercise. The adjusted cost base to a Non-Resident Holder of the CBST Common Shares acquired on the exercise of an Anti-Dilutive Warrant will be the same as described above with respect to a Resident Holder under the heading “Residents of Canada – Taxation of Anti-Dilutive Warrants – Exercise of Anti-Dilutive Warrants”.

Expiry of Anti-Dilutive Warrants

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of the expiry or termination of an unexercised Anti-Dilutive Warrant.

Other Dispositions of Anti-Dilutive Warrants

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any gain realized on a disposition of Anti-Dilutive Warrants unless the Anti-Dilutive Warrants disposed of constitute “taxable Canadian property” of the Non-Resident Holder and the Non-Resident Holder is not entitled to relief under an applicable income tax treaty or convention.

The Anti-Dilutive Warrants will generally only be “taxable Canadian property” of a Non-Resident Holder if the CBST Common Shares to be issued upon the exercise of the Anti-Dilutive Warrants would be “taxable Canadian property” of the Non-Resident Holder, as described above under the heading “Disposition of CBST Common Shares”.

SUPPORT AGREEMENT

On February 27, 2025, Cannabist entered into the Support Agreement with the Supporting Senior Noteholders. Capitalized terms used in this section that are not otherwise defined have the meanings specified in the Support Agreement.

The following is a summary of the principal terms of the Support Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the Support Agreement, a copy of which is available under Cannabist’s profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.

Covenants

Pursuant to the Support Agreement, and subject to the terms and conditions thereof, each Supporting Senior Noteholder agreed, among other things:

 

1)

to extend the maturity date of the Senior Notes to December 31, 2028 (subject to extension in certain circumstances) in accordance with the Term Sheet, subject to the terms and conditions of the Support Agreement and the Definitive Documents;

 

2)

to consent to and support the Transaction, including the approval of the Releases;

 

3)

not to, directly or indirectly, from the Support Agreement Effective Date to the date the Support Agreement is terminated:

 

a)

sell, assign, lend, pledge, hypothecate, dispose or otherwise transfer any of its Relevant Notes or Debt or any rights or interests therein (or permit any of the foregoing with respect to any of its Relevant Notes or Debt) or enter into any agreement, arrangement or understanding in connection therewith; provided that, each Supporting Senior Noteholder may Transfer some or all of its

 

46

Relevant Notes or Debt to: (i) any Affiliate of, related fund of, or fund managed by or under common control with the Supporting Senior Noteholder that is an Accredited Investor (provided that such Person executes a Joinder Agreement); (ii) any other Supporting Senior Noteholder reasonably acceptable to Cannabist; provided that in determining whether the Transfer to any other Supporting Senior Noteholder is reasonably acceptable, Cannabist may only consider whether the proposed Transfer will result in an adverse consequence with respect to the regulatory approvals and timing contemplated by the Transaction; or (iii) any other person that is reasonably acceptable to Cannabist; provided that in determining whether the Transfer to any other person is reasonably acceptable, Cannabist may only consider whether the proposed Transfer will result in an adverse consequence with respect to the regulatory approvals and timing contemplated by the Transaction; and is an Accredited Investor provided such person agrees pursuant to a Joinder Agreement with the Companies to be bound by the terms of the Support Agreement with respect to the transferred Relevant Notes and Debt as a Supporting Senior Noteholder and such duly executed Joinder Agreement is delivered to Stikeman and the Advisors prior to consummation of such Transfer; provided that nothing in Section 5(d)(i) of the Support Agreement shall prohibit any pledge or hypothecation of Relevant Notes or Debt so long as such pledge or hypothecation does not adversely affect such Party’s ability to timely satisfy its obligations under the Support Agreement; or

 

b)

except as contemplated by the Support Agreement, deposit any of its Relevant Notes or Debt into a voting trust, or grant (or permit to be granted) any proxies or powers of attorney or attorney in fact, or enter into a voting agreement, understanding or arrangement, with respect to the voting of its Relevant Notes or Debt if such trust, grant, agreement, understanding or arrangement would in any manner restrict the ability of the Supporting Senior Noteholder to comply with its obligations under the Support Agreement, including the obligations in Section 5 thereof;

 

4)

not to directly or indirectly: (a) object to, delay, impede, or take any other action to interfere with the Proceedings, the Transaction, or approval or implementation of the Plan; or (b) otherwise take any action, or omit to take any action, that is inconsistent with its obligations under the Support Agreement or that could reasonably be expected to delay, challenge, or frustrate the consummation of the Transaction and the Plan;

 

5)

subject to applicable Law, including the receipt of a Court-approved information circular, to

 

a)

vote (or cause to be voted) all of its Relevant Notes and Debt, as applicable:

 

i.

in favour of the approval, consent, ratification and adoption of the Plan (and any actions required by the Supporting Senior Noteholders in furtherance thereof, provided that, the Supporting Senior Noteholders shall not be required to incur any significant expense or incur any liability in connection therewith) in accordance with the terms herein; and

 

ii.

against the approval, consent, ratification and adoption of any matter or transaction that, if approved, consented to, ratified or adopted, would reasonably be expected to delay, challenge, frustrate or hinder the consummation of the Transaction or the Plan, as applicable; and

 

b)

tender its proxy for any such vote in compliance with the Interim Order prior to the applicable deadline set forth in the Interim Order;

 

6)

not to directly or indirectly propose, encourage, seek, pursue, initiate, join in, file, solicit, vote for, otherwise support, or participate in the formulation of or enter into negotiations or discussions with any Person regarding any alternative offer (including any offer in respect of the acquisition of the equity interests of the Companies or substantially all of the assets of the Companies), restructuring,

 

47

liquidation, workout or plan of compromise or arrangement or reorganization of or for the Companies, including any proceeding under the CBCA, other legislation or otherwise, including under Bankruptcy Laws, including, for the avoidance of doubt, making or supporting any filings with the Court or any Governmental Entity, or making or supporting any press release, press report or comparable public statement or filing with respect to any of the foregoing, that is inconsistent with the Transaction and the Plan, except with the prior written (including email) consent of Cannabist;

 

7)

not direct any administrative agent, collateral agent, or indenture trustee (including the Indenture Trustee), as applicable, to take any action inconsistent with such Supporting Senior Noteholder’s obligations under the Support Agreement or the Term Sheet and, if any applicable administrative agent, collateral agent, or indenture trustee (including the Indenture Trustee) takes any action inconsistent with such Supporting Senior Noteholder’s obligations under the Support Agreement or the Term Sheet, such Supporting Senior Noteholder will use its commercially reasonable efforts (provided it shall not be required to incur any significant cost or liability in connection therewith) to request such administrative agent, collateral agent, or indenture trustee (including the Indenture Trustee) to cease, desist, and refrain from taking any such action;

 

8)

negotiate and act in good faith consistent with the Support Agreement and, upon agreement to the terms of the Definitive Documents, complete, enter into, and effectuate (as applicable) the Definitive Documents (as applicable);

 

9)

timely vote (or cause to be voted) its Relevant Notes or Debt or any other Claims or Interests against any Alternative Transaction (as defined in the Support Agreement);

 

10)

cooperate and coordinate activities (to the extent practicable and subject to the terms hereof) and (a) use commercially reasonable efforts (to the extent applicable) to assist the Companies in obtaining any necessary federal, state, and local regulatory approvals, including, without limitation, approval from the Court, or any other regulatory body or authority required to obtain approval of the Plan or consummate the Plan and the Transaction contemplated thereby and herein, and (b) use best efforts to obtain (to the extent applicable) and assist the Companies in obtaining the approval of all cannabis-related licenses, permits or authorizations that are necessary for the execution and delivery of, and performance of, its obligations pursuant to the Plan, the Transaction and any agreements contemplated thereby and herein; provided that, in each case with respect to the foregoing, such Supporting Senior Noteholder shall not be required to, subject to Section 5(o) of the Support Agreement, incur any material expense or liability (but excluding, in each case, third party legal, accounting, financial or other advisor fees or expenses paid or reimbursed by Cannabist);

 

11)

to support the applications and motions filed by the Companies in the Proceedings for the Interim Order and Final Order;

 

12)

to the extent reasonably practicable and permitted under applicable law: (a) coordinate in good faith with the Companies and/or their representatives with respect to any substantive oral or written communication that they or any of their representatives receives from any Governmental Entity relating to any federal, state, or local cannabis-related regulatory approvals required to obtain approval of the Plan or consummate the Transaction; (b) coordinate in good faith with the Companies and their respective representatives with respect to any substantive communication relating to the approval of the Plan and the Transaction that are proposed to be made by such party to any cannabis regulator and provide Cannabist with copies of all substantive correspondence, filings or applications between them or any of their representatives, on the one hand, and any cannabis-related regulator or members of its staff, on the other hand, with respect to the Plan and the Transaction (except for any commercially sensitive or proprietary information, which may be redacted); and (c) advise Cannabist of any substantive meeting or discussion (including any pre-arranged phone call) with any cannabis regulator in respect of any such filings, investigation or other inquiry, and to the extent permitted by such regulator, give Cannabist the opportunity to attend and participate at such meeting or discussion, in each case to the extent related to the Transaction and the Plan;

 

48

13)

if requested by one or more of the Companies, timely oppose, including by way of joinder, any objections filed with respect to the Court approval of any of the Definitive Documents or the Transaction;

 

14)

to the extent any legal, regulatory or structural impediment arises that would prevent, hinder or delay the consummation of the Transaction, (a) negotiate in good faith appropriate additional or alternative provisions, structures, or arrangements to address and attempt in good faith to resolve any such impediment (it being understood that all Parties’ rights are reserved in connection therewith); and (b) promptly and diligently consider in good faith and pursue commercially reasonable alternatives in a good faith attempt to resolve any such impediment under any cannabis law that may be asserted by any state cannabis regulatory authority, so as to enable the Parties to consummate the Transaction as soon as reasonably practicable, and in any event prior to the Outside Date, and each such Supporting Senior Noteholder shall consider in good faith commercially reasonable alternatives for purposes of attempting to resolve any such impediment by the Outside Date following reasonable cooperation and coordination between such Supporting Senior Noteholder and Cannabist;

 

15)

to supply as promptly as practicable any additional information and documentary material that may be requested by the Companies (except for any commercially sensitive or proprietary information, which may be redacted) or a cannabis regulator to facilitate obtaining cannabis-related regulatory approvals for the Transaction;

 

16)

not to accelerate or enforce or take any action or initiate any proceeding to accelerate or enforce the payment or repayment of any of its Relevant Notes or Debt or other Claims or Interests and not to support any other Person in taking any of the foregoing enforcement actions, including any Holder of a vendor take back note issued by the Companies and/or their Affiliates; and

 

17)

to forbear from exercising remedies with respect to any defaults or events of default under the Trust Indenture that may occur solely as a result of: (a) the commencement and/or continuation of the Proceedings in conformity with the Support Agreement; and/or (b) the pursuit or completion of the Transaction, including the entering into of any related documents.

Notwithstanding anything contained therein to the contrary, nothing in the Support Agreement shall in any way be construed to preclude a Supporting Senior Noteholder from acquiring or acquiring voting control over additional Senior Notes that are not otherwise subject to the Support Agreement; provided, however, that such additional Senior Notes shall automatically and immediately upon such acquisition by a Supporting Senior Noteholder be deemed to constitute Relevant Notes (and together with all accrued and unpaid interest and any other amount that such Supporting Senior Noteholder is entitled to claim in respect of the additional Senior Notes pursuant to the Trust Indenture or otherwise shall be deemed to constitute Debt) of the Supporting Senior Noteholder thereunder subject to the terms of the Support Agreement, and the Supporting Senior Noteholder agreed to provide prompt written (including email) notice of any such acquisition to Cannabist and Stikeman, advising of (i) the acquisition by the Supporting Senior Noteholder of or of voting control over additional Senior Notes, and (ii) the principal amount of additional Senior Notes so acquired by the Supporting Senior Noteholder. Subject to Section 10 of the Support Agreement, following the Support Effective Date, upon written request (including by email) by Cannabist or Stikeman, the Supporting Senior Noteholder agreed to promptly identify, in writing, to Cannabist and Stikeman the nature and amount of any additional Claim or Interest held in relation to Cannabist by all Persons represented by the Supporting Senior Noteholder in connection with Cannabist as of the date of such request.

Pursuant to the Support Agreement, and subject to the terms and conditions thereof, Cannabist and certain of its affiliates, as applicable, agreed, among other things:

 

1)

to pursue the approval, implementation, completion and consummation of the Transaction on a timely basis, obtain Court approval of the Plan, and to take all other actions reasonably necessary to implement the Transaction in accordance with the Support Agreement (including the Schedules thereto) and the Term Sheet, and not to take any action (or inaction) that is inconsistent with the terms of the Support Agreement or the Term Sheet or that is intended to or is likely to interfere with or frustrate, challenge or delay the consummation of the Transaction;

 

49

2)

to comply with the Trust Indenture in all respects, except as otherwise provided in Section 5(r) of the Support Agreement;

 

3)

to negotiate in good faith consistent with the Support Agreement and, upon agreement to the terms of the Definitive Documents, complete, enter into, and effectuate the Definitive Documents (as applicable);

 

4)

to file the Plan on a timely basis, recommend (subject to Section 14 of the Support Agreement) to any person entitled to vote on the Plan that they vote to approve the Plan and take all reasonable actions necessary to obtain any regulatory approvals for the Transaction in a timely manner;

 

5)

to provide draft copies of all motions or applications and other documents with respect to the Transaction and the Plan that the Companies intend to file with the Court, the CBOE or applicable regulators in connection with the Proceedings or the Transaction to the Advisors at least three (3) Business Days prior to the date when the Companies intend to file or otherwise disseminate such documents (or, where circumstances make it impracticable to allow for such advance notice, not less than one (1) calendar day prior to the date when the Companies intend to file or otherwise disseminate such documents). For greater certainty, the Interim Order, Final Order and the Plan shall only be submitted to the Court in a form reasonably acceptable to Cannabist and the Requisite Supporting Senior Noteholders;

 

6)

to promptly notify the Advisors if, at any time before the effective time of implementation of the Plan, it becomes aware that an application for a regulatory approval or any other order, registration, consent, filing, ruling, exemption or approval under applicable Laws contains a statement which is materially inaccurate or incomplete or of information that otherwise requires an amendment or supplement to such application, and the Companies shall co-operate in the preparation of such amendment or supplement as required;

 

7)

to promptly notify the Advisors of any material claims threatened or brought against it which would reasonably be expected to impede or delay the consummation of the Transaction or the Plan;

 

8)

subject to Section 14 of the Support Agreement, not to directly or indirectly propose, encourage, seek, pursue, initiate, join in, file, solicit, vote for, otherwise support, or participate in the formulation of or enter into negotiations or discussions with any Person regarding any Alternative Transaction, or make or support any press release, press report or comparable public statement or filing with respect to any of the foregoing that is inconsistent with the Transaction, the Term Sheet or the Support Agreement, except with the prior written (including email) consent of the Requisite Supporting Senior Noteholders;

 

9)

cooperate and coordinate activities (to the extent practicable and subject to the terms of the Support Agreement) and (a) use commercially reasonable efforts to obtain any necessary federal, state, and local regulatory approvals, including, without limitation, approval from the Court, or any other regulatory body or authority required to obtain approval of the Plan or to consummate the Plan and the Transaction contemplated thereby and herein, including as applicable all required approvals from the CBOE and under applicable state cannabis regulations; and (b) use best efforts to obtain the approval of all cannabis-related issuances, re-issuances or transfers of all licenses, permits or authorizations that are necessary for the execution and delivery of, the performance of its obligations pursuant to, and the implementation of the Plan, the Transaction, and any agreements contemplated thereby and in the Support Agreement;

 

50

10)

to the extent reasonably practicable and permitted under applicable law, (a) coordinate in good faith with the Supporting Senior Noteholders and/or their representatives with respect to any substantive oral or written communication that it or any of its representatives receives from any Governmental Entity relating to any federal, state, or local cannabis-related regulatory approvals required to obtain approval of the Plan or consummate the Transaction, (b) coordinate in good faith with the Supporting Senior Noteholders and their respective representatives with respect to any substantive communication relating to the approval of the Plan and the Transaction that are proposed to be made by such party to any cannabis regulator and provide the Supporting Senior Noteholders with copies of all substantive correspondence, filings or applications between them or any of their representatives, on the one hand, and any cannabis-related regulator or members of its staff, on the other hand, with respect to the Plan and the Transaction (except for any commercially sensitive or proprietary information, which may be redacted), and (c) advise the Supporting Senior Noteholders of any substantive meeting or discussion (including any pre-arranged phone call) with any cannabis regulator in respect of any such filings, investigation or other inquiry, and to the extent permitted by such regulator, give the Supporting Senior Noteholders the opportunity to attend and participate at such meeting or discussion, in each case to the extent related to the Transaction and the Plan;

 

11)

to the extent any legal, regulatory or structural impediment arises that would prevent, hinder or delay the consummation of the Transaction, (a) negotiate in good faith appropriate additional or alternative provisions, structures, or arrangements to address and attempt in good faith to resolve any such impediment (it being understood that all Parties’ rights are reserved in connection therewith); and (b) promptly and diligently consider in good faith pursuing commercially reasonable alternatives in a good faith attempt to resolve any such impediment under any cannabis law that may be asserted by any state cannabis regulatory authority, so as to enable the Parties to consummate the Transaction as soon as reasonably practicable, and the Companies shall consider in good faith commercially reasonable alternatives for purposes of attempting to resolve any such impediment by the Outside Date following reasonable cooperation and coordination between the Companies and the Supporting Senior Noteholders;

 

12)

to maintain the good standing and legal existence of each of the Companies under the Laws of the jurisdiction in which it is incorporated, organized or formed, except where the failure to maintain such good standing and legal existence is not material;

 

13)

to supply as promptly as practicable any additional information and documentary material that may be requested by the Supporting Senior Noteholders (except for any commercially sensitive or proprietary information, which may be redacted) or a cannabis regulator to facilitate obtaining cannabis-related regulatory approvals for the Transaction;

 

14)

if any of the Companies receives a verbal or written offer or proposal with respect to an Alternative Transaction, within two (2) Business Days after the receipt of such proposal for an Alternative Transaction, to (a) notify the Advisors of the receipt thereof, with such notice to include the material terms thereof (including the identity of the Person(s) involved), (b) promptly provide the Advisors with any amendments, supplements or modifications to such proposal for an Alternative Transaction that are received by any of the Companies, and (c) consult with the Advisors with respect to such proposal and any amendments, supplements or modifications thereto; provided that, to the extent Cannabist is prohibited from doing any of the foregoing due to a confidentiality restriction or condition upon which such proposal was submitted, such Company Entity shall (i) promptly notify the Advisors upon receipt of any confidential proposal, (ii) use commercially reasonable efforts to obtain relief from such restriction or condition as promptly as practicable, and (iii) refrain from engaging in any discussions or negotiations with the Person that submitted the proposal (other than with respect to the confidentiality restriction or condition) unless and until such Person agrees to permit the Advisors and the Supporting Senior Noteholders to review the proposal pursuant to a confidentiality agreement acceptable to the Supporting Senior Noteholders, acting reasonably;

 

15)

except as otherwise expressly provided by the Support Agreement, to conduct their businesses and operations in the ordinary course of business consistent with past practices in all material respects;

 

51

16)

not to (a) seek discovery in connection with, prepare or commence any proceeding that disputes or challenges (i) the amount, validity, allowance, character, enforceability or priority of the Senior Notes, or (ii) the validity, enforceability or perfection of any lien or other encumbrance securing (or purporting to secure) any Senior Notes held by any Supporting Senior Noteholder, or (b) support any Person in connection with any of the acts described in clause (a);

 

17)

other than the Management Incentive Program, not enter into, adopt or establish any new compensation or benefit plans or arrangements with respect to the existing executive management team (including employment agreements and any retention, success or other bonus plans), or amend or terminate any existing compensation or benefit plans or arrangements with respect to the executive management team (including employment agreements), or grant (including pursuant to a key employee retention or incentive plan or other similar arrangement) any additional or any increase in the wages, salary, bonus, commissions, retirement benefits, pension, severance or other compensation or benefits of any director or executive management team member, whether in one transaction or a series of related transactions, in the case of each of the foregoing, outside of the ordinary course of business consistent with past practices;

 

18)

not to amend or change any of their respective formation or organizational documents in any material respect;

 

19)

other than Approved Sales, not sell, convey, dispose or otherwise Transfer any of its assets or properties (a) for less than fair market value, and (b) without the prior written consent of the Requisite Supporting Senior Noteholders for any sale with expected proceeds greater than $5.0 million, including any sale(s) of the Verano Common Shares;

 

20)

except as otherwise expressly provided in the Support Agreement or in the ordinary course of business consistent with past practice, not to: (a) make any loans, advances or capital contributions to, or investments in, any other Person; (b) authorize, create, issue, sell or grant any additional Interests, or reclassify, recapitalize, redeem, purchase, acquire, declare any distribution on or make any distribution on any Interests, except pursuant to existing obligations as of the date of the Support Agreement; (c) incur any indebtedness for borrowed money or grant any liens or encumbrances; or (d) enter into any definitive agreement with respect to any of the foregoing;

 

21)

to not amend, modify or supplement any of the existing seller debt or seller assumed debt without the prior written consent of the Requisite Supporting Senior Noteholders and such consent not to be unreasonably withheld;

 

22)

subject to Section 14 of the Support Agreement, not to announce publicly, or announce to any holders of Claims or Interests in each of the Companies, its intention not to support the Transaction;

 

23)

not to amend or modify the Plan or the Definitive Documents other than in a manner that is consistent with the Support Agreement or otherwise reasonably acceptable to the Requisite Supporting Senior Noteholders; and

 

24)

to pay the reasonable and documented fees and expenses of the Advisors as and when due and payable in accordance with and subject to the engagement letters and fee letters entered into by Cannabist and the Advisors.

Representations and Warranties

The parties to the Support Agreement made a number of customary representations and warranties regarding themselves, the Support Agreement and the Transaction.

 

52

Conditions to the Transaction

The Transaction shall be subject to the satisfaction of the following conditions prior to or at the time the Transaction is implemented, each of which is for the mutual benefit of the Companies, on the one hand, and the Supporting Senior Noteholders, on the other hand, and may be waived in whole or in part jointly by Cannabist and the Requisite Supporting Senior Noteholders (provided that such conditions shall not be enforceable by Cannabist or a Supporting Senior Noteholder, as the case may be, if any failure to satisfy such conditions results from an action, error or omission by or within the control of the Party seeking enforcement):

 

1)

the Interim Order, the Plan and the Final Order shall have been approved by (a) the Court, and (b) the requisite majorities of affected stakeholders as and to the extent required by the Court;

 

2)

the distribution of the New CBST Common Shares pursuant to the Arrangement shall be exempt from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof and applicable securities laws of any state of the United States and the Amended and Restated Indenture shall have been declared effective by the Securities and Exchange Commission under the U.S. Trust Indenture Act;

 

3)

the CBOE shall have consented to or not objected to the Transaction;

 

4)

all filings, consents, and approvals required under applicable Law to consummate the Transaction (including, without limitation, required state and municipal cannabis regulatory approvals) shall have been made or obtained, as applicable, and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated, in each case on terms reasonably satisfactory to Cannabist and the Requisite Supporting Senior Noteholders;

 

5)

the Plan and all Definitive Documents shall be in form and substance consistent with the Support Agreement and the Term Sheet and otherwise reasonably acceptable to Cannabist and the Requisite Supporting Senior Noteholders;

 

6)

the conditions precedent to implementation of the Plan shall have been satisfied or waived in accordance with the terms of the Plan;

 

7)

the conditions precedent in each of the Definitive Documents shall have been satisfied or waived in accordance with the terms of the applicable Definitive Document;

 

8)

there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, that restrains, impedes or prohibits, the Transaction or the Plan or any material part thereof or requires or purports to require a material variation of the Term Sheet;

 

9)

there shall be usual and customary releases in connection with the implementation of the Transaction under the CBCA to be effective as of the Effective Date pursuant to the Plan and the Final Order, and pursuant to contractual releases entered into among the Parties. The Releases shall be in the form and substance annexed to the Support Agreement as Schedule E; and

 

10)

the CBCA Director shall have issued a Certificate of Arrangement giving effect to the articles of arrangement in respect of the Plan.

 

53

The obligations of the Companies to complete the Transaction and the other transactions contemplated by the Support Agreement are subject to the satisfaction of the following additional conditions prior to or at the Effective Date, each of which is for the benefit of the Companies and may be waived, in whole or in part, by Cannabist (provided that such conditions shall not be enforceable by the Companies if any failure to satisfy such conditions results from an action, error or omission by or within the control of the Companies):

 

1)

Cannabist has not validly terminated the Support Agreement or delivered a termination notice that is subject to cure on account of one or more of the Supporting Senior Noteholders having failed to comply in all material respects with each covenant and obligation in the Support Agreement that is to be performed by them on or before the Effective Date; and

 

2)

the Interim Order, the Plan, and the Final Order shall have been filed and approved by the Court in form and substance reasonably acceptable to the Companies.

The obligations of the Supporting Senior Noteholders to complete the Transaction and the other transactions contemplated by the Support Agreement are subject to the satisfaction of the following additional conditions prior to or at the Effective Date, each of which is for the benefit of the Supporting Senior Noteholders and may be waived, in whole or in part, by the Requisite Supporting Senior Noteholders (provided that such conditions shall not be enforceable by the Supporting Senior Noteholders if any failure to satisfy such conditions results from an action, error or omission by or within the control of the Supporting Senior Noteholder seeking enforcement):

 

1)

the Requisite Supporting Senior Noteholders shall have not have validly terminated the Support Agreement or delivered a termination notice in accordance with the terms thereof;

 

2)

the New CBST Common Shares, the Anti-Dilutive Warrants and the New Notes shall have been issued, and not be subject to a restricted period (other than contractual lock-ups including as contemplated in the Term Sheet) or to a statutory hold period under Canadian or U.S. securities laws, or to any resale restriction under the rules, policies or requirements of the CBOE;

 

3)

prior to delivery of the securities issued pursuant to the Plan, all necessary corporate action shall have been taken by Cannabist to authorize and issue all such securities, and all such securities shall have been validly issued and delivered, shall not have been issued in violation of or subject to any pre-emptive rights or contractual rights to purchase securities issued by Cannabist;

 

4)

the Interim Order, the Plan, and the Final Order shall have been filed and approved by the Court in form and substance reasonably acceptable to the Requisite Supporting Senior Noteholders; and

 

5)

the reasonable and documented invoiced fees and expenses of the Advisors in accordance with and subject to the engagement letters and fee letters entered into by Cannabist and the Advisors shall have been paid, provided that the Advisors shall have provided Cannabist with invoices for all such fees and expenses at least one (1) calendar day prior to the Effective Date (it being understood that failure to provide such invoice prior to the Effective Date shall not preclude the applicable Advisor’s right to payment following the Effective Date).

Termination

The Support Agreement may be terminated by the Requisite Supporting Senior Noteholders, by providing written notice to Cannabist, delivered in accordance with Section 12 of the Support Agreement upon the occurrence of any of the following:

 

1)

if any of the Companies breach the Support Agreement or take any action materially inconsistent with the Support Agreement or fail to comply with, or default in the performance or observance of, any material term, condition, covenant or agreement set forth in the Support Agreement that, if capable of being cured, is not cured within seven days after receipt by Cannabist of written notice of such failure or default;

 

54

2)

if any representation, warranty or acknowledgement of any of the Companies made in the Support Agreement shall prove untrue in any material respect as of the date when made and such breach remains uncured seven days following Cannabist’s receipt of written notice;

 

3)

if an Event of Default (as defined in the Trust Indenture) (other than the Specified Default) has occurred or is continuing under the Trust Indenture or the Senior Notes;

 

4)

if the Proceedings are dismissed or any Company Entity becomes subject to a proceeding (other than such proceeding commenced by a Supporting Senior Noteholder) under any Bankruptcy Law;

 

5)

the Court enters an order, or any of the Companies files a motion or application seeking the dismissal of the Proceedings;

 

6)

the issuance by any Governmental Entity, including any regulatory authority or court of competent jurisdiction, of any ruling, judgment or order enjoining the consummation of or rendering illegal a material portion of the Transaction, and such ruling, judgment or order has not been reversed or vacated within five (5) Business Days;

 

7)

Cannabist exercises its rights under Section 14 of the Support Agreement;

 

8)

failure to meet any milestone dates with respect to the Proceedings and the Transaction listed on Schedule C to the Support agreement and such failure remains uncured for seven (7) days, which Milestones may be extended as agreed to in writing (which may include email) by Cannabist and the Requisite Supporting Senior Noteholders; or

 

9)

the Transaction has not been consummated by the Outside Date.

The Support Agreement may be terminated by Cannabist, on behalf of itself and the other Company Entities, by providing written notice to the Supporting Senior Noteholders, delivered in accordance with Section 12 of the Support Agreement, following the occurrence of any of the following events:

 

1)

at any time the Supporting Senior Noteholders party to the Support Agreement or similar agreements hold in the aggregate less than 60% of the principal amount of outstanding Senior Notes;

 

2)

in accordance with Section 14 of the Support Agreement, the Board reasonably determines, in good faith after consultation with and upon the advice of outside counsel, to cause the Companies to enter into, announce, publicly support or consummate a transaction that either (a) when consummated will result in a higher or better outcome for both the Companies and Senior Noteholders; or (b) indefeasibly repays in full in cash all obligations due under the Senior Notes;

 

3)

one or more Supporting Senior Noteholders publicly supports any Alternative Transaction or any modification to the Transaction that is not consistent with the Support Agreement or the Plan, which breach would result in the non-breaching Supporting Senior Noteholders holding less than 60% of the aggregate outstanding principal amount of Senior Notes and such breach has not been cured (if curable) within five (5) days of written notice from Cannabist;

 

4)

the material breach by one or more of the Supporting Senior Noteholders of any of the representations, warranties, covenants, or other obligations of the Supporting Senior Noteholders set forth in the Support Agreement, which breach would result in non-breaching Supporting Senior Noteholders holding less than 60% of the aggregate outstanding principal amount of Senior Notes and such breach has not been cured (if curable) within five (5) days of written notice from Cannabist;

 

55

5)

the issuance by any Governmental Entity, including any regulatory authority or court of competent jurisdiction, of any ruling, judgment or order enjoining the consummation of or rendering illegal the Transaction, and such ruling, judgment or order has not been reversed or vacated within five (5) Business Days; or

 

6)

the Transaction has not been consummated by the Outside Date.

The obligations of the Companies under the Support Agreement may be terminated by the Companies as to a breaching Supporting Senior Noteholder only, by providing written notice to such Supporting Senior Noteholder, in exercise of its sole discretion, upon the occurrence and continuation of any of the following events (and the Breaching Noteholder shall thereupon no longer be a Supporting Senior Noteholder):

 

1)

if such Breaching Noteholder has taken any action inconsistent with the Support Agreement or failed to comply with, or defaulted in the performance or observance of, any material term, condition, covenant or agreement set forth in the Support Agreement that, if capable of being cured, is not cured within five (5) Business Days after receipt of written notice of such failure or default; or

 

2)

if any representation, warranty or acknowledgement of such Breaching Noteholder made in the Support Agreement shall prove untrue in any material respect as of the date when made.

The Support Agreement may be terminated at any time by mutual written consent of the Companies and the Requisite Supporting Senior Noteholders. The Support Agreement shall terminate automatically on the Effective Date upon implementation of the Plan. Subject to Section 9(8) of the Support Agreement, the Support Agreement, upon its termination, shall be of no further force and effect and each Party hereto shall be automatically and simultaneously released from its commitments, undertakings, and agreements under or related to the Support Agreement. Each Party shall be responsible and shall remain liable for any breach of the Support Agreement by such Party occurring prior to the termination of the Support Agreement. Notwithstanding the termination of the Support Agreement pursuant to Section 9 thereof, the agreements and obligations of the Parties in Sections 10 and 12 of the Support Agreement shall survive such termination and shall continue in full force and effect for the benefit of the Parties in accordance with the terms of the Support Agreement.

If the Transaction is not consummated pursuant to the Plan concurrently with the date of termination of the Support Agreement, nothing in the Support Agreement shall be construed as a waiver by any Party of any or all such Party ’s rights and the Parties expressly reserve any and all of their respective rights. Pursuant to U.S. Federal Rule of Evidence 408 and any other applicable rules of evidence, the Support Agreement and all negotiations relating thereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms.

Fiduciary Duties

Nothing in the Support Agreement will require any directors or officers of any of the Companies, each in his or her capacity as a director or officer of any of the Companies, to take any action or to refrain from taking any action, in the event the Board reasonably determines, in good faith after consultation with and upon the advice of outside counsel, would be inconsistent with its fiduciary duties under applicable law in the event of an Alternative Transaction that: (1) when consummated will result in a higher or better outcome for both the Companies and Senior Noteholders; or (2) repays in full in cash all obligations under the Senior Notes. Notwithstanding anything to the contrary in the Support Agreement, the Companies and their respective directors, officers, employees, investment bankers, attorneys, accountants, consultants, and other advisors or representatives shall have the right, in consultation with the Advisors, to consider and respond to unsolicited proposals or inquiries that the Board determines constitute or may be capable of constituting a Superior Proposal and, in connection therewith, (a) provide access to non-public information concerning any of the Companies in furtherance, pursuit, or respect of Superior Proposals (b) engage in discussions or negotiations in furtherance, pursuit, or respect of Superior Proposals and (c) otherwise cooperate with, assist, participate in, or facilitate any inquiries, proposals, discussions or negotiations in furtherance, pursuit, or respect of such Superior Proposals.

 

56

Effectiveness

The Support Agreement will become effective and binding: (1) as to the Companies and Supporting Senior Noteholders, on the Support Effective Date; (2) as to any Supporting Senior Noteholder that enters into a Joinder Agreement on or following the Support Effective Date, upon delivery to Cannabist and the Supporting Senior Noteholders of such validly completed Joinder Agreement; and (3) as to any Permitted Transferee, upon delivery of a validly completed Joinder Agreement; provided that signature pages executed by Supporting Senior Noteholders will be delivered to (a) Cannabist, each of the other Supporting Senior Noteholders, and the Advisors in unredacted form that includes such Supporting Senior Noteholder’s holdings of the Senior Notes and (b) Dorsey, Stikeman, and Moelis in an unredacted form (to be held by Dorsey, Stikeman and Moelis on a “professional eyes only” basis).

SECURITIES LAW MATTERS

United States

The following discussion is a general overview of certain requirements of U.S. federal securities laws that may be applicable to Senior Noteholders in the United States in respect of New Notes and New CBST Common Shares received pursuant to the Transaction and to existing CBST Shareholders that receive Anti-Dilutive Warrants. All securityholders are urged to consult with their own legal counsel to ensure that any subsequent resale of securities issued to them in connection with the Arrangement and corresponding Transaction complies with applicable securities legislation.

The following discussion does not address the Canadian securities laws that will apply to the issuance to or the resale by securityholders within Canada of securities of Cannabist. Securityholders reselling their securities in Canada must comply with Canadian securities laws, as outlined below under “Securities Law Matters – Canada”.

Exemption of the New Notes, the New CBST Common Shares and the New Guarantees from the Registration Requirements of the U.S. Securities Act pursuant to Section 3(a)(10) of the U.S. Securities Act

The issuance and distribution of the New Notes, the New CBST Common Shares and the New Guarantees under the Plan have not been registered under the U.S. Securities Act. The New Notes, the New CBST Common Shares and the New Guarantees are being issued in reliance on the exemption from registration under the U.S. Securities Act pursuant to Section (3)(a)(10) of the U.S. Securities Act on the basis of the approval of the Court, which will consider, among other things, the fairness of the Arrangement to the persons affected and exemptions provided under the securities laws of each state of the United States in which applicable Senior Noteholders reside. The exemption provided pursuant to Section 3(a)(10) of the U.S. Securities Act exempts from registration the distribution of a security that is issued in exchange for outstanding securities, claims or property interests 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, by a court or by a governmental authority expressly authorized by law to grant such approval. Accordingly, the Final Order will, if granted, constitute a basis for the exemption from the registration requirements of the U.S. Securities Act with respect to the New Notes, the New CBST Common Shares and the New Guarantees issued in connection with the Transaction. Holders of New Notes and New CBST Common Shares validly issued pursuant to Section 3(a)(10) of the U.S. Securities Act will generally not be subject to resale restrictions under the U.S. Securities Act. See “Securities Law Matters – United States – Restrictions on the Resale of Securities Constituting “Control Securities”” for further information with respect to securityholders that may hold “control securities” under the U.S. Securities Act.

The Court issued the Interim Order on March 28, 2025, and, subject to the approval of the Arrangement by the Senior Noteholders, a hearing on the application for the Final Order is expected to take place on or about May 12, 2025. All Senior Noteholders are entitled to appear and be heard at this hearing. The Final Order, if granted, will constitute a basis for the Section 3(a)(10) exemption with respect to the New Notes, New CBST Common Shares and New Guarantees to be issued to Senior Noteholders in exchange for their Senior Notes, pursuant to and upon completion of the Arrangement. Prior to the hearing on the Final Order, the Court will be informed of this effect of the Final Order.

 

57

Exemption of the Anti-Dilutive Warrants from the Registration Requirements of the U.S. Securities Act

The Anti-Dilutive Warrants will be issued to existing CBST Shareholders (excluding the recipients of the New CBST Common Shares) in order to reduce the dilutive effect of the New CBST Common Shares. Cannabist will not receive any consideration for the issuance of the Anti-Dilutive Warrants. Therefore, the issuance of the Anti-Dilutive Warrants is not expected to constitute a “sale,” as such term is defined in Section 2(a)(3) of the U.S. Securities Act and will not require registration under the U.S. Securities Act. The Anti-Dilutive Warrants will generally not be subject to resale restrictions under the U.S. Securities Act. Notwithstanding the foregoing, the Anti-Dilutive Warrants may only be exercised: (1) outside the United States pursuant to Regulation S under the U.S. Securities Act; (2) inside the United States pursuant to available exemptions from registration requirements under the U.S. Securities Act and in compliance with any applicable U.S. state securities laws; or (3) pursuant to an effective registration statement under the U.S. Securities Act, and, in each case, in compliance with any applicable local securities laws. Furthermore, unless registered under the U.S. Securities Act, the CBST Common Shares underlying such Anti-Dilutive Warrants will be considered “restricted securities” under U.S. federal securities laws and subject to restrictions on transfer, which would require transfers to be made pursuant to an available exemption from the registration requirements of the U.S. Securities Act or pursuant to an effective registration statement. See “Securities Law Matters – United States - Restrictions on the Resale of Securities Constituting “Control Securities”” for further information with respect to securityholders that may hold “control securities” under the U.S. Securities Act.

Restrictions on the Resale of Securities Constituting “Control Securities”

Persons who receive New Notes, New CBST Common Shares or Anti-Dilutive Warrants (including the CBST Common Shares underlying the Anti-Dilutive Warrants), as applicable, and who are “affiliates” of Cannabist or who have been affiliates of Cannabist within 90 days before the proposed resale of such securities will hold “control securities” under U.S. federal securities laws and will have additional limitations on resales of such securities, including volume limitations, public information requirements and manner and notice of sale requirements. Persons who may be deemed to be “affiliates” of an issuer generally include individuals or entities that control, are controlled by, or are under common control with, the issuer, whether through the ownership of voting securities, by contract or otherwise, and generally include executive officers and directors of the issuer as well as principal shareholders of the issuer. Any resale of such New Notes, New CBST Common Shares or Anti-Dilutive Warrants (including the CBST Common Shares underlying the Anti-Dilutive Warrants), as applicable, by such an affiliate (or, if applicable, former affiliate) may be subject to the registration requirements of the U.S. Securities Act and applicable state securities laws, absent an exemption therefrom. Subject to certain limitations, such affiliates (and former affiliates) who receive New Notes or New CBST Common Shares may be entitled to immediately resell such securities outside the United States without registration under the U.S. Securities Act pursuant to Regulation S under the U.S. Securities Act. Subject to certain limitations, affiliates who receive New Notes, New CBST Common Shares or Anti-Dilutive Warrants (including the CBST Common Shares underlying the Anti-Dilutive Warrants) may be entitled to resell such securities in accordance with Rule 144 under the U.S. Securities Act, if available. All securityholders are urged to consult with their own legal counsel to ensure that any subsequent resale of securities issued to them in connection with the Arrangement and corresponding Transaction complies with applicable securities legislation.

Canada

The issuance of: (1) CBST Common Shares pursuant to the Transaction (including the New CBST Common Shares and the CBST Common Shares issuable upon exercise of the Anti-Dilutive Warrants); (2) the New Notes; and (3) the Anti-Dilutive Warrants, will each be exempt from the prospectus and registration requirements under Canadian securities laws. As a consequence of these exemptions, certain protections, rights and remedies provided by Canadian securities laws, including statutory rights of rescission or damages, will not be available in respect of such new securities to be issued pursuant to the Transaction.

 

58

Such CBST Common Shares, New Notes and Anti-Dilutive Warrants will generally be “freely tradeable” under Canadian securities laws if the following conditions (as specified in National Instrument 45-102 – Resale of Securities) (“NI 45-102”) are satisfied: (1) the trade is not a “control distribution” (as defined in NI 45-102); (2) no unusual effort is made to prepare the market or to create a demand for the shares that are the subject of the trade; (3) no extraordinary commission or consideration is paid to a person or company in respect of the trade; and (4) if the selling shareholder is an insider (as defined under Canadian securities laws) or officer of the issuer, the selling shareholder has no reasonable grounds to believe that the issuer is in default of securities legislation.

ARRANGEMENT STEPS

The following is a summary of the principal steps in respect of the Plan. This summary does not purport to be complete and is qualified in its entirety by reference to the Plan, a copy of which is appended hereto as Appendix “B” and which is also available under Cannabist’s profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.

Pursuant to the Plan, commencing at the Effective Time, the following events or transactions will occur, or be deemed to have occurred and be taken and effected, sequentially as set out below without any further authorization, act or formality, in each case, unless stated otherwise, effective as at five minute intervals commencing at the Effective Time. Capitalized terms used in this section that are not otherwise defined shall have the meanings specified in the Plan.

 

1)

Cannabist and the Warrant Agent shall enter into the Warrant Agency Agreement and Cannabist shall cause to be issued, as a special distribution, to each CBST Shareholder, its Pro Rata Share (based on the aggregate CBST Common Shares issued and outstanding as of the Warrant Record Date and assuming conversion of each CBST Proportionate Voting Share into 100 CBST Common Shares) as of the Warrant Record Date of the Anti-Dilutive Warrants;

 

2)

The Companies, the Existing Guarantors, the New Guarantors and the Indenture Trustee shall enter into the Amended and Restated Indenture and the other New Notes Documents in respect of the issuance of the New Notes which were not entered into prior to the Effective Time;

 

3)

Cannabist shall pay all accrued but unpaid interest on the Senior Notes since the last Interest Payment Date (as defined in the Plan) to, but excluding the Effective Date, in cash to the Indenture Trustee, for and on behalf of the Senior Noteholders, and the Indenture Trustee shall pay (or cause to be paid) such interest payment to the Senior Noteholders pursuant to standing instructions and customary practices, without abatement or rights of setoff or counterclaim of any nature;

 

4)

each 2025 Noteholder, 2026 Noteholder and New Senior Note-Electing Noteholder shall: (a) be deemed to have surrendered their Senior Notes in accordance with Section 3.2 of the Plan; and (b) receive as consideration therefor, as applicable:

 

(i)

its respective Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Senior Noteholders pursuant to Section 2.2(d) of the Plan) of the New Senior Notes, which aggregate principal amount shall be equal to the aggregate principal amount of Senior Notes surrendered by the Noteholders pursuant to Section 2.2(d) of the Plan;

 

(ii)

its respective Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Senior Noteholders pursuant to Section 2.2(d) of the Plan) of the New CBST Common Shares; and

 

59

(iii)

if such 2025 Noteholder, 2026 Noteholder or New Senior Note-Electing Noteholder, as applicable, is an Early Supporting Noteholder, (A) its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders pursuant to Section 2.2(d) of the Plan) of the Early Consent Consideration either in cash, or by transfer of such number of Verano Shares equal to its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders pursuant to Section 2.2(d) of the Plan) of the Early Consent Consideration divided by the 30-day VWAP of the Verano Shares and (B) the right to receive its Pro Rata Share (based on the aggregate principal amount of the Senior Notes surrendered by the Early Supporting Noteholders pursuant to Section 2.2(d) of the Plan) of the Additional Early Consent Consideration;

in full and final satisfaction of such Noteholder’s Notes Claims (as defined in the Plan), and each Noteholder receiving New CBST Common Shares shall be deemed to have entered into the Standstill and Lock-Up Agreement concurrently with the receipt of their New CBST Common Shares;

 

5)

each New Convertible Note-Electing Noteholder shall (a) be deemed to have surrendered its Senior Notes in accordance with Section 3.2 of the Plan and (b) receive its respective Pro Rata Share (based on the aggregate principal amount of 2027 Notes surrendered by 2027 Noteholders pursuant to Section 2.2(f) of the Plan) of the New Convertible Notes, which aggregate principal amount shall be equal to the aggregate principal amount of 2027 Notes surrendered by the New Convertible Note-Electing Noteholders pursuant to Section 2.2(f) of the Plan, in full and final satisfaction of such Senior Noteholder’s Notes Claims (as defined in the Plan);

 

6)

the Senior Notes and any related Senior Noteholder’s Notes Claims (including any make whole premiums, redemption premiums or similar premiums) shall be irrevocably and finally extinguished, discharged and settled and the Senior Notes, the Existing Indenture and the other New Notes Documents shall be deemed to be cancelled and terminated in all respects;

 

7)

the releases referred to in Section 4.1 of the Plan shall become effective; and

 

8)

Cannabist Canada and Cannabist Canada 2 will amalgamate to form Cannabist Canada Amalco.

ANTI-DILUTIVE WARRANTS

Following the Closing, there will be an aggregate of 118,246,947 Anti-Dilutive Warrants outstanding, which will be held by the CBST Shareholders based on their Pro Rata Share (based on the number of CBST Common Shares held by such CBST Shareholder relative to the aggregate number of CBST Common Shares issued and outstanding, in each case as of the Warrant Record Date and assuming conversion of each CBST Proportionate Voting Share into 100 CBST Common Shares) of the CBST Shares as of the close of business on the Warrant Record Date.

All Anti-Dilutive Warrants will become exercisable commencing on the Closing. Each Anti-Dilutive Warrant is exercisable to purchase one CBST Common Share at a price of C$0.14 per share, subject to the following adjustments. The warrant agency agreement with Odyssey Trust Company, as warrant agent (the “Warrant Agent”), in respect of the Anti-Dilutive Warrants (the “Warrant Agency Agreement”) will provide that the exercise price and number of CBST Common Shares issuable on exercise of the Anti-Dilutive Warrants may be adjusted in certain customary circumstances, including in the event of a stock dividend, Extraordinary Dividend (as such term shall be defined in the Warrant Agency Agreement) or a recapitalization, reorganization, merger or consolidation. The Anti-Dilutive Warrants will not, however, be adjusted for issuances of CBST Common Shares at a price below their exercise price.

The exercise of the Anti-Dilutive Warrants by any Holder in the United States, or that is a U.S. Person, may only be effected if the securities issuable upon exercise have been registered under the U.S. Securities Act or otherwise in compliance with an exemption from the registration requirements of the U.S. Securities Act. See “Securities Law Matters – United States” for further information.

 

60

The Holders of Anti-Dilutive Warrants will not have the rights or privileges of CBST Shareholders or any voting rights until they exercise their Anti-Dilutive Warrants and receive the underlying CBST Common Shares. After the issuance of corresponding CBST Common Shares upon exercise of the Anti-Dilutive Warrants, each Holder will be entitled to vote the CBST Common Shares in accordance with their terms.

The Warrant Agent shall, on receipt of a written request of Cannabist or Holders of not less than 25% of the aggregate number of Anti-Dilutive Warrants then outstanding, convene a meeting of Holders of Anti-Dilutive Warrants upon at least 21 calendar days’ written notice to Holders of Anti-Dilutive Warrants. Every such meeting shall be held in Toronto, Ontario or at such other place as may be approved or determined by the Warrant Agent. A quorum at meetings of Holders of Anti-Dilutive Warrants shall be two persons present in person or represented by proxy holding or representing more than 20% of the aggregate number of Anti-Dilutive Warrants then outstanding.

From time to time, Cannabist and the Warrant Agent, without the consent of the Holders of Anti-Dilutive Warrants, may amend or supplement the Warrant Agency Agreement for certain purposes including curing defects or inconsistencies or making any change that does not adversely affect the rights of any Holder of Anti-Dilutive Warrants. Any amendment or supplement to the Warrant Agency Agreement that adversely affects the interests of the Holders of Anti-Dilutive Warrants may only be made by an “extraordinary resolution”, which is defined in the Warrant Agency Agreement as a resolution either: (1) passed at a meeting of the Holders of Anti-Dilutive Warrants by the affirmative vote of Holders of Anti-Dilutive Warrants representing not less than two-thirds of the aggregate number of the then outstanding Anti-Dilutive Warrants represented at the meeting and voted on such resolution; or (2) adopted by an instrument in writing signed by the Holders of Anti-Dilutive Warrants representing not less than two-thirds of the aggregate number of the then outstanding Anti-Dilutive Warrants.

The Anti-Dilutive Warrants will expire at 5:00 p.m. (Eastern time) on the day that is two years after the Closing.

CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION

Unless the context otherwise requires, all references to “$” mean references to the lawful money of the United States. All references to “C$” refer to Canadian dollars. The following table sets forth, for each year indicated, the low and high exchange rates for U.S. dollars expressed in Canadian dollar terms, the exchange rate at the end of such year and the average of such exchange rates on the last day of each month during such year, based on the closing rate as reported by Bloomberg L.P. The exchange rates set forth below demonstrate trends in exchange rates only.

 

		Year Ended December 31,
		2022				2023				2024
High		C$	1.3885			C$	1.3875			C$	1.4447
Low		C$	1.247			C$	1.3110			C$	1.3239
Year End		C$	1.3554			C$	1.3243			C$	1.4384
Average Rate		C$	1.3019			C$	1.3495			C$	1.3700

On March 27, 2025, the closing rate as reported by Bloomberg L.P. was $1.00 = CAD$1.4306; unless the context states or requires otherwise, for purposes of U.S. dollars and Canadian dollar conversions contained in this Circular (if any), Cannabist has assumed such an exchange rate.

NON-GAAP FINANCIAL PERFORMANCE MEASURES

Certain financial performance measures referenced in this Circular and/or the documents incorporated by reference herein are not prescribed by United States generally accepted accounting principles (“GAAP”). These measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. Accordingly, these measures should not be considered in isolation from nor as a substitute for Cannabist’s financial information reported under GAAP. Cannabist uses non-GAAP measures including

 

61

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin which may be calculated differently by other companies. These non-GAAP measures and metrics are used to provide investors with supplemental measures of Cannabist’s operating performance and liquidity and thus highlight trends in its business that may not otherwise be apparent when relying solely on GAAP measures. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented. Cannabist also recognizes that securities analysts, investors, and other interested parties frequently use non-GAAP measures in the evaluation of companies within its industry. Finally, Cannabist uses non-GAAP measures and metrics in order to facilitate evaluation of operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of executive compensation.

PRIOR SALES

CBST Common Shares

For the 12-month period before the date of this Circular, Cannabist issued the following CBST Common Shares and securities exercisable or convertible into CBST Common Shares.

 

Date of Issuance		Security		Number of Securities				Issue /Exercise Price Per Security ($)
May 2, 2024		CBST Common Shares			327,868				0.305
May 21, 2024		CBST Common Shares			327,868				0.305
May 23, 2024		CBST Common Shares			8,225,383				0.28
June 7, 2024		CBST Common Shares			4,845,359				0.31
August 16, 2024		CBST Common Shares			1,854,546				0.27
October 2, 2024		CBST Common Shares			1,137,860				0.28
October 10, 2024		CBST Common Shares			327,868				0.305
October 18, 2024		CBST Common Shares			42,116				0.21
December 13, 2024		CBST Common Shares			18,318				0.08

Anti-Dilutive Warrants and New Notes

Cannabist did not issue any Anti-Dilutive Warrants or New Notes during the 12-month period before the date of this Circular.

 

62

TRADING PRICE AND VOLUME

The CBST Common Shares are currently listed on the CBOE under the symbol “CBST” and are quoted on the OTCQX Best Market under the symbol “CBSTF” and on the Frankfurt Stock Exchange under the symbol “3LP”. On March 27, 2025, being the last trading day completed prior to the date of this Circular, the closing price of the CBST Common Shares on the CBOE was C$0.075 and the closing bid price of the CBST Common Shares on the OTCQX was $0.05. The following table sets forth, for the periods indicated, the reported high and low prices and the aggregate volume of trading of the CBST Common Shares on the CBOE, as quoted on the CBOE.

 

Month		High (C$)				Low (C$)				Total Volume
March 1-27, 2025			0.06				0.04				24,960,090
February 2025			0.05				0.08				17,806,875
January 2025			0.10				0.05				14,139,570
December 2024			0.12				0.05				25,566,208
November 2024			0.22				0.10				23,670,498
October 2024			0.26				0.18				25,911,964
September 2024			0.25				0.20				8,213,437
August 2024			0.31				0.18				14,245,751
July 2024			0.26				0.17				9,635,554
June 2024			0.24				0.17				12,187,321
May 2024			0.44				0.24				23,887,857
April 2024			0.41				0.25				24,515,359
March 2024			0.38				0.21				26,145,896

DESCRIPTION OF SECURITIES

New Notes

The full text of the Amended and Restated Indenture, which will govern the New Notes, is attached hereto as Appendix “G”. The full text of the First Supplemental Indenture, which will govern the New Convertible Notes, is attached hereto as Appendix “I”. A blackline of the Amended and Restated Indenture to the Existing Indenture is also attached hereto as Appendix “H”. A blackline of the First Supplemental Indenture to the 2027 Note Indenture is also attached hereto as Appendix “J”. Capitalized terms not otherwise defined in this section have the meanings given to them in the Amended and Restated Indenture. Senior Noteholders are encouraged to read the entirety of the Amended and Restated Indenture and review the changes as compared to the Existing Indenture.

Except as summarized below and subject to the full text of the Amended and Restated Indenture, the financial terms and covenants of the New Senior Notes under the Amended and Restated Indenture will be, in all material respects, similar to 2025 Notes (other than the removal of the conversion feature in the 2025 Notes) and the 2026 Notes under the Existing Indenture. Except as summarized below, the terms of the New Convertible Notes under the Amended and Restated Indenture will be the same as the 2027 Notes under the Existing Indenture and the covenants applicable to the 2027 Notes will be, in all material respects, the same as the covenants applicable to the New Senior Notes.

Interest and Maturity

The New Senior Notes will have a 9.25% cash interest rate and a maturity date of December 31, 2028; provided that Cannabist shall be permitted to extend such maturity date to June 30, 2029 and subsequently to December 31, 2029 at any time upon 30 days notice to the Indenture Trustee and the Holders of New Senior Notes (each a “New Senior Notes Extension Notice”). Concurrently with the delivery of any New Senior Notes Extension Notice, Cannabist shall pay the Holders of New Senior Notes an extension fee equal to 0.50% of the aggregate principal amount then outstanding under the New Senior Notes, and any such extension shall require Cannabist to concurrently extend the maturity date of the New Convertible Notes to the same date.

 

63

The New Convertible Notes will have a 9.00% cash interest rate and a maturity date of December 31, 2028; provided that Cannabist shall be permitted to extend such maturity date to June 30, 2029 and subsequently to December 31, 2029 at any time upon 30 days notice to the Indenture Trustee and the Holders of New Convertible Notes (each a “New Convertible Notes Extension Notice”). Concurrently with the delivery of any New Convertible Notes Extension Notice, the Cannabist shall pay the Holders of New Senior Notes an extension fee equal to 0.50% of the aggregate principal amount then outstanding under the New Convertible Notes, and any such extension shall require Cannabist to concurrently extend the maturity date of the New Senior Notes to the same date.

Other Material Provisions

The Amended and Restated Indenture will include the following provisions or modified covenants:

 

•

Minimum Liquidity Requirements: Commencing September 30, 2025, Cannabist’s liquidity based on cash and cash equivalents held in accounts subject to control agreements in favour of the Indenture Trustee and certain other accounts set forth in the Amended and Restated Indenture, on a consolidated basis shall not fall below $15 million at any time from September 30, 2025.

 

•

Consolidated Net Leverage Ratio: Commencing on March 31, 2026, Cannabist will be required to maintain a Consolidated Leverage Ratio (as defined and calculated in the Amended and Restated Indenture) at the end of any fiscal quarter ending on certain prescribed dates, which is less than certain prescribed ratios set out in the Amended and Restated Indenture.

 

•

Asset Sales: The Amended and Restated Indenture will include modifications to the Asset Sale covenant to permit certain Approved Sales. All Approved Sales and Asset Sales will be subject to the oversight of the Board as set out in the Amended and Restated Indenture. The first $36.5 million of net proceeds received from Approved Sales which are completed on or before March 31, 2026, may be used for general corporate purposes (the “Retained Proceeds”). The use of net proceeds in excess of the Retained Proceeds or derived from other Asset Sales for any purpose other than a mandatory repayment of the New Notes shall be subject to the approval of a majority of the independent directors of the Board; provided that Cannabist will have 274 days to make open market purchases of New Notes prior to redeeming them at par.

 

•

Incurrence Covenants: The Amended and Restated Indenture will contemplate a number of new or improved incurrence covenants, as summarized in Appendix “H”.

 

•

Financial Advisor: Beginning on March 31, 2026, a third party financial advisor (the “Financial Advisor”) will be retained by the Indenture Trustee on behalf of the Holders of New Notes (or retained directly by the Holders of New Notes, if the Indenture Trustee is unable to retain the Financial Advisor) at Cannabist’s expense, to receive and review certain reporting materials of Cannabist for the period ended March 31, 2026 and thereafter.

Cannabist Share Capital

The authorized share capital of Cannabist consists of: (1) an unlimited number of CBST Common Shares; (2) an unlimited number of CBST Proportionate Voting Shares; and (3) an unlimited number of preferred shares, issuable in series, none of which are issued and outstanding.

Generally, the CBST Common Shares and CBST Proportionate Voting Shares have the same rights, are equal in all respects and are treated by Cannabist as if they were shares of one class only.

 

64

The following is a brief summary of certain general terms and provisions of the CBST Common Shares and the CBST Proportionate Voting Shares. This summary does not purport to be complete.

Voting Rights

All CBST Shareholders are entitled to receive notice of any meeting of CBST Shareholders, and to attend and vote at such meetings, except those meetings at which only holders of a specific class or series of shares are entitled to vote separately as a class under the BCBCA. A quorum for the transaction of business at a meeting of CBST Shareholders is present if CBST Shareholders who, in the aggregate, hold at least 25% of the voting rights attached to the issued CBST Shares entitled to vote at the meeting are present in person or represented by proxy.

On all matters upon which CBST Shareholders are entitled to vote:

 

•

each CBST Common Share is entitled to one vote per CBST Common Share; and

 

•

each CBST Proportionate Voting Share is entitled to 100 votes per CBST Proportionate Voting Share, and each fraction of a CBST Proportionate Voting Share is entitled to the number of votes calculated by multiplying the fraction by 100.

The number of votes represented by fractional CBST Proportionate Voting Shares will be rounded down to the nearest whole number. Unless a different majority is required by law or the articles of Cannabist (the “Articles”), resolutions to be approved by CBST Shareholders require approval by a simple majority of the total number of votes of all shares cast at a meeting of CBST Shareholders at which a quorum is present based on the voting entitlements of each class of shares described above.

Dividend Rights

CBST Shareholders are entitled to receive dividends out of the assets available for the payment or distribution of dividends at such times and in such amount and form as the Board may from time to time determine, subject to any preferential rights of the holders of any outstanding preferred shares of Cannabist (the “Preferred Shares”), on the following basis, and otherwise without preference or distinction among or between the shares: each CBST Proportionate Voting Share will be entitled to 100 times the amount paid or distributed per CBST Common Share (including by way of share dividends, which holders of CBST Proportionate Voting Shares will receive in CBST Proportionate Voting Shares, unless otherwise determined by the Board) and each fraction of a CBST Proportionate Voting Share will be entitled to the applicable fraction thereof. See “Conversion Rights and Transfers” below.

Liquidation Rights

In the event of the liquidation, dissolution or winding-up of Cannabist, whether voluntary or involuntary, or any other distribution of its assets among its shareholders for the purpose of winding-up its affairs, the CBST Shareholders will be entitled to receive all of Cannabist’s assets remaining after payment of all debts and other liabilities, subject to any preferential rights of the holders of any outstanding Preferred Shares, on the basis that each CBST Proportionate Voting Share will be entitled to 100 times the amount distributed per CBST Common Share (and each fraction of a CBST Proportionate Voting Share will be entitled to the amount calculated by multiplying the fraction by the amount otherwise payable in respect of a whole CBST Proportionate Voting Share), and otherwise without preference or distinction among or between the shares. See “Conversion Rights and Transfers” below.

Conversion Rights and Transfers

Issued and outstanding CBST Proportionate Voting Shares, including fractions thereof, may at any time, subject to the FPI Condition (as defined below), at the option of the Holder, be converted into CBST Common Shares at a ratio of 100 CBST Common Shares per CBST Proportionate Voting Share with

 

65

fractional CBST Proportionate Voting Shares convertible into CBST Common Shares at the same ratio. Further, the Board may determine in the future that it is no longer advisable to maintain the CBST Proportionate Voting Shares as a separate class of shares and may cause all of the issued and outstanding CBST Proportionate Voting Shares to be converted into CBST Common Shares at a ratio of 100 CBST Common Shares per CBST Proportionate Voting Share with fractional CBST Proportionate Voting Shares convertible into CBST Common Shares at the same ratio and the Board shall not be entitled to issue any more CBST Proportionate Voting Shares under the Articles thereafter.

The CBST Proportionate Voting Shares are not transferrable without Board approval, except to Permitted Holders (as defined below) and in compliance with U.S. securities laws.

Conversion Conditions

The right of the CBST Proportionate Voting Shares to convert into CBST Common Shares is subject to certain conditions, which were previously required in order to maintain Cannabist’s historic status as a “foreign private issuer” under U.S. securities laws. Unless otherwise waived by Cannabist, the right to convert the CBST Proportionate Voting Shares is subject to the condition that the aggregate number of CBST Common Shares and CBST Proportionate Voting Shares (calculated as a single class) held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Exchange Act) may not exceed fifty percent (50%) of the aggregate number of CBST Common Shares and CBST Proportionate Voting Shares issued and outstanding after giving effect to such conversions (calculated as a single class) (the “FPI Condition”). As of the date of filing, Cannabist is not a “foreign private issuer” under U.S. securities laws.

A Holder of CBST Common Shares may at any time, at the option of the Holder and with the approval of the Board, convert such CBST Common Shares into CBST Proportionate Voting Shares on the basis of 100 CBST Common Shares for one CBST Proportionate Voting Share.

No fractional CBST Common Shares will be issued on any conversion of any CBST Proportionate Voting Shares and any fractional CBST Common Shares will be rounded down to the nearest whole number.

For the purposes of the foregoing:

“Affiliate” means, with respect to any specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person.

“Permitted Holders” means (1) the initial holders of CBST Proportionate Voting Shares; and (2) any Affiliate or Person controlled, directly or indirectly, by one or more of the Persons referred to in clause (2) above.

“Person” means any individual, partnership, corporation, company, association, trust, joint venture or limited liability company.

A Person is “controlled” by another Person or other Persons if: (1) in the case of a company or other body corporate wherever or however incorporated: (a) securities entitled to vote in the election of directors carrying in the aggregate at least a majority of the votes for the election of directors and representing in the aggregate at least a majority of the participating (equity) securities are held, other than by way of security only, directly or indirectly, by or solely for the benefit of the other Person or Persons; and (b) the votes carried in the aggregate by such securities are entitled, if exercised, to elect a majority of the board of directors of such company or other body corporate; or (2) in the case of a Person that is not a company or other body corporate, at least a majority of the participating (equity) and voting interests of such Person are held, directly or indirectly, by or solely for the benefit of the other Person or Persons; and “controls”, “controlling” and “under common control with” shall be interpreted accordingly.

 

66

Pre-emptive and Redemption Rights

CBST Shareholders will not have any pre-emptive or redemption rights.

Subdivision or Consolidation

No subdivision or consolidation of any class of CBST Shares may be carried out unless, at the same time, the CBST Common Shares and CBST Proportionate Voting Shares, as the case may be, are subdivided or consolidated in the same manner and on the same basis, so as to preserve the relative rights of the holders of each class of shares.

Certain Amendments

In addition to any other voting right or power to which the CBST Shareholders shall be entitled by law or regulation or other provisions of the Articles from time to time in effect, but subject to the provisions of the Articles, CBST Shareholders shall each be entitled to vote separately as a class, in addition to any other vote of CBST Shareholders that may be required, in respect of any alteration, repeal or amendment of the Articles which would prejudice or interfere with the rights or special rights attached to the CBST Common Shares or CBST Proportionate Voting Shares, or which would affect the rights or special rights of the CBST Shareholders differently, on a per share basis, including an amendment to the terms of the Articles that provide that any CBST Proportionate Voting Shares sold or transferred to a Person that is not a Permitted Holder shall be automatically converted into CBST Common Shares.

Pursuant to the Articles, CBST Shareholders will be treated equally and identically, on a per share basis, in certain change of control transactions that require approval of our shareholders under the BCBCA, unless different treatment of the shares of each such class is approved by a majority of the votes cast by the Holders of the CBST Common Shares and CBST Proportionate Voting Shares, each voting separately as a class.

Issuance of Additional CBST Proportionate Voting Shares

Cannabist may issue additional CBST Proportionate Voting Shares upon the approval of the Board. CBST Shareholder approval is not required in connection with a subdivision or consolidation on a pro-rata basis as between the CBST Common Shares and the CBST Proportionate Voting Shares.

Take-Over Bid Protection

If an offer is being made for CBST Proportionate Voting Shares (a “PVS Offer”) where: (1) by reason of applicable securities legislation or stock exchange requirements, the offer must be made to all holders of the class of CBST Proportionate Voting Shares; and (2) no equivalent offer is made for the CBST Common Shares, the holders of CBST Common Shares have the right, pursuant to the Articles, at their option, to convert their CBST Common Shares into CBST Proportionate Voting Shares for the purpose of allowing the holders of the CBST Common Shares to tender to such PVS Offer, provided that such conversion into CBST Proportionate Voting Shares will be solely for the purpose of tendering the CBST Proportionate Voting Shares to the PVS Offer in question and that any CBST Proportionate Voting Shares that are tendered to the PVS Offer but that are not, for any reason, taken up and paid for by the offeror will automatically be reconverted into the CBST Common Shares that existed prior to such conversion.

In the event that holders of CBST Common Shares are entitled to convert their CBST Common Shares into CBST Proportionate Voting Shares in connection with a PVS Offer pursuant to (2) above, holders of an aggregate of CBST Common Shares of less than 100 (an “Odd Lot”) will be entitled to convert all but not less than all of such Odd Lot of CBST Common Shares into an applicable fraction of one CBST Proportionate Voting Share, provided that such conversion into a fractional CBST Proportionate Voting Share will be solely for the purpose of tendering the fractional CBST Proportionate Voting Share to the PVS Offer in question and that any fraction of a CBST Proportionate Voting Share that is tendered to the PVS Offer but that is not, for any reason, taken up and paid for by the offeror will automatically be reconverted into the CBST Common Shares that existed prior to such conversion.

 

67

Compliance Provisions

The Articles contain certain provisions (the “Compliance Provisions”), including a combination of certain remedies such as a suspension of voting and/or dividend rights, a discretionary right to force a share transfer to a third party and/or a discretionary redemption right in favour of Cannabist, in each case to seek to ensure that Cannabist and its subsidiaries are able to comply with applicable regulatory and licensing regulations.

The purpose of the Compliance Provisions is to provide Cannabist with a means of protecting itself from having a shareholder, or as determined by the Board, a group of shareholders acting jointly or in concert, with an ownership interest of, whether of record or beneficially (or having the power to exercise control or direction over) (“Owning or Controlling”), five percent (5%) or more of the issued and outstanding CBST Shares, or such other number as is determined by the Board from time to time, and: (1) who a governmental authority granting licenses to, or otherwise governing the operations of, Cannabist or its subsidiaries has determined to be unsuitable to own CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable; (2) whose ownership of CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, may result in the loss, suspension or revocation (or similar action) with respect to any licenses or permits relating to Cannabist’s or its subsidiaries’ conduct of business (being the conduct of any activities relating to the cultivation, manufacturing and dispensing of cannabis and cannabis-derived products in the United States, which include the owning and operating of cannabis licenses) or in Cannabist or any of its affiliates being unable to obtain any new licenses or permits in the normal course, all as determined by the Board; or (3) who have not been determined by the applicable regulatory authority to be an acceptable person or otherwise have not received the requisite consent of such regulatory authority to own the CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, in each case within a reasonable time period acceptable to the Board or prior to acquiring any CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable (in each case, an “Unsuitable Person”). The ownership restrictions in Cannabist’s notice of articles and articles are also subject to an exemption for applicable depositaries and clearing houses as well as underwriters (as defined in the Securities Act (Ontario)) in the course of a distribution of securities of Cannabist.

Notwithstanding the foregoing, the Compliance Provisions provide that any shareholder (or group of shareholders acting jointly or in concert) proposing to Own or Control five percent (5%) or more of the issued and outstanding CBST Shares (or such other number as is determined by the Board from time to time) will be required to provide not less than 30 days’ advance written notice to Cannabist by mail sent to Cannabist’s head office to the attention of the Corporate Secretary and to obtain all necessary regulatory approvals. Upon any such shareholder(s) Owning or Controlling five percent (5%) or more of the issued and outstanding CBST Shares (or such other number as is determined by the Board from time to time), and having not received the requisite approval of any applicable regulatory authority to own the CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, the Compliance Provisions provide: (1) that such shareholder(s) may, in the discretion of the Board, be prohibited from exercising any voting rights and/or receiving any dividends from Cannabist, unless and until all requisite regulatory approvals are obtained; and (2) Cannabist with a right, but not the obligation, at its option, upon notice to the Unsuitable Person, to: (a) redeem any or all CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, directly or indirectly held by an Unsuitable Person; and/or (b) forcibly transfer any or all CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, directly or indirectly held by an Unsuitable Person to a third party. Such rights are required in order for Cannabist to comply with regulations in various jurisdictions where Cannabist or its subsidiaries conduct business or are expected to conduct business.

Further, a Holder of the CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, will be prohibited from acquiring five percent (5%) or more of the issued and outstanding CBST Shares, directly or indirectly, in one or more transactions, without providing 30 days’ advance written notice to Cannabist by mail sent to Cannabist’s registered office to the attention of the Corporate Secretary. The foregoing restrictions will not apply to the ownership, acquisition or disposition of CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, as a result of: (1) transfer

 

68

of CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, occurring by operation of law including, inter alia, the transfer of CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, to a trustee in bankruptcy, (2) an acquisition or proposed acquisition by one or more underwriters who hold CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, for the purposes of distribution to the public or for the benefit of a third party provided that such third party is in compliance with the foregoing restriction, or (3) conversion, exchange or exercise of securities issued by Cannabist or a subsidiary into or for CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, in accordance with their respective terms. If the Board reasonably believes that any such Holder of the CBST Common Shares may have failed to comply with the foregoing restrictions, Cannabist may apply to the Supreme Court of British Columbia, or any other court of competent jurisdiction, for an order directing that such shareholder disclose the number of CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, directly or indirectly held.

Upon receipt by the CBST Shareholder of a notice to redeem or to transfer any or all of its CBST Common Shares and/or CBST Proportionate Voting Shares, the holder will be entitled to receive, as consideration therefor, no less than 95% of the lesser of: (1) the closing price of the CBST Common Shares on the CBOE (or the then principal exchange on which Cannabist’s securities are listed or quoted for trading) on the trading day immediately prior to the closing of the redemption or transfer (or the average of the last bid and last asking prices if there was no trading on the specified date); and (2) the five-day VWAP of the CBST Common Shares on CBOE (or the then principal exchange on which Cannabist’s securities are listed or quoted for trading) for the five trading days immediately prior to the closing of the redemption or transfer (or the average of the last bid and last asking prices if there was no trading on the specified dates).

Notwithstanding the adoption of the proposed Compliance Provisions, Cannabist may not be able to exercise such rights in full or at all, including its redemption rights. Under the BCBCA, a corporation may not make any payment to redeem shares if there are reasonable grounds for believing that the company is unable to pay its liabilities as they become due in the ordinary course of its business or if making the payment of the redemption price or providing the consideration would cause the company to be unable to pay its liabilities as they become due in the ordinary course of its business.

Furthermore, Cannabist may become subject to contractual restrictions on its ability to redeem its CBST Common Shares and/or CBST Proportionate Voting Shares, as applicable, by, for example, entering into a secured credit facility subject to such restrictions. In the event that restrictions prohibit Cannabist from exercising its redemption rights in part or in full, Cannabist will not be able to exercise its redemption rights absent a waiver of such restrictions, which Cannabist may not be able to obtain on acceptable terms or at all.

Anti-Dilutive Warrants

The Anti-Dilutive Warrants will be exercisable for two years following Closing at C$0.14 per share, representing an 80% premium to the 10-trading day VWAP of the New CBST Common Shares on February 26, 2025. For further information, see “Anti-Dilutive Warrants”.

RISK FACTORS

Before voting on the matters being put before them at the Meeting, Senior Noteholders should consider carefully the risks set out herein and incorporated by reference in this Circular, including disclosure in the 2024 Annual Report, 2024 Financial Statements and 2024 MD&A. These documents discuss, among other things, known material trends and events, and risks or uncertainties that may reasonably be expected to have a material effect on Cannabist’s business, financial condition or results of operations or on the New Notes and New CBST Common Shares.

 

69

The completion of the Arrangement may not occur or may be delayed.

Cannabist will not be able to complete the Arrangement unless and until all conditions precedent to the Arrangement are satisfied or waived (where permitted). These conditions include certain items that are outside of Cannabist’s control, such as the requirement that the Court shall have determined that the Arrangement is fair and reasonable and granted the Final Order. Even if the Arrangement is not completed, it may not be completed on the timeline described in this Circular and/or provided for in the Support Agreement. Accordingly, Senior Noteholders participating in the Arrangement may have to wait longer than expected to receive their entitlements under the Plan. In addition, if the Arrangement is not completed on the schedule described in this Circular, Cannabist may incur additional expenses. If the Arrangement is not completed at all, Cannabist will face significant liquidity challenges in mid-2025 unless an alternative transaction can be completed.

The Support Agreement may be terminated.

Each of Cannabist and the Requisite Supporting Senior Noteholders have the right to terminate the Support Agreement in certain circumstances. Accordingly, there is no certainty, nor can Cannabist provide any assurance, that the Support Agreement will not be terminated by either Cannabist or the Supporting Senior Noteholders before the completion of the Arrangement. In addition, certain costs related to the Arrangement, such as legal and certain financial advisor fees, must be paid by Cannabist even if the Arrangement is not completed. If the Support Agreement is terminated and the Arrangement is not completed, Cannabist will more than likely face significant liquidity challenges starting in mid-2025 unless an alternative transaction can be completed.

If the Arrangement is not completed, the market price or value of the Senior Notes and/or of the CBST Common Shares may decline.

If the Arrangement is not completed or its completion is materially delayed and/or the Support Agreement is terminated, then the market price or value of the Senior Notes and/or of the CBST Common Shares may decline. Cannabist’s business, financial condition or results of operations could also be subject to various material adverse consequences, including in connection with, in particular, the upcoming maturity of 2025 Notes. If the Support Agreement is terminated and the Arrangement is not completed, Cannabist will more than likely face significant liquidity challenges starting in mid-2025 unless an alternative transaction can be completed.

The uncertainty surrounding the Arrangement could negatively impact Cannabist’s current and future operations, financial condition and prospects.

If the Arrangement is not completed for any reason, there are risks that the announcement of the Arrangement and the dedication of Cannabist’s resources to the attempted completion thereof could negatively impact current and future operations, financial condition and prospects of Cannabist. In addition, Cannabist has, and will continue to, incur significant transaction expenses in connection with the Arrangement, regardless of whether the Arrangement is completed. If the Arrangement is not completed, Cannabist will face significant liquidity challenges starting in mid-2025 unless an alternative transaction can be completed.

The pending Arrangement may divert the attention of Cannabist’s management.

The pending Arrangement could cause the attention of Cannabist’s management to be diverted from the day-to-day operations. These disruptions could be exacerbated by a delay in the completion of the Arrangement and could have an adverse effect on the business, operating results or prospects of Cannabist regardless of whether the Arrangement is ultimately completed.

Despite Cannabist’s current level of indebtedness, Cannabist may be able to incur more debt following completion of the Arrangement. This level of indebtedness could further exacerbate risks to Cannabist’s financial condition.

Cannabist may be able to incur additional indebtedness in the future. Although the Amended and Restated Indenture will contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions. If Cannabist incurs any such additional indebtedness, it may have the effect of reducing the amount of proceeds distributed to its creditors and/or shareholders in connection with any future insolvency, liquidation, reorganization, dissolution or other winding-up proceeding involving Cannabist. If new debt is added to Cannabist’s current debt levels, the related risks that Cannabist and its subsidiaries now face could intensify.

 

70

The Arrangement may have adverse tax consequences for Cannabist.

Cannabist is a resident of Canada for Canadian federal income tax purposes, and is also treated as a U.S. corporation for U.S. federal income tax purposes, pursuant to section 7874(b) of the United States Internal Revenue Code, as amended (the “Code”), and is subject to U.S. federal income tax on its worldwide income. As a result, subject to an applicable tax treaty or convention, Cannabist is subject to taxation both in Canada and the U.S., which could have a material adverse effect on Cannabist ’s business, financial condition and results of operations. Accordingly, Senior Noteholders should consult with their own tax advisors in this regard.

Depending on the future trading price or value of the New Notes and the CBST Common Shares, Cannabist may suffer material “cancellation of debt income” under U.S. federal income tax laws which could give rise to material tax obligations which may have a material adverse effect on Cannabist. As a cannabis company, Cannabist is currently unable to fully deduct many expenses as a result of the application of section 280E of the Code.

The tax laws of any applicable country, province, state or territory (including Canadian and United States federal income tax laws), and the administrative application and interpretation of such laws, are subject to change. Any change in the tax laws that are applicable to Cannabist or the interest held by a Senior Noteholder in Cannabist, or the administrative application or interpretation of such laws, could have an adverse impact on such Senior Noteholder’s interests in Cannabist.

Cannabist has not sought or obtained from any tax authority advance confirmation of its tax filing positions (including an advance income tax ruling from the Canada Revenue Agency or a private letter ruling from the Internal Revenue Service), therefore it is possible that such positions may be successfully challenged by tax authorities, which could result in materially different tax consequences than anticipated. It is possible that the Canadian and/or United States tax authorities could take positions or adopt interpretations regarding the applicable tax consequences to Senior Noteholders or CBST Shareholders that differ from those set out in this Circular. Further, this Circular does not describe the U.S. federal income tax consequences of the Arrangement to any Senior Noteholders or CBST Shareholders. Senior Noteholders and CBST Shareholders should consult their own tax advisors.

Following the Arrangement, Cannabist may not be able to generate sufficient cash to service all of its indebtedness, including the New Notes, and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful.

Cannabist’s ability to make scheduled payments on or to refinance its debt obligations, including the New Notes (some of the maturity dates of which are subject to extension), depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond Cannabist’s control. Cannabist may be unable to maintain a level of cash flow from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on its indebtedness, including the New Notes.

If Cannabist’s cash flows and capital resources are insufficient to fund its debt service obligations, Cannabist could face substantial liquidity problems and could be forced to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. Cannabist may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow Cannabist to meet its scheduled debt service obligations.

Cannabist’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its indebtedness on commercially reasonable terms or at all, would materially and adversely affect Cannabist’s business, financial position and results of operations and its ability to satisfy its obligations under the New Notes.

 

71

The Support Agreement and Amended and Restated Indenture contain additional restrictive covenants

The Support Agreement contains interim operating covenants that are more restrictive than the covenants under the Existing Indenture and may limit Cannabist’s ability to respond to developments in its business or the broader economy prior to completion of the Transaction. Following completion of the Transaction, the Amended and Restated Indenture will contain covenants that restrict Cannabist’s ability to engage in certain transactions and may impair its ability to respond to changing business and economic conditions. These covenants restrict, among other things, Cannabist’s ability to pay dividends and make other payments, incur additional indebtedness, maintain a certain amount of unrestricted cash, maintain certain leverage ratios starting in mid-2025, make certain investments, and acquisitions and transfer and sell assets. Future indebtedness or other contracts could contain financial or other covenants more restrictive than those contained in the Amended and Restated Indenture.

The ability of Cannabist and its subsidiaries to comply with these provisions may be affected by general economic conditions, political decisions, industry conditions and other events beyond its control. As a result, Cannabist cannot assure Senior Noteholders that it and its subsidiaries will be able to comply with the covenants described above. Cannabist’s and its subsidiaries’ failure to comply with the covenants contained in their debt instruments, including failure as a result of events beyond their control, could result in an event of default, which could materially and adversely affect Cannabist’s consolidated operating results and financial condition.

In addition, if there were an event of default under one of such debt instruments, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to become due and payable immediately which may cause cross-defaults to other debt. Cannabist cannot assure holders of the New Notes that its consolidated assets or cash flow would be sufficient to fully repay borrowings under its outstanding debt instruments if accelerated upon an event of default, or that Cannabist would be able to repay, refinance or restructure the payments on those debt instruments.

There may not be sufficient collateral security to pay all or any of the New Notes.

No appraisal of the value of the collateral which will secure the New Notes has been made and the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the collateral securing the New Notes may not produce proceeds in an amount sufficient to pay any amounts due thereon.

The fair market value of the collateral expected to secure the New Notes is subject to fluctuations based on factors that include, among others, the condition of the United States cannabis industry, the ability to sell the collateral in an orderly sale, general economic conditions, the availability of buyers, other secured debt and other factors. The amount to be received upon a sale of the collateral would be dependent on numerous factors, including, but not limited to, the actual fair market value of the collateral at such time and the timing and manner of the sale. By their nature, portions of the collateral may be illiquid and may have no readily ascertainable market value, or may be difficult to dispose of for regulatory reasons. Accordingly, there can be no assurance that the collateral could be sold in a short period of time or in an orderly manner. In the event of a foreclosure, liquidation, reorganization, bankruptcy or other insolvency proceeding, it cannot be assured that the proceeds from any sale or liquidation of the collateral will be sufficient to pay Cannabist’s obligations under the New Notes. In addition, in the event of any such proceeding, the ability of the holders of the New Notes to realize upon any of the collateral may be subject to United States bankruptcy and insolvency law limitations as a result of Cannabist operating a cannabis business.

 

72

Anti-Dilutive Warrants may only be exercised: (1) if the securities issuable upon exercise have been registered under the U.S. Securities Act; (2) outside the United States pursuant to Regulation S; or (3) inside the United States in compliance with an exemption from the registration requirements of the U.S. Securities Act; and the underlying CBST Common Shares may be subject to restrictions on trading under U.S. securities laws.

The Anti-Dilutive Warrants may only be exercised: (1) outside the United States pursuant to Regulation S under the U.S. Securities Act, (2) inside the United States pursuant to available exemptions from registration requirements under the U.S. Securities Act and in compliance with any applicable U.S. state securities laws; or (3) pursuant to an effective registration statement under the U.S. Securities Act, and, in each case, in compliance with any applicable local securities laws. Further, unless registered under the U.S. Securities Act, the CBST Common Shares underlying such Anti-Dilutive Warrants will be considered “restricted securities” under U.S. federal securities laws and subject to restrictions on transfer which would require transfers to be made pursuant to an effective registration statement or transferred under an available exemption from the registration requirements of the U.S. Securities Act. See “Securities Law Matters – United States” for further information regarding further U.S. securities law restrictions that may apply to the Anti-Dilutive Warrants, the CBST Common Shares and the other securities issued in connection with the Arrangement and corresponding Transaction. All securityholders are urged to consult with their own legal counsel to ensure that any subsequent resale of securities issued to them in connection with the Arrangement and corresponding Transaction complies with applicable securities legislation.

EXPERTS

Certain Canadian legal matters relating to matters described in this Circular are to be passed upon by Stikeman Elliott LLP on behalf of Cannabist. Certain U.S. securities law matters relating to matters described in this Circular are to be passed upon by Dorsey & Whitney LLP on behalf of Cannabist. As at the date of this Circular, the partners and associates of Stikeman Elliott LLP and Koger, each beneficially owned, directly or indirectly, less than 1% of the outstanding Senior Notes and CBST Common Shares.

INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

Except as described herein, no director or executive officer of Cannabist, or any person who has held such a position since the beginning of the last completed financial year end of Cannabist, nor any associate or affiliate of the foregoing persons, has any substantial or material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted on at the Meeting.

PRINCIPAL HOLDERS OF SECURITIES

Following completion of the Transaction and following the issuance of the New CBST Common Shares, to the knowledge of Cannabist, no person is expected to beneficially own, or control, directly or indirectly, 10% or more of the then outstanding CBST Common Shares.

OTHER BUSINESS

The Board is not aware of any matters intended to come before the Meeting other than those items of business set forth in the attached Notice of Meeting of Senior Noteholders accompanying this Circular. If any other matters properly come before the Meeting, it is the intention of the persons named in the Proxy to vote in respect of those matters in accordance with their judgment.

ADDITIONAL INFORMATION

Financial information for Cannabist’s most recently completed financial year is provided in the 2024 Financial Statements and 2024 MD&A, and the 2024 Annual Report, the 2024 AGM Circular and this Circular are available upon request made via email to investor@cannabistcompany.com and are also available electronically on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.

 

73

APPROVAL OF THE BOARD

The contents and sending of this Circular and its distribution to Senior Noteholders have been approved by the Board and the Board of Directors of Cannabist Canada.

DATED at Chelmsford, Massachusetts, this 28^th day of March, 2025.

THE CANNABIST COMPANY HOLDINGS INC. and THE CANNABIST COMPANY HOLDINGS (CANADA) INC.

 

BY ORDER OF THE BOARD OF DIRECTORS

(Signed) “David Hart”

David Hart

Director

 

74

CONSENT OF KOGER

We hereby consent to the inclusion of our firm’s name and to the references to our firm’s opinion dated February 26, 2025 with respect to the fairness, from a financial point of view, of the Transaction (the “Fairness Opinion ”), in the management information circular of The Cannabist Company Holdings Inc. (“Cannabist”) and The Cannabist Company Holdings (Canada) Inc. (“Cannabist Canada” and together with Cannabist, the “Companies”) dated March 28, 2025 (the “Circular”) and to the inclusion of the Fairness Opinion in its entirety and summaries thereof in the Circular and to the filings thereof, as necessary, by the Companies with the CBCA Director and with the securities regulatory authorities in each province and territory of Canada. In providing our consent herein, we do not intend that any person other than the Board of Directors of Cannabist shall rely upon such opinion.

 

Toronto, Ontario				(Signed) “Koger Valuations Inc.”
March 28, 2025

 

75

APPENDIX A

ARRANGEMENT RESOLUTION

SPECIAL RESOLUTION OF THE HOLDERS

(the “Senior Noteholders”)

OF

6.0% SENIOR SECURED CONVERTIBLE NOTES DUE JUNE 29, 2025

9.5% SENIOR SECURED FIRST-LIEN NOTES DUE FEBRUARY 3, 2026

9.0% SENIOR SECURED CONVERTIBLE NOTES DUE MARCH 19, 2027

ISSUED BY

THE CANNABIST COMPANY HOLDINGS (CANADA) INC.

(“Cannabist Canada”)

AND

THE CANNABIST COMPANY HOLDINGS INC.

(“Cannabist” and together with Cannabist Canada, the “Companies”)

BE IT RESOLVED THAT:

 

1.

The arrangement (the “Arrangement”) under section 192 of the Canada Business Corporations Act (the “CBCA”) of Cannabist Canada and 16834434 Canada Inc. (“Cannabist Canada 2” and together with Cannabist Canada, the “Applicants”) and involving Cannabist and its other subsidiaries, as more particularly described and set forth in the management information circular of the Companies dated March 28, 2025 (the “Circular”) and as it may be amended, modified or supplemented in accordance with the terms of the Support Agreement (as defined in the Circular), is hereby authorized, approved and adopted.

 

2.

The plan of arrangement of the Applicants and involving Cannabist (the “Plan of Arrangement”), as it may be amended, modified or supplemented in accordance with its terms and the Support Agreement, the full text of which is set out in Appendix “B” to the Circular, is hereby authorized, approved and adopted.

 

3.

The (a) Support Agreement and all the transactions contemplated therein, including the entering into by the Companies and Odyssey Trust Company, in its capacity as trustee, of: (i) an amended and restated trust indenture (the “Amended and Restated Indenture”) providing for the issue of 9.25% senior secured notes of the Companies, as co-issuers, due December 31, 2028; and (ii) a first supplemental indenture (the “First Supplemental Indenture”) to the Amended and Restated Indenture providing for the issue of 9.0% senior secured convertible notes of the Companies, as co-issuers, due December 31, 2028, (b) actions of the directors of the Companies in approving the Arrangement, the Support Agreement, the Amended and Restated Indenture and the First Supplemental Indenture, and (c) actions of the directors and officers of the Companies in executing and delivering the Support Agreement, the Amended and Restated Indenture, the First Supplemental Indenture and related agreements, and any amendments, modifications or supplements thereto, are hereby ratified, authorized and approved, as applicable.

 

4.	The Applicants are hereby authorized to apply for a final order from the Ontario Superior Court of Justice (Commercial List) (the “Court”) to approve the Arrangement on the terms set forth in the Support Agreement and the Plan of Arrangement.

 

A - 1

5.

Notwithstanding that this resolution has been passed by all Senior Noteholders or that the Arrangement has been approved by the Court, the directors (and/or any committee thereof) of the Companies are hereby authorized and empowered, without further notice to or approval of the Senior Noteholders: (a) to amend, modify or supplement the Support Agreement or the Plan of Arrangement, to the extent permitted thereby; and (b) subject to the terms of the Support Agreement, not to proceed with the Arrangement and related transactions at any time prior to the Arrangement becoming effective pursuant to the provisions of the CBCA.

 

6.

Any director or officer of the Companies be and is hereby authorized and directed, for and on behalf of Cannabist Canada or Cannabist (whether under corporate seal or otherwise), to execute and deliver, or cause to be executed, under the seal of Cannabist Canada or Cannabist or otherwise, and delivered articles of arrangement and any and all other documents, agreements and instruments and to perform, or cause to be performed by, such other acts and things, as in such person’s opinion may be necessary or desirable to give full effect to these resolutions and the matters authorized hereby, including the transactions required and/or contemplated by the Arrangement and the Plan of Arrangement and the transactions completed thereby in accordance with the Support Agreement, such determination to be conclusively evidenced by the execution and delivery of such documents, agreements or other instruments or the doing of any such act or thing.

 

7.

The proper officers and authorized signatories of Odyssey Trust Company be and are hereby authorized and directed to execute and deliver all documents and instruments and to take such other actions as they may deem necessary or desirable to implement these resolutions and the matters authorized hereby, including the transactions required and/or contemplated by the Arrangement, such determination to be conclusively evidenced by the execution and delivery of such documents or other instruments or the taking of such actions.

 

A - 2

APPENDIX B

PLAN OF ARRANGEMENT

SEE ATTACHED

 

B - 1

Court File No. CV-25-00739458-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

IN THE MATTER OF AN APPLICATION UNDER SECTION 192 OF THE CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, c. C-44, AS AMENDED, AND RULES 14.05(2) AND 14.05(3) OF THE RULES OF CIVIL PROCEDURE

AND IN THE MATTER OF A PROPOSED ARRANGEMENT OF THE CANNABIST COMPANY HOLDINGS (CANADA) INC. AND 16834434 CANADA INC. INVOLVING THE CANNABIST COMPANY HOLDINGS INC., PATRIOT CARE CORP., CURATIVE HEALTH LLC, COLUMBIA CARE DC LLC, MISSION BAY, LLC, CCUT PHARMACY LLC, COLUMBIA CARE PENNSYLVANIA LLC, COLUMBIA CARE INDUSTRIAL HEMP LLC, CURATIVE HEALTH CULTIVATION LLC, COLUMBIA CARE NY LLC, FOCUSED HEALTH LLC, COLUMBIA CARE NEW JERSEY LLC, COLUMBIA CARE WV INDUSTRIAL HEMP LLC, CCPA INDUSTRIAL HEMP LLC, CC OH REALTY LLC, CCF HOLDCO LLC, CC CALIFORNIA LLC, COLUMBIA CARE MD LLC, COLUMBIA CARE DE MANAGEMENT LLC, COLUMBIA CARE DELAWARE, LLC, AND COLUMBIA CARE LLC

PLAN OF ARRANGEMENT

[●], 2025

 

 

B - 2

TABLE OF CONTENTS

 

						Page
ARTICLE 1 INTERPRETATION							1
		1.1		Definitions			1
		1.2		Certain Rules of Interpretation			9
		1.3		Governing Law			10
		1.4		Currency			10
		1.5		Date for Any Action			10
		1.6		Time			10
		1.7		Binding Effect			10
ARTICLE 2 THE ARRANGEMENT							10
		2.1		Corporate Authorizations			10
		2.2		Effective Date Transactions			11
		2.3		2027 Noteholder Election Mechanics			13
		2.4		Other Implementation Steps			14
		2.5		Fractional Interests			14
		2.6		Rounding of Cash			15
		2.7		Calculations			15
ARTICLE 3 EXCHANGE OF NOTES AND ISSUANCE OF NEW NOTES, NEW CBST COMMON SHARES, AND ANTI-DILUTIVE WARRANTS							15
		3.1		Issuance of New Notes			15
		3.2		Surrender of Notes			15
		3.3		Issuance of New CBST Common Shares			15
		3.4		Issuance of Anti-Dilutive Warrants			16
		3.5		Payment of the Early Consent Consideration			16
		3.6		No Liability in Respect of Deliveries			16
		3.7		Deposit of Notes			17
		3.8		Letter of Transmittal and Election Form			18
		3.9		Lost Certificates			18
		3.10		Securities Law Matters			18
		3.11		Withholding Rights			18
ARTICLE 4 RELEASES							19
		4.1		Release of Released Parties			19
		4.2		Injunctions			20
ARTICLE 5 CONDITIONS PRECEDENT AND IMPLEMENTATION							20
		5.1		Conditions to Plan Implementation			20
		5.2		Waiver of Conditions			21
		5.3		Effectiveness			21
		5.4		Effect of Non-Occurrence of Effective Date			21
ARTICLE 6 GENERAL							21
		6.1		Deemed Consents, Waivers and Agreements			21
		6.2		Waiver of Defaults			22
		6.3		Compliance with Deadlines			22
		6.4		Paramountcy			22
		6.5		Deeming Provisions			23

 

B - 3

		6.6		Amendment or Modification of Plan			23
		6.7		Notices			23
		6.8		Consent of Supporting Noteholders			25
		6.9		Further Assurances			25

 

B - 4

ARTICLE 1

INTERPRETATION

 

1.1	Definitions

In this Plan, unless otherwise stated:

“2025 Notes” means the 6.0% Senior Secured Convertible Notes due June 29, 2025, co-issued by CBST and CBST Canada 1 pursuant to the Existing Indenture;

“2025 Noteholder” means a Holder of the 2025 Notes;

“2026 Notes” means the 9.5% Senior Secured First-Lien Notes due February 3, 2026, co-issued by CBST and CBST Canada 1 pursuant to the Existing Indenture;

“2026 Noteholder” means a Holder of the 2026 Notes;

“2027 Notes” means the 9.0% Senior Secured Convertible Notes due March 19, 2027, co-issued by CBST and CBST Canada 1 pursuant to the Existing Indenture;

“2027 Noteholder” means a Holder of the 2027 Notes;

“Additional Amounts” has the meaning given thereto in Section 3.11(b);

“Additional Early Consent Consideration” means consideration in the aggregate amount of $1,500,000, payable by CBST in cash at maturity of the New Senior Notes, except that such payment will be accelerated and made upon the occurrence of certain milestones, as follows: (i) $750,000 shall be paid on the date on which CBST has received aggregate proceeds for Approved Sales equal to or greater than $15 million; and (2) $750,000 shall be paid on the date on which CBST has received aggregate proceeds for Approved Sales equal to or greater than $20 million, with, for greater certainty, any balance remaining payable at maturity of the New Senior Notes;

“Amalgamation” has the meaning given thereto in Section 2.2(h);

“Amended and Restated Trust Indenture” means the Amended and Restated Trust Indenture, substantially in the form appended to the Circular, to be entered into among CBST, CBST Canada 1, the Existing Guarantors, the New Guarantors and the Indenture Trustee on the Effective Date, which shall amend and restate the Existing Indenture and govern the New Notes upon this Plan becoming effective on the Effective Date and includes for the purpose of this Plan, the First Supplemental Indenture;

“Anti-Dilutive Warrants” means 118,246,947 warrants to purchase CBST Common Shares for a period of two years from the Effective Date at an exercise price per share of C$0.14, issued on the Effective Date pursuant to the Warrant Agency Agreement and this Plan to existing CBST Shareholders as of the Warrant Record Date;

“Applicants” means CBST Canada 1 and CBST Canada 2;

“Approved Sales” means those certain pre-approved asset sales disclosed by CBST and CBST Canada 1 to the Supporting Noteholders in writing;

 

B- 5

“Arrangement” means the arrangement under section 192 of the CBCA on the terms and subject to the conditions set out in this Plan, subject to any amendments, modifications and/or supplements made thereto in accordance with the terms of this Plan or made at the discretion of the Court in the Final Order with the prior written consent of the Applicants, CBST, and the Requisite Supporting Noteholders, each acting reasonably;

“Articles of Arrangement” means the articles of arrangement of the Applicants in respect of the Arrangement, in form and substance satisfactory to the Applicants and the Requisite Supporting Noteholders, that are required to be filed with the CBCA Director in order for the Arrangement to become effective on the Effective Date;

“Business Day” means any day, other than a Saturday, Sunday or a statutory or civic holiday, on which banks are generally open for business in Toronto, Ontario and New York, New York;

“Canadian Securities Administrators” means, collectively, the applicable securities commissions or regulatory authorities in each of the provinces and territories of Canada;

“Canadian Securities Laws” means, collectively, and, as the context may require, the applicable securities Laws of each of the provinces and territories of Canada, and the respective regulations and rules made under those securities Laws together with all applicable instruments, blanket orders and rulings of the Canadian Securities Administrators and all discretionary orders or rulings, if any, of the Canadian Securities Administrators made in connection with the transactions contemplated by the Plan, as the context may require;

“CBCA” means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;

“CBCA Director” means the Director appointed under section 260 of the CBCA;

“CBCA Proceedings” means the proceedings commenced by the Applicants under the CBCA on March 20, 2025 in connection with this Plan;

“CBST” means The Cannabist Company Holdings Inc., a company existing under the laws of British Columbia;

“CBST Amalco” means The Cannabist Company Holdings (Canada) Inc., the corporation that will result from the Amalgamation under the federal laws of Canada;

“CBST Canada 1” means The Cannabist Company Holdings (Canada) Inc., a corporation existing under the federal laws of Canada, and a direct, wholly-owned subsidiary of CBST;

“CBST Canada 2” means 16834434 Canada Inc., a corporation existing under the federal laws of Canada, and a direct, wholly-owned subsidiary of CBST;

“CBST Common Shares” means common shares in the capital of CBST;

 

 

B - 6

“CBST Entities” means, collectively, the Applicants, CBST, and each other direct or indirect subsidiary of CBST, and “CBST Entity” means any of them;

“CBST Proportionate Voting Shares” means proportionate voting shares in the capital of CBST;

“CBST Shareholders” means the Holders of CBST Shares;

“CBST Shares” means, collectively, the CBST Common Shares and CBST Proportionate Voting Shares;

“CDS” means CDS Clearing and Depository Services Inc. and its nominees, successors and assigns;

“Certificate of Arrangement” means the certificate giving effect to the Arrangement, to be issued by the CBCA Director pursuant to section 192(7) of the CBCA upon receipt of the Articles of Arrangement in respect of the Applicant in accordance with section 262 of the CBCA;

“Circular” means the management information circular of CBST and CBST Canada 1 dated March 28, 2025, including all appendices thereto, as it may be amended, modified and/or supplemented from time to time, subject to the terms of the Interim Order or other Order of the Court;

“Claim” means any right or claim of any Person that may be asserted or made in whole or in part against the applicable Persons, or any of them, in any capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, whether at Law or in equity, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including, any legal, statutory, equitable or fiduciary duty), by reason of any right of setoff, counterclaim or recoupment, or by reason of any equity interest, right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and together with any security enforcement costs or legal costs associated with any such claim, and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, perfected, unperfected, present or future, known or unknown, by guarantee, warranty, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any claim made or asserted against the applicable Persons, or any of them, through any successor, assignee, affiliate, subsidiary, associated or related Person, or any right or ability of any Person to advance a claim for an accounting, reconciliation, contribution, indemnity, restitution or otherwise with respect to any matter, grievance, action (including any class action or proceeding before an administrative or regulatory tribunal), cause or chose in action, whether existing at present or commenced in the future;

“Court” means the Ontario Superior Court of Justice (Commercial List);

“Depositary” means Odyssey Trust Company or any other trust company, bank or equivalent financial institution agreed to in writing by the Applicants and the Requisite Supporting Noteholders and appointed to carry out any of the duties of the Depositary hereunder;

 

B - 7

“DRS Advice” means an advice issued by the Transfer Agent, the Warrant Agent or the Indenture Trustee evidencing the securities held by a Holder of CBST Common Shares or other CBST Entity securities (including, for greater certainty, the New CBST Common Shares), Anti-Dilutive Warrants, Notes and/or New Notes, as applicable, in lieu of a physical certificate;

“Early Consent Consideration” means consideration in the aggregate amount of $1,500,000, payable by CBST either (i) in cash; or (ii) by the transfer of Verano Shares equal to such value as measured by the 30-day VWAP of the Verano Shares on the Effective Date, at the option of CBST;

“Early Consent Consideration Deadline” means 5:00 p.m. (Toronto Time) on March 10, 2025 or such later date as agreed between CBST, CBST Canada 1 and the Requisite Supporting Noteholders;

“Early Supporting Noteholders” means Supporting Noteholders as of the Early Consent Consideration Deadline, excluding New Convertible Note-Electing Noteholders;

“Effective Date” means the date shown on the Certificate of Arrangement issued by the CBCA Director;

“Effective Time” means such time on the Effective Date as may be specified by the Applicants as the time at which the Arrangement implementation steps set forth in Section 2.2 shall be deemed to commence;

“Election Deadline” means 5:00 p.m. (Toronto time) on the date that is five (5) Business Days prior to the Noteholders Meeting;

“Existing Guarantees” means the guarantees delivered pursuant to the Existing Indenture guaranteeing the indebtedness and obligations under the Existing Indenture and the Notes;

“Existing Guarantors” means collectively, Patriot Care Corp., Curative Health LLC, Columbia Care DC LLC, Mission Bay, LLC, CCUT Pharmacy LLC, Columbia Care Pennsylvania LLC, Columbia Care Industrial Hemp LLC, Curative Health Cultivation LLC, Columbia Care NY LLC, Focused Health LLC, Columbia Care New Jersey LLC, Columbia Care WV Industrial Hemp LLC, CCPA Industrial Hemp LLC, CC OH Realty LLC, CCF Holdco LLC, CC California LLC, Columbia Care MD LLC, Columbia Care De Management LLC, Columbia Care Delaware, LLC, and Columbia Care LLC;

“Existing Indenture” means the trust indenture dated as of May 14, 2020, among CBST, CBST Canada 1 and the Indenture Trustee, as amended;

“Final Order” means the Order of the Court approving the Arrangement under section 192 of the CBCA, which shall include such terms as may be necessary or appropriate to give effect to the Arrangement and this Plan, in form and substance satisfactory to the Applicants, CBST, and the Requisite Supporting Noteholders, as such Order may be amended from time to time in a manner acceptable to the Applicants, CBST and the Requisite Supporting Noteholders;

 

B - 8

“First Supplemental Indenture” means first supplemental indenture to the Amended and Restated Trust Indenture dated as of the Effective Date, which shall govern the New Convertible Notes upon this Plan becoming effective on the Effective Date;

“Governmental Entity” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other Law-making organization (including any stock exchange and the Canadian Investment Regulatory Organization) or entity: (i) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (ii) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power;

“Holder” means a Person in whose name a note, warrant or share is registered, as the context requires;

“Indemnified Taxes” has the meaning given thereto in Section 3.11(b);

“Indenture Trustee” means Odyssey Trust Company as trustee under the Existing Indenture and the Amended and Restated Trust Indenture, and its successors and assigns;

“Interim Order” means the interim Order of the Court granted on March 28, 2025, pursuant to section 192 of the CBCA, which, among other things, approves the calling of, and the date for, the Noteholders Meeting, and as may be amended from time to time in a manner acceptable to the Applicants, CBST and the Requisite Supporting Noteholders;

“Interest Payment Date” has the meaning ascribed thereto in the Existing Indenture;

“Intermediary” means a broker, custodian, investment dealer, nominee, bank, trust company or other intermediary;

“Law” means any law, statute, constitution, treaty, convention, code, injunction, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States, or any other country, or any domestic or foreign state, county, province, territory, city or other political subdivision or of any Governmental Entity;

“Letter of Transmittal and Election Form ” means the letter of transmittal and election form sent to registered Noteholders for use in connection with the Arrangement;

“Meeting Record Date” means March 7, 2025, as may be amended by the Applicants in accordance with the Interim Order;

“New CBST Common Shares” means a total of 118,209,105 CBST Common Shares to be issued to the 2025 Noteholders, 2026 Noteholders and the New Senior Note-Electing Noteholders;

 

B - 9

“New Convertible Note-Electing Noteholder” means a 2027 Noteholder that has validly made, or has been deemed to have made, a New Convertible Note Election in accordance with Sections 2.3(a)(ii) or 2.3(c), respectively;

“New Convertible Notes” means new 9.0% Senior Secured Convertible Notes due December 31, 2028, to be issued by CBST and CBST Canada 1 and guaranteed by the Existing Guarantors and the New Guarantors, pursuant to the Amended and Restated Trust Indenture and this Plan, which notes will be denominated in U.S. Dollars and constitute a new series under the Amended and Restated Trust Indenture, and shall be issued to New Convertible Note-Electing Noteholders;

“New Convertible Note Election” has the meaning given thereto in Section 2.3(a)(ii);

“New Guarantees” means the new guarantees of the New Notes to be provided by the New Guarantors, including, for greater certainty, all general, collateral and other security agreements entered into by the New Guarantors;

“New Guarantors” means the CBST Entities other than the Applicants, CBST, the Existing Guarantors and the Unrestricted Subsidiaries;

“New Notes” means the New Senior Notes and New Convertible Notes;

“New Notes Documents” means, collectively, the Amended and Restated Trust Indenture, the New Notes, the New Guarantees and the guarantees to be provided by the Existing Guarantors pursuant to the Amended and Restated Trust Indenture, and the new security agreements (as applicable) to be entered into by the Existing Guarantors and the New Guarantors, and all other documents and agreements related thereto, in each case, in a form acceptable to the Applicants, CBST and the Requisite Supporting Noteholders;

“New Senior Note -Electing Noteholder” means a 2027 Noteholder that has validly made a New Senior Note Election in accordance with Section 2.3(a)(i);

“New Senior Notes” means new 9.25% senior notes due December 31, 2028, to be issued by CBST and CBST Canada 1 and guaranteed by the Existing Guarantors and the New Guarantors, pursuant to the Amended and Restated Trust Indenture and this Plan, which notes will be denominated in U.S. Dollars and constitute a new series under the Amended and Restated Trust Indenture, and shall be issued to 2025 Noteholders, 2026 Noteholders and New Senior Note-Electing Noteholders;

“New Senior Note Election” has the meaning given thereto in Section 2.3(a)(i);

“Notes” means the 2025 Notes, the 2026 Notes, and the 2027 Notes;

“Notes Claims” means all outstanding liabilities, debts and obligations, including without limitation principal and interest, any make whole, any prepayment, redemption or similar premiums, reimbursement obligations, fees, penalties, damages, guarantees, indemnities, costs, expenses or otherwise, and any other liabilities, debts or obligations, whether direct or indirect, absolute or contingent, known or unknown, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Notes Documents, owing by any Person (whether as issuer, guarantor or otherwise) as at the Effective Date;

 

B - 10

“Notes Documents ” means , collectively, the Existing Indenture, the Notes, the Existing Guarantees and all security and other documentation related to the Notes;

“Noteholders” means Holders of the Notes;

“Noteholders Arrangement Resolution” means the resolution of the Noteholders, approving the Arrangement to be considered and voted upon at the Noteholders Meeting, substantially in the form attached as Appendix “A” to the Circular;

“Noteholders Meeting” means the meeting of Noteholders as of the Meeting Record Date called and held pursuant to the Interim Order for the purpose of considering and voting on the Noteholders Arrangement Resolution and to consider and vote on such other matters as may properly come before such meeting, and includes any adjournment(s) or postponement(s) of such meeting;

“Order” means any order entered by the Court in the CBCA Proceedings;

“Person” means any individual, firm, corporation, partnership, limited or limited liability partnership, limited or unlimited liability company, joint venture, fund, association, organization, trust, trustee, executor, administrator, legal personal representative, estate, group, unincorporated association or organization, Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body, whether or not having legal status;

“Plan” means this plan of arrangement and any amendments, restatements, modifications and/or supplements hereto made in accordance with the terms hereof;

“Proxy, Information and Exchange Agent” means Carson Proxy Advisors or any other Person appointed by CBST or the Applicants for such purpose;

“Pro Rata Share” means a Person’s respective proportionate share of the aggregate relevant Notes or aggregate relevant CBST Shares, as applicable, and identified and set forth in the Plan.

“Release Carve-Outs” has the meaning given thereto in Section 4.1;

“Released Claims” has the meaning given thereto in Section 4.1;

“Released Parties” means, collectively, (i) the CBST Entities and each of their respective current and former directors, officers, principals, members, affiliates, limited partners, general partners, managers of accounts or funds, fund advisors, employees, shareholders, financial and other advisors, legal counsel and agents, including the Proxy, Information and Exchange Agent and the Indenture Trustee each in their capacity as such, and (ii) the Supporting Noteholders and their respective current and former directors, officers, principals, members, affiliates, limited partners, general partners, managers of accounts or funds, fund advisors, employees, shareholders, financial advisors, legal counsel and agents, each in their capacity as such;

 

B - 11

“Requisite Supporting Noteholders” has the meaning ascribed thereto in the Support Agreement;

“Support Agreement” means the support agreement entered into by , among others, CBST, CBST Canada 1 and the Supporting Noteholders in connection with this Plan on February 27, 2025;

“Supporting Noteholders” has the meaning ascribed thereto in the Support Agreement;

“Supporting Noteholders Advisors” means Goodmans LLP, Feuerstein Kulick LLP and Ducera Partners LLC;

“Standstill and Lock -up Agreement ” means the standstill and lock-up agreement to be entered into or deemed entered into by CBST, CBST Canada 1 and the Noteholders as of the Effective Date, substantially in the form attached as Appendix “I” to the Circular;

“Tax Act” means the Income Tax Act (Canada) as amended and all regulations thereunder;

“Taxes” means all income taxes, capital taxes, stamp taxes, charges to tax, withholdings, sales and use taxes, value added taxes, goods and services taxes, and all penalties, interest and other payments thereon or in respect thereof, including a payment under the Tax Act, the U.S. Code, or any other federal, provincial, territorial, state, municipal, local or foreign tax Law;

“Transfer Agent” means Odyssey Trust Company, in its capacity as the transfer agent and registrar of CBST;

“Unrestricted Subsidiaries” has the meaning ascribed thereto in the Amended and Restated Trust Indenture;

“U.S. Code” means the United States Internal Revenue Code of 1986, as amended;

“U.S. Securities Act” means the United States Securities Act of 1933, as amended;

“Verano Shares” means the common shares in the capital of Verano Holdings Corp. owned by CBST;

“VWAP” means the volume-weighted average price on the securities exchange maintained by Cboe Canada Inc.;

“Warrant Agency Agreement” means the warrant agency agreement between CBST and the Warrant Agent to be entered into on the Effective Date, in form and substance satisfactory to CBST and the Requisite Supporting Noteholders, each acting reasonably;

“Warrant Agent” means Odyssey Trust Company, in its capacity as warrant agent under the Warrant Agency Agreement; and

 

B - 12

“Warrant Record Date” means the date that is two (2) Business Days prior to the Effective Date.

 

1.2	Certain Rules of Interpretation

For the purposes of this Plan:

 

(a)

Unless otherwise expressly provided herein, any reference in this Plan to an instrument, agreement or an order or an existing document or exhibit filed or to be filed means such instrument, agreement, order, document or exhibit as it may have been or may be amended, modified, restated or supplemented in accordance with its terms;

 

(b)

The division of this Plan into articles, sections, subsections, clauses and paragraphs is for convenience of reference only, and the descriptive headings of articles and sections are not intended as complete or accurate descriptions of the content thereof, none of which shall affect the construction or interpretation of this Plan;

 

(c)

The use of words in the singular or plural, or with a particular gender, including a definition, shall not limit the scope or exclude the application of any provision of this Plan to such Person (or Persons) or circumstances as the context otherwise permits;

 

(d)

The words “includes” and “including” and similar terms of inclusion shall not, unless expressly modified by the words “only” or “solely”, be construed as terms of limitation, but rather shall mean “includes but is not limited to” and “including but not limited to”, so that references to included matters shall be regarded as illustrative without being either characterizing or exhaustive;

 

(e)

Unless otherwise specified, time periods within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends;

 

(f)

Unless otherwise provided, any reference to a statute or other enactment of parliament, a legislature or other Governmental Entity includes all rules, regulations and blanket orders made thereunder, all amendments to or re-enactments of such statute or other enactment in force from time to time, and, if applicable, any statute or enactment that supplements or supersedes such statute or enactment;

 

(g)

References to a specific recital, article, section, subsection or clause shall, unless something in the subject matter or context is inconsistent therewith, be construed as references to that specific recital, article, section, subsection or clause of this Plan, whereas the terms “this Plan”, “hereof”, “herein”, “hereto”, “hereunder” and similar expressions shall be deemed to refer generally to this Plan and not to any particular recital, article, section, subsection, clause or other portion of this Plan and shall include any amended or restated Plan and any documents supplemental hereto;

 

 

B - 13

(h)

Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Existing Indenture; and

 

(i)

The word “or” is not exclusive.

 

1.3	Governing Law

This Plan shall be governed by and construed in accordance with the Laws of Ontario and the federal Laws of Canada applicable therein. All questions as to the interpretation or application of this Plan and all proceedings taken in connection with this Plan and its provisions shall be subject to the exclusive jurisdiction of the Court.

 

1.4

Currency

Unless otherwise stated, all references in this Plan to sums of money are expressed in, and all payments provided for herein shall be made in, U.S. Dollars.

 

1.5	Date for Any Action

If the date on which any action is required to be taken hereunder by a Person is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day.

 

1.6

Time

Time shall be of the essence in this Plan. Unless otherwise specified, all references to time expressed in this Plan and in any document issued in connection with this Plan mean local time in Toronto, Ontario, and any reference to an event occurring on a Business Day shall mean prior to 5:00 p.m. on such Business Day.

 

1.7	Binding Effect

The Arrangement will become effective at, and be binding at and after, the Effective Time on (i) the Applicants, CBST, the Existing Guarantors, the New Guarantors and the other CBST Entities, (ii) all current and former Noteholders and CBST Shareholders; (iii) all current and former beneficial holders of Notes, CBST Common Shares and CBST Proportionate Voting Shares, (iv) the Indenture Trustee, (v) the Warrant Agent, (vi) the Transfer Agent, (vii) the Depositary, and (viii) CDS.

ARTICLE 2

THE ARRANGEMENT

 

2.1	Corporate Authorizations

The adoption, execution, delivery, implementation and consummation of all matters contemplated under this Plan involving corporate action of any of the Applicants, CBST or the other CBST Entities will occur and be effective as of the Effective Date (or such other date as the Applicants, CBST, the other CBST Entities and the Requisite Supporting Noteholders may agree, acting reasonably), and will be authorized and approved under this Plan and by the Court, where appropriate, as part of the Final Order, in all respects and for all purposes and without any requirement, except as expressly provided herein, of further action by the Noteholders, the CBST Shareholders, or by the directors or officers of the Applicants, CBST, the Existing Guarantors, the New Guarantors or any other CBST Entity.

 

B - 14

2.2	Effective Date Transactions

At the Effective Time, the following events or transactions will occur, or be deemed to have occurred and be taken and effected, sequentially as set out below without any further authorization, act or formality, in each case, unless stated otherwise, effective as at five-minute intervals commencing at the Effective Time:

 

(a)

CBST and the Warrant Agent shall enter into the Warrant Agency Agreement and CBST shall cause to be issued, as a special distribution, to each CBST Shareholder its Pro Rata Share as of the Warrant Record Date (based on the number of CBST Shares held by such CBST Shareholder relative to the aggregate number of CBST Shares issued and outstanding, in each case as of the Warrant Record Date and assuming conversion of each CBST Proportionate Voting Share into 100 CBST Common Shares) of the Anti-Dilutive Warrants;

 

(b)

CBST, CBST Canada 1, the Existing Guarantors and the New Guarantors and the Indenture Trustee shall enter into the Amended and Restated Trust Indenture and the other New Notes Documents in respect of the issuance of the New Notes, which were not entered into prior to the Effective Time;

 

(c)

CBST shall pay all accrued but unpaid interest on the Notes since the last Interest Payment Date to, but excluding the Effective Date, in cash to the Indenture Trustee, for and on behalf of the Noteholders, and the Indenture Trustee shall pay (or cause to be paid) such interest payment to the Noteholders pursuant to standing instructions and customary practices, without abatement or rights of setoff or counterclaim of any nature;

 

(d)

each 2025 Noteholder, 2026 Noteholder and New Senior Note-Electing Noteholder shall: (i) be deemed to have surrendered their Notes in accordance with Section 3.2; and (ii) receive as consideration:

 

A.

its respective Pro Rata Share (based on the aggregate principal amount of the Notes surrendered by such Noteholder relative to the aggregate principal amount of all Notes surrendered by all Noteholders pursuant to this Section 2.2(d)) of the New Senior Notes, the aggregate principal amount of which shall be equal to the aggregate principal amount of Notes surrendered by the Noteholders pursuant to this Section 2.2(d);

 

B.

its respective Pro Rata Share (based on the aggregate principal amount of the Notes surrendered by such Noteholder relative to the aggregate principal amount of all Notes surrendered by all Noteholders pursuant to this Section 2.2(d)) of the New CBST Common Shares; and

 

B - 15

C.

if such 2025 Noteholder, 2026 Noteholder or New Senior Note-Electing Noteholder, as applicable, is an Early Supporting Noteholder, such Early Supporting Noteholder’s Pro Rata Share (based on the aggregate principal amount of the Notes surrendered by such Early Supporting Noteholder relative to the aggregate principal amount of all Notes surrendered by the Early Supporting Noteholders pursuant to this Section 2.2(d)) of: (A) the Early Consent Consideration, which shall be paid in accordance with Section 3.5; and (B) the right to receive the Additional Early Consent Consideration, which will be paid in accordance with Section 7.15(d) of the Amended and Restated Indenture, which, for greater certainty will be additional consideration for such Noteholder’s Notes;

in full and final satisfaction of such Noteholder’ s Notes Claims, and CBST, CBST Canada 1 and each such Noteholder shall be deemed to have entered into the Standstill and Lock-up Agreement concurrently with the receipt of their New CBST Common Shares;

 

(e)

each New Convertible Note-Electing Noteholder shall: (i) be deemed to have surrendered its Notes in accordance with Section 3.2; and (ii) receive its respective Pro Rata Share (based on the aggregate principal amount of 2027 Notes surrendered by such New Convertible Note-Electing Noteholder relative to the aggregate principal amount of all 2027 Notes surrendered by New Convertible Note-Electing Noteholders pursuant to this Section 2.2(e)) of the New Convertible Notes issued by CBST and CBST Canada 1, the aggregate principal amount of which shall be equal to the principal amount of 2027 Notes surrendered by the New Convertible Note-Electing Noteholders pursuant to this Section 2.2(e), in full and final satisfaction of such Noteholder’s Notes Claims;

 

(f)

the Notes and any related Notes Claims (including any make whole premiums, redemption premiums or similar premiums) shall be irrevocably and finally extinguished, discharged and settled and the Notes, the Existing Indenture and the other Notes Documents shall be deemed to be cancelled and terminated in all respects;

 

(g)

the releases referred to in Section 4.1 shall become effective; and

 

(h)

CBST Canada 1 and CBST Canada 2 will amalgamate under the CBCA (the “Amalgamation”) and thereupon:

 

(i)

the name of CBST Amalco will be “The Cannabist Company Holdings (Canada) Inc.”;

 

(ii)

the by-laws of CBST Amalco shall be the same as the by-laws of CBST Canada 2 immediately prior to the Effective Time;

 

(iii)

the board of directors of CBST Amalco shall be the same as the directors of CBST Canada 2 immediately prior to the Effective Time; and

 

(iv)

all shares of CBST Canada 1 shall be cancelled without any repayment of capital in respect thereof; no shares shall be issued by CBST Amalco in connection with such amalgamation; and all shares of CBST Canada 2 prior to the Amalgamation shall be unaffected and shall continue as shares of CBST Amalco;

 

B - 16

(v)

the stated capital account of the common shares of CBST Amalco shall be equal to the aggregate paid-up capital (for purposes of the Tax Act) of the common shares of CBST Canada 1 and CBST Canada 2 immediately prior to the Amalgamation;

 

(vi)

the provisions of subsection 186(a) to (g) of the CBCA shall apply to the Amalgamation with the result that:

 

A.

the amalgamation of the amalgamating corporations and their continuance as one corporation becomes effective;

 

B.

the property of each amalgamating corporation continues to be the property of CBST Amalco;

 

C.

CBST Amalco continues to be liable for the obligations of each amalgamating corporation;

 

D.

an existing cause of action, claim or liability to prosecution of either of the amalgamating corporations is unaffected;

 

E.

a civil, criminal or administrative action or proceeding pending by or against an amalgamating corporation may be continued to be prosecuted by or against CBST Amalco;

 

F.

a conviction against, or ruling, order or judgment in favour of or against, an amalgamating corporation may be enforced by or against CBST Amalco; and

 

G.

the Articles of Arrangement are deemed to be the articles of incorporation of CBST Amalco and the Certificate of Arrangement is deemed to be the certificate of incorporation of CBST Amalco.

 

2.3	2027 Noteholder Election Mechanics

With respect to the surrender and exchange of 2027 Notes effected pursuant to Sections 2.2(d) and 2.2(e):

 

(a)

each 2027 Noteholder may elect to surrender and exchange its 2027 Notes for either:

 

(i)

its Pro Rata Share of the New Senior Notes, New CBST Common Shares and, if applicable, the Early Consent Consideration and the right to receive the Additional Early Consent Consideration pursuant to Section 2.2(d) (such election being a “New Senior Note Election”); or

 

(ii)

its Pro Rata Share of the New Convertible Notes pursuant to Section 2.2(e) (such election being a “New Convertible Note Election”);

 

 

B - 17

(b)

in order to make an election set forth in Section 2.3(a), each electing 2027 Noteholder must deposit with the Depositary, prior to the Election Deadline, a duly completed and executed Letter of Transmittal and Election Form indicating such 2027 Noteholder’s election, which election shall be irrevocable and may not be withdrawn, together with any certificates representing the 2027 Notes held by such 2027 Noteholder and such additional documents and instruments as the Depositary, the Applicants or CBST may reasonably require; and

 

(c)

any 2027 Noteholder who does not make a valid New Senior Note Election or New Convertible Note Election prior to the Election Deadline in accordance with this Section 2.3, shall be deemed to have made a New Convertible Note Election.

 

2.4	Other Implementation Steps

 

(a)

The Applicants, CBST, and the other CBST Entities may undertake any other steps or transactions necessary or desirable to implement this Plan on the terms set out herein (as may be amended pursuant to the terms hereof) in any manner and on such date(s) and/or time(s) determined by the CBST Entities with the consent of the Requisite Supporting Noteholders, acting reasonably.

 

(b)

Without limiting the generality of Section 2.4(a), and subject in all cases to the consent of the Requisite Supporting Noteholders, to the extent that the Applicants, CBST and the other CBST Entities determine that it is not practicable to file and/or register, prior to the Effective Date, security documents and instruments that are required to be registered prior to the Effective Date pursuant to the Amended and Restated Indenture, such security documents and instruments may be filed or registered after the Effective Date, provided that, CBST, CBST Amalco and the other CBST Entities shall take best efforts to file and or register each such document and instrument as soon as practicable after the Effective Date and will not wait to register any such document or instrument until all such documents and instruments are available for registration; provided that, CBST, CBST Amalco and the other CBST Entities will use commercially reasonable efforts to provide any DACAs or any mortgages that are required pursuant to the Amended and Restated Indenture within 120 days from the Effective Date (or such longer time as agreed by the Requisite Supporting Noteholders).

 

2.5	Fractional Interests

 

(a)

The New Notes issued pursuant to this Plan shall be issued in minimum increments of U.S.$1,000, and the amount of New Notes that each Noteholder shall be entitled to under this Plan shall in each case be rounded down to the nearest multiple of U.S.$1,000 without compensation therefor.

 

(b)

No fractional New CBST Common Shares shall be issued pursuant to this Plan. In lieu of any fractional New CBST Common Shares, each Person otherwise entitled to a fractional interest in New CBST Common Shares will receive an aggregate amount of New CBST Common Shares rounded down to the nearest whole number increment.

 

B - 18

2.6	Rounding of Cash

In any case where the aggregate cash amount payable to a particular Noteholder under the Arrangement would, but for this provision, include a fraction of a cent, the amount payable shall be rounded down to the nearest whole cent.

 

2.7	Calculations

All calculations made by the Applicants, CBST or Indenture Trustee pursuant to this Plan, absent manifest error, shall be conclusive, final and binding on all Persons affected by this Plan.

ARTICLE 3

EXCHANGE OF NOTES AND ISSUANCE OF NEW NOTES, NEW CBST COMMON SHARES,

AND ANTI-DILUTIVE WARRANTS

 

3.1	Issuance of New Notes

The New Notes to be issued to the Noteholders pursuant to this Plan shall be made by way of issuance by CBST and CBST Canada 1 on the Effective Date of one or more global notes in respect of each of the New Senior Notes and New Convertible Notes, authenticated by the Indenture Trustee, and issued in the name of CDS (or its nominee) in respect of Noteholders, other than certain Holders of New Notes (or their Intermediaries) who, at the request of such Holders, will receive DRS Advices or definitive certificates representing the New Notes from the Indenture Trustee. Any definitive certificates shall be held by the Depositary until such time as the applicable Noteholder delivers a duly completed Letter of Transmittal and surrenders its Notes in accordance with Section 3.2.

 

3.2	Surrender of Notes

On the Effective Date, CDS (or its nominee) as a registered Noteholder on behalf of certain Noteholders shall surrender, or cause the surrender of, the Notes it holds in exchange for the portion of the consideration payable to it as a Noteholder pursuant to Section 2.2. At the time set out in Section 2.2, each Noteholder whose Notes are represented by a DRS Advice shall be deemed to have surrendered and transferred (free and clear of all liens and encumbrances), without any further action by the Noteholder, the Notes represented by DRS Advice to CBST and CBST Canada 1 in exchange for the portion of the consideration payable to it as a Noteholder pursuant to Section 2.2. On the Effective Date, each Noteholder holding a certificate representing Notes shall surrender, or cause the surrender of, the certificate(s) representing its respective Notes to the Depositary (with a duly completed Letter of Transmittal) in exchange for the portion of the consideration payable to it as a Noteholder pursuant to Section 2.2.

 

3.3	Issuance of New CBST Common Shares

 

(a)

The New CBST Common Shares to be issued pursuant to this Plan shall be deemed to be duly authorized, validly issued, fully paid and non-assessable. CBST will add to the stated capital account maintained in respect of the CBST Common Shares C$1.00, in the aggregate, with respect to the issuance of the New CBST Common Shares.

 

B - 19

(b)

Prior to the filing by the Applicants of the Articles of Arrangement, CBST shall deliver or cause to be delivered a treasury direction to the Transfer Agent, for the benefit of the applicable Noteholders, that directs the Transfer Agent to issue the New CBST Common Shares to be distributed under this Plan and directs the Transfer Agent to cause the New CBST Common Shares to be distributed, subject to the provisions of the Standstill and Lock-up Agreement and Sections 3.3(c) and 3.7.

 

(c)

The New CBST Common Shares to be issued under this Plan will be deposited with the Depositary and, subject to Section 3.2, delivered either (i) through the facilities of CDS who, in turn, will make delivery of the New CBST Common Shares to the ultimate beneficial recipients thereof pursuant to standing instructions and customary practices of CDS, as applicable, or (ii) by providing DRS Advices or confirmations in the name of the applicable recipient thereof (or its Intermediary) and registered in CBST’s records which will be maintained by the Transfer Agent, following surrender of the Notes in accordance with Section 3.2 and Section 3.7.

 

3.4	Issuance of Anti-Dilutive Warrants

Prior to the filing by the Applicants of the Articles of Arrangement, CBST shall deliver or cause to be delivered: (a) a direction to the Warrant Agent, for the benefit of the CBST Shareholders, instructing the Warrant Agent to issue the Anti-Dilutive Warrants, to be distributed under this Plan; and (b) a reservation order to the Transfer Agent such that the number of CBST Common Shares issuable upon exercise of the Anti-Dilutive Warrants are reserved for issuance. Thereafter, the Warrant Agent shall distribute the Anti-Dilutive Warrants (x) through the facilities of CDS who, in turn, will make delivery of the Anti-Dilutive Warrants to the ultimate beneficial recipients thereof pursuant to standing instructions and customary practices of CDS, as applicable, and/or (y) by providing DRS Advices or confirmations in the name of the applicable recipient thereof (or its Intermediary) that is registered as a CBST Shareholder in CBST’s records which are maintained by the Transfer Agent. The Anti-Dilutive Warrants will only be exercisable (i) outside the United States pursuant to Regulation S under the U.S. Securities Act, (ii) inside the United States, pursuant to exemptions from such registration requirements under the U.S. Securities Act and in compliance with any applicable U.S. state securities laws, or (iii) pursuant to an effective registration statement under the U.S. Securities Act, and in each case, in compliance with any applicable local securities Laws.

 

3.5	Payment of the Early Consent Consideration

Prior to the filing by the Applicants of the Articles of Arrangement, CBST shall deposit or cause to be deposited with the Depositary, for the benefit of the Early Supporting Noteholders, the Early Consent Consideration, and the Depository shall, subject to Section 3.2, deliver the Early Consent Consideration either (i) through the facilities of CDS who, in turn, will make delivery to the ultimate beneficial recipients thereof pursuant to standing instructions and customary practices of CDS, as applicable, and/or (ii) by delivering cheques, or in the case where the Early Consent Consideration is satisfied by the transfer of Verano Shares, certificates or DRS Advices representing such Verano Shares, in the name of the applicable recipient thereof (or its Intermediary) and registered in CBST’s records which will be maintained by the Transfer Agent.

 

3.6	No Liability in Respect of Deliveries

 

(a)

The Applicants, CBST or the other CBST Entities and their respective directors, officers, shareholders, agents or advisors, shall not have any liability or obligation in respect of any deliveries, directly or indirectly, from, as applicable, (i) the Indenture Trustee, the Transfer Agent or the Warrant Agent, or (ii) the Intermediaries, in each case to the ultimate beneficial recipients of any consideration payable or deliverable by CBST or CBST Canada 1 pursuant to this Plan.

 

B - 20

(b)

The Indenture Trustee, the Depositary, CDS, the Transfer Agent or the Warrant Agent shall not incur, and each is hereby released from, any liability as a result of carrying out any provisions of this Plan and any actions related or incidental thereto, save and except for any gross negligence or wilful misconduct on its part (as determined by a final, non-appealable judgment of a court of competent jurisdiction). On the Effective Date, after the completion of the transactions set forth in Section 2.2, all duties and responsibilities of the Indenture Trustee arising under or related to the Notes shall be discharged except to the extent required in order to effectuate this Plan, including without limitation, as set forth in Section 3.1.

 

3.7	Deposit of Notes

 

(a)

At or before the Effective Time, each Noteholder may deposit all certificate(s) representing Notes with the Depositary to be held in escrow until the Arrangement takes effect. Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented Notes together with a duly completed and executed Letter of Transmittal, and such additional documents and instruments as the Depositary may reasonably require, the Noteholder of such surrendered certificate shall be entitled to receive in exchange therefor, and the Depositary shall deliver to such Noteholder, as soon as practicable after the Effective Time and in accordance with Sections 3.1 and 3.3(c), the number of New Notes and New CBST Common Shares to which it is entitled pursuant to this Plan, less any amounts withheld pursuant to Section 3.11, and any certificate representing Notes so surrendered shall forthwith be cancelled.

 

(b)

Until surrendered as contemplated by this Section 3.7, each certificate, which immediately prior to the Effective Time represented any Notes shall be deemed after the Effective Time to represent only the right to receive upon such surrender the aggregate principal amount of New Notes, number of New CBST Common Shares and amount of the Early Consent Consideration, as applicable, to which it is entitled pursuant to this Plan, less any amounts withheld pursuant to Section 3.11. Any such certificate formerly representing Notes not duly surrendered on or before the third anniversary of the Effective Date shall cease to represent a claim by or interest of any former Noteholder of any kind or nature against or in the Applicants, CBST or any other CBST Entity. On such anniversary date, all certificates representing the Notes shall be deemed to have been surrendered to CBST and any certificates for New Notes and New CBST Common Shares to which such former Holder was entitled, together with any entitlements accrued but unpaid interest thereon, shall be deemed to have been and shall be surrendered to CBST or CBST Canada 1 (or its successor) for cancellation, for no consideration.

 

(c)

Any certificate representing New Notes or New CBST Common Shares that has been returned to the Depositary or that otherwise remains unclaimed, in each case on or before the third anniversary of the Effective Date, shall cease to represent a right or claim of any kind or nature and the right of the Noteholder to receive the consideration for the Notes pursuant to this Plan shall terminate and be deemed to be surrendered and forfeited to CBST and/or CBST Canada 1, as applicable, for no consideration.

 

B - 21

3.8	Letter of Transmittal and Election Form

At the time of mailing the Circular or as soon as practicable thereafter, CBST shall forward the Letter of Transmittal and Election Form to registered Noteholders holding certificate(s) representing Notes in accordance with the Interim Order.

 

3.9	Lost Certificates

In the event any certificate which immediately prior to the Effective Time represented one or more Notes that were to be surrendered pursuant to Section 3.2, shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen or destroyed, the Indenture Trustee may issue in exchange for such lost, stolen or destroyed certificate, a certificate or DRS Advice representing New Notes and the New CBST Common Shares deliverable in accordance with such holder’s Letter of Transmittal. When authorizing such payment in exchange for any lost, stolen or destroyed certificate, the Person to whom any such certificate or DRS Advice is to be delivered shall as a condition precedent to the delivery of same, give a bond satisfactory to CBST, CBST Canada 1, the Indenture Trustee and the Transfer Agent in such sum as they may direct, acting reasonably, or otherwise indemnify CBST, CBST Canada 1, the Indenture Trustee and the Transfer Agent in a manner satisfactory to them against any claim that may be made against CBST, CBST Canada 1, the Indenture Trustee or the Transfer Agent with respect to the certificate alleged to have been lost, stolen or destroyed.

 

3.10	Securities Law Matters

 

(a)

The New Notes, New CBST Common Shares and New Guarantees issued in exchange for the Notes pursuant to this Plan shall be exempt from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof;

 

(b)

The Anti-Dilutive Warrants will be issued to existing CBST Shareholders (excluding the recipients of New CBST Common Shares) in order to reduce the dilutive effect of the New CBST Common Shares. CBST will not receive any consideration for the issuance of the Anti-Dilutive Warrants. Therefore, the issuance of the Anti-Dilutive Warrants is not expected to constitute a “sale,” as such term is defined in Section 2(a)(3) of the U.S. Securities Act and will not require registration under the U.S. Securities Act; and

 

(c)

The New Notes, New CBST Common Shares, and the Anti-Dilutive Warrants issued pursuant to this Plan shall be exempt from the prospectus requirements of Canadian Securities Laws pursuant to Section 2.11 of National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators.

 

B - 22

3.11	Withholding Rights

 

a)

CBST, the Applicants, the Indenture Trustee, the Transfer Agent, the Warrant Agent and the Intermediaries, and their respective agents, shall each be entitled to deduct and withhold from any consideration or other amount deliverable or otherwise payable to any Person hereunder such amounts as they may be required to deduct or withhold with respect to such payment under the Tax Act, U.S. Code, or any provision of any applicable Tax Law, provided, that, any such right to deduct or withhold shall not otherwise change or modify their obligations in respect of withholding Taxes under the terms of the Existing Indenture or Amended and Restated Trust Indenture (or any supplements thereto) and any and all other documents. To the extent that Taxes or other amounts are so deducted or withheld and timely remitted to the Appropriate Governmental Entity, such deducted or withheld amounts shall be treated for all purposes hereof as having been paid to the relevant Person in respect of which such deduction and withholding was made. Such deducted or withheld amounts shall be remitted to the appropriate Governmental Entity.

 

b)

Notwithstanding the foregoing, if any of CBST, an Applicant, the Indenture Trustee, the Transfer Agent, the Intermediaries, their respective agents, or any other Person is required under the Tax Act, the U.S. Code, or any provision of any applicable Tax Law to deduct or withhold any Taxes in respect of any consideration or other amount deliverable or otherwise payable to any Noteholder (which definition shall, for purposes of this Section 3.11(b), include any beneficial holder of Notes) under this Plan (“Indemnified Taxes”), then CBST or an Applicant shall pay to such Noteholder such additional amounts in cash as necessary, so that after making or allowing for all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 3.11(b)) the Noteholder receives what it would have received (as an amount in cash, property or otherwise) had no such deductions or withholdings been required (“Additional Amounts”). Further, CBST, the Applicants and the Guarantors shall, without duplication of the foregoing, indemnify and hold harmless each Noteholder, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes paid by the Noteholder (including with respect to any amounts paid under this Section 3.11(b)) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Entity.

 

c)	Notwithstanding Section 3.11(b), no Additional Amounts or indemnity for Indemnified Taxes will be paid to Excluded Holders (as defined in the Amended and Restated Trust Indenture (excluding, for this purpose, the First Supplemental Indenture)).

ARTICLE 4

RELEASES

 

4.1	Release of Released Parties

As of the Effective Date, each of the Released Parties shall be released and discharged from all actions, causes of action, damages, judgments, executions, obligations, liabilities and Claims of any kind or nature whatsoever arising on or prior to the Effective Date in connection with the Notes, the Notes Claims, the Notes Documents, New CBST Common Shares, the Anti-Dilutive Warrants, the Support Agreement, the Arrangement, the Plan, the

 

B - 23

CBCA Proceedings and any other proceedings commenced with respect to or in connection with the Plan, the transactions contemplated hereunder, and any other actions or matters related directly or indirectly to the foregoing (collectively, the “Released Claims”), provided that nothing in this paragraph shall release or discharge the following: (i) any of the Released Parties from or in respect of their respective obligations under the Plan, the New Notes (including the Amended and Restated Trust Indenture and the other New Notes Documents solely as they relate to the New Notes), the New Guarantees, the Warrant Agency Agreement, the New CBST Common Shares, the Anti -Dilutive Warrants, or any Order or document ancillary to any of the foregoing, (ii) any director or officer of CBST, the Applicants or any other CBST Entity of their right to indemnity, insurance claims, and employment related rights or claims, (iii) any inter-company obligations between or among CBST, the Applicants or any other CBST Entity on or before the Effective Date; or (iv) any act or omission arising out of any Released Party’s gross negligence, actual and intentional fraud, willful misconduct, or criminal acts (as determined by a final non-appealable order from a court of competent jurisdiction) (collectively, the “Release Carve-Outs”). The foregoing release shall not be construed to prohibit a party in interest from seeking to enforce the terms of this Plan or any contract or agreement entered into pursuant to, in connection with or contemplated by this Plan.

 

4.2	Injunctions

All Persons are permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Date, with respect to any and all Released Claims, from: (i) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits, demands or other proceedings of any nature or kind whatsoever of any Person against the Released Parties, as applicable; (ii) enforcing, levying, attaching, collecting or otherwise recovering or enforcing by any manner or means, directly or indirectly, any judgment, award, decree or order against the Released Parties; (iii) creating, perfecting, asserting or otherwise enforcing, directly or indirectly, any lien or encumbrance of any kind against the Released Parties or their property; or (iv) taking any actions to interfere with the implementation or consummation of this Plan or the transactions contemplated hereunder; provided, however, that the foregoing shall not apply to the enforcement of any obligations under this Plan or any document, instrument or agreement executed to implement this Plan or issue the New Notes, the New Guarantees, the New CBST Common Shares, and/or the Anti-Dilutive Warrants.

ARTICLE 5

CONDITIONS PRECEDENT AND IMPLEMENTATION

 

5.1	Conditions to Plan Implementation

The implementation of this Plan and the occurrence of the Effective Date shall be conditional upon the fulfilment, satisfaction or waiver (to the extent permitted by Section 5.2) of the following conditions:

 

(a)

the Court shall have granted the Final Order, the implementation, operation or effect of which shall not have been stayed or vacated;

 

(b)

the Support Agreement shall not have been validly terminated in accordance with Section 9 of the Support Agreement; and

 

B - 24

(c)

all conditions to implementation contained in Section 8 of the Support Agreement shall have been satisfied or waived in accordance with the terms of the Support Agreement, other than the condition contemplated by Section 8(1)(a) of the Support Agreement.

 

5.2	Waiver of Conditions

CBST, the Applicants and the Requisite Supporting Noteholders may at any time and from time to time jointly waive the fulfilment or satisfaction, in whole or in part, of the conditions set out in Section 5.1 to the extent and on such terms as they may agree, provided however that the condition set out in Section 5.1(a) cannot be waived.

 

5.3	Effectiveness

This Plan shall become effective in the sequence described in Section 2.2 on the filing of the Articles of Arrangement and the issuance of the Certificate of Arrangement and shall, from and after the Effective Time, be binding on and enure to the benefit of the Persons described in Section 1.7, the Released Parties, and all other Persons named or referred to in, or subject to, this Plan and their respective successors and assigns and their respective heirs, executors, administrators and other legal representatives, and their respective successors and assigns. The Articles of Arrangement shall be filed no earlier than five (5) Business Days following the Court granting the Final Order unless agreed otherwise by the Applicants, CBST and the Requisite Supporting Noteholders. The Articles of Arrangement shall be filed and the Certificate of Arrangement shall be issued in each case with respect to the Arrangement in its entirety. The Certificate of Arrangement shall be conclusive evidence that the conditions in Section 5.1 have been satisfied or waived, the Arrangement has become effective and that each of the provisions in Section 2.2 have become effective in the sequence set forth therein. No portion of this Plan shall take effect with respect to any party or Person until the Effective Time.

 

5.4	Effect of Non-Occurrence of Effective Date

If the Effective Date does not occur on or before the valid termination of the Support Agreement in accordance with its terms, unless the Applicants, CBST and the Requisite Supporting Noteholders agree in writing, then (a) this Plan shall be null and void in all respects; (b) any settlement or compromise embodied in this Plan, and any document or agreement executed pursuant to this Plan shall be deemed null and void; and (c) the obligations of CBST and CBST Canada 1 and the Existing Guarantors with respect to the Notes, the Notes Documents and the Notes Claims shall remain unchanged and nothing contained in this Plan shall constitute or be deemed to constitute a waiver or release of any Notes Claims or otherwise.

ARTICLE 6

GENERAL

 

6.1	Deemed Consents, Waivers and Agreements

 

(a)

At the Effective Time, each Noteholder shall be deemed to have consented and agreed to all of the provisions of this Plan in its entirety; and

 

(b)

Each CBST Entity, Noteholder and beneficial owner of Notes shall be deemed to have executed and delivered to the other parties all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out this Plan in its entirety.

 

B - 25

6.2	Waiver of Defaults

From and after the Effective Time, all Persons named or referred to in, or subject to, this Plan shall be deemed to have consented and agreed to all of the provisions of this Plan in its entirety. Without limiting the foregoing, from and after the Effective Time, all Persons shall be deemed to have:

 

(a)

waived any and all defaults or events of default, third-party change of control rights or any non-compliance with any covenant, warranty, representation, term, provision, condition or obligation, expressed or implied, in any contract, instrument, credit document, lease, licence, guarantee, seller note, vendor takeback note, security agreement, subordination agreement, agreement for sale or other agreement, written or oral, in each case relating to, arising out of, or in connection with, the Notes, the Notes Documents, this Plan, the Arrangement, the Support Agreement, the transactions contemplated thereby or hereunder, the CBCA Proceedings and any other proceedings commenced with respect to or in connection with this Plan. Any and all notices of default and demands for payment or any step or proceeding taken or commenced in connection with any of the foregoing shall be deemed to have been rescinded, irrevocably waived and of no further force or effect; provided that nothing shall be deemed to excuse the Applicants, CBST or the other CBST Entities, and their respective successors and assigns, from performing their obligations under this Plan, the New Notes Documents or any other contract or agreement entered into pursuant to, in connection with, or contemplated by, this Plan; and

 

(b)

agreed that if there is any conflict between the provisions of any agreement or other arrangement, written or oral, existing between such Person and the Applicants, CBST or the other CBST Entities prior to the Effective Date and the provisions of this Plan, then the provisions of this Plan take precedence and priority and the provisions of such agreement or other arrangement are deemed to be amended accordingly.

For greater certainty, nothing in this Plan shall release or waive Claims in respect of the Release Carve-Outs.

 

6.3	Compliance with Deadlines

The Applicants have the right to waive strict compliance with any election or other deadlines pursuant to this Plan (with the prior consent of the Requisite Supporting Noteholders, which shall not be unreasonably withheld or delayed), and shall be entitled to waive any deficiencies with respect to any forms or other documentation submitted pursuant to this Plan.

 

6.4	Paramountcy

From and after the Effective Date, any conflict between this Plan and the covenants, warranties, representations, terms, conditions, provisions or obligations, expressed or implied, of any contract, mortgage, security agreement, indenture, trust indenture, guarantee, subordination agreement, loan agreement, commitment letter, by-laws or other agreement, written or oral existing between one or more of the Noteholders and any one or more

 

B - 26

of the Applicants, CBST and/or the Existing Guarantors with respect to the Notes Documents as at the Effective Date shall be deemed to be governed by the terms, conditions and provisions of this Plan and the Final Order, which shall take precedence and priority. In the event of any conflict between this Plan and the New Notes Documents, the New Notes Documents shall take precedence and priority.

 

6.5	Deeming Provisions

In this Plan, the deeming provisions are not rebuttable and are conclusive and irrevocable.

 

6.6	Amendment or Modification of Plan

 

(a)

The Applicants reserve the right to amend, restate, modify and/or supplement this Plan at any time and from time to time, in a manner consistent with the Support Agreement or otherwise acceptable to the Requisite Supporting Noteholders; provided that any such amendment, restatement, modification or supplement must be contained in a written document that is (i) filed with the Court and, subject to Section 6.6(c) below, if made following the Noteholders Meeting, approved by the Court, and (ii) communicated to the Noteholders in the manner required by the Court (if so required).

 

(b)

Any amendment, restatement, modification or supplement to this Plan may be proposed by the Applicants, in a manner consistent with the Support Agreement or otherwise acceptable to the Requisite Supporting Noteholders, at any time prior to or at the Noteholders Meeting, with or without any prior notice or communication (other than as may be required under the Interim Order), and if so proposed and accepted at the Noteholders Meeting, shall become part of this Plan for all purposes.

 

(c)

Any amendment, restatement, modification or supplement to this Plan may be made following the Noteholders Meeting by the Applicants, in a manner consistent with the Support Agreement or otherwise acceptable to the Requisite Supporting Noteholders, without requiring filing with, or approval of, the Court; provided that it concerns a matter which is of an administrative nature and is required to better give effect to the implementation of this Plan and is not materially adverse to the financial or economic interests of any of the Noteholders.

 

(d)

Any amendment, restatement, modification or supplement to this Plan that is approved or directed by the Court following the Noteholders Meeting shall be effective only if it is consented to by each of the Applicants, CBST and the Requisite Supporting Noteholders.

 

(e)

Any amendment, supplement or modification of this Plan that materially adversely affects any of the Supporting Noteholders in a disproportionate manner shall require the written approval of the adversely affected Supporting Noteholder.

 

B - 27

6.7

Notices

Any notice or other communication to be delivered hereunder must be in writing and refer to this Plan and may, as hereinafter provided, be made or given by personal delivery, prepaid mail or email addressed to the respective parties as follows:

 

(a)

if to the Applicants or CBST, at:

321 Billerica Road, Suite 204

Chelmsford, MA 01824

 

 

(b)

if to any Supporting Noteholder, at:

 

 

 

B - 28

(c)

if to the Indenture Trustee, the Transfer Agent, the Warrant Agent or the Depositary, at:

Odyssey Trust Company

Stock Exchange Tower

1230 – 300 5th Avenue SW

Calgary AB T2P 3C4

Attn: Corporate Trust

or to such other address as any party above may from time to time notify the others in accordance with this Section 6.7. In the event of any strike, lock-out or other event which interrupts postal service in any part of Canada or the United States, all notices and communications during such interruption may only be given or made by personal delivery, courier or by email and any notice or other communication given or made by prepaid mail within the five (5) Business Day period immediately preceding the commencement of such interruption, unless actually received, shall be deemed not to have been given or made. Any such notices and communications so given or made, in the case of notice by way of personal delivery, courier or email, shall be deemed to have been given or made and to have been received on the day of delivery, couriering or of emailing, as applicable, if received on a Business Day before 5:00 p.m. (local time), or on the next following Business Day if received after 5:00 p.m. (local time) on a Business Day or at any time on a non-Business Day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the fifth Business Day following the date on which such notice or other communication is mailed or couriered. The unintentional failure by the Applicants to give a notice contemplated hereunder to any particular Noteholder shall not invalidate this Plan or any action taken by any Person pursuant to this Plan.

 

6.8	Consent of Supporting Noteholders

For the purposes of this Plan, any matter requiring the agreement, waiver, consent or approval of the Supporting Noteholders or Requisite Supporting Noteholders shall be deemed to have been agreed to, waived, consented to or approved by the Supporting Noteholders or Requisite Supporting Noteholders, as applicable, if such matter is agreed to, waived, consented to or approved in writing (which can be by way e -mail) by any of the Supporting Noteholders Advisors on behalf of the Supporting Noteholders or the Requisite Supporting Noteholders, as applicable, provided that such Supporting Noteholders Advisor confirms in writing (which can be by way of e-mail) that it is providing such agreement, consent, waiver or approval on behalf of the Supporting Noteholders or the Requisite Supporting Noteholders, as applicable.

 

6.9	Further Assurances

Notwithstanding that the transactions and events set out herein will occur and be deemed to occur in the order set out in this Plan without any further act or formality (except as provided herein), each of the Persons named or referred to in, affected by or subject to, this Plan will make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by the Applicants, CBST or the Requisite Supporting Noteholders to carry out the full intent and meaning of this Plan and to give effect to the transactions contemplated herein.

 

B - 29

APPENDIX C

FORM OF PROXY

SEE ATTACHED

 

C - 1

 

The Cannabist Company Holdings (Canada) Inc. and The Cannabist Company Holdings Inc.   Form of Proxy – Special Meeting to be held on April 29, 2025		Trader’s Bank Building 702, 67 Yonge St. Toronto, ON M5E 1J8

 

Appointment of Proxyholder I/We being the undersigned holder(s) of 6.0% senior secured convertible notes (CUSIP: 13765YAC7) of The Cannabist Company Holdings (Canada) Inc. and The Cannabist OR Company Holdings Inc. (together, the “Companies”) hereby appoint David Sirolly or,failing this person, David Hart		OR		Print the name of the person you are appointing if this person is someone other than the Management Nominees listed herein:

as my/our proxyholder with full power of substitution and to attend, act, and to vote for and on my/our behalf in accordance with the following direction (or if no directions have been given, as the proxyholder sees fit) and all other matters that may properly come before the Special Meeting of the Companies to be held at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, 53rd Floor, Toronto, Ontario, Canada M5L 1B9 at 10:00am (Eastern Time) or at any adjournment thereof.

 

								For		Against
1.  Special Resolution. To approve a plan of arrangement under Section 192 of the Canada Business Corporations Act (the “CBCA”) of The Cannabist Company Holdings (Canada) Inc. and 16834434 Canada Inc. and involving The Cannabist Company Holdings Inc. and its other subsidiaries, as more particularly described and set forth in the management information circular of the Companies.								☐		☐
				Signature(s):				Date
Authorized Signature(s) – This section must be completed for your instructions to be executed.
								/  /
I/we authorize you to act in accordance with my/our instructions set out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above, this Proxy will be voted as recommended by Management.								MM / DD / YY

 

C - 2

This form of proxy is solicited by and on behalf of Management.

Proxies must be received by 10:00am, Eastern Time, on April 25, 2025.

Notes to Proxy

 

1.

Each holder has the right to appoint a person, who need not be a holder, to attend and represent him or her at the Special Meeting. If you wish to appoint a person other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided on the reverse.

 

2.

If the securities are registered in the name of more than one holder (for example, joint ownership, trustees, executors, etc.) then all of the registered owners must sign this proxy in the space provided on the reverse. If you are voting on behalf of a corporation or another individual, you may be required to provide documentation evidencing your power to sign this proxy with signing capacity stated.

 

3.

This proxy should be signed in the exact manner as the name appears on the proxy.

 

4.

If this proxy is not dated, it will be deemed to bear the date on which it is mailed by Management to the holder.

 

5.

The securities represented by this proxy will be voted as directed by the holder; however, if such a direction is not made in respect of any matter, this proxy will be voted as recommended by Management.

 

6.

The securities represented by this proxy will be voted or withheld from voting, in accordance with the instructions of the holder, on any ballot that may be called for and, if the holder has specified a choice with respect to any matter to be acted on, the securities will be voted accordingly.

 

7.

This proxy confers discretionary authority in respect of amendments to matters identified in the Notice of Meeting or other matters that may properly come before the 3-C meeting.

 

8.

This proxy should be read in conjunction with the accompanying documentation provided by Management.

INSTEAD OF MAILING THIS PROXY, YOU MAY SUBMIT YOUR PROXY USING SECURE ONLINE VOTING AVAILABLE ANYTIME:

 

C - 3

		To Vote Your Proxy Online please visit:   https://login.odysseytrust.com/pxlogin   You will require the CONTROL NUMBER printed with your address to the right. If you vote by Internet, do not mail this proxy.   To request the receipt of future documents via email and/or to sign up for Securityholder Online services, you may contact Odyssey Trust Company at www.odysseycontact.com.
Voting by mail may be the only method for securities held in the name of a corporation or securities being voted on behalf of another individual. A return envelope has been enclosed for voting by mail.

 

C - 4

APPENDIX D

NOTICE OF APPLICATION

SEE ATTACHED

 

D-1

Electronically issued / Délivré par voie électronique : 20-Mar-2025 Toronto Superior Court of Justice / Cour supérieure de justice		Court File No./N° du dossier du greffe :  CV-25-00739458-00CL

 

		ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

IN THE MATTER OF AN APPLICATION UNDER SECTION 192 OF THE CANADA

BUSINESS CORPORATIONS ACT, R.S.C. 1985, C. C-44, AS AMENDED

AND IN THE MATTER OF RULES 14.05(2) and 14.05(3) OF THE RULES OF CIVIL PROCEDURE

AND IN THE MATTER OF A PROPOSED ARRANGEMENT OF THE CANNABIST COMPANY HOLDINGS (CANADA) INC. AND 16834434 CANADA INC., AND INVOLVING THE CANNABIST COMPANY HOLDINGS INC, PATRIOT CARE CORP., CURATIVE HEALTH LLC, COLUMBIA CARE DC LLC, MISSION BAY, LLC, CCUT PHARMACY LLC, COLUMBIA CARE PENNSYLVANIA LLC, COLUMBIA CARE INDUSTRIAL HEMP LLC, CURATIVE HEALTH CULTIVATION LLC, COLUMBIA CARE NY LLC, FOCUSED HEALTH LLC, COLUMBIA CARE NEW JERSEY LLC, COLUMBIA CARE WV INDUSTRIAL HEMP LLC, CCPA INDUSTRIAL HEMP LLC, CC OH REALTY LLC, CCF HOLDCO LLC, CC CALIFORNIA LLC, COLUMBIA CARE MD LLC, COLUMBIA CARE DE MANAGEMENT LLC, COLUMBIA CARE DELAWARE, LLC, AND COLUMBIA CARE LLC

THE CANNABIST COMPANY HOLDINGS (CANADA) INC and 16834434 CANADA INC.

(Applicants)

NOTICE OF APPLICATION

TO THE RESPONDENT

A LEGAL PROCEEDING HAS BEEN COMMENCED by the Applicants. The claim made by the Applicants appears on the following page.

THIS APPLICATION will come on for a hearing before a Judge presiding over the Commercial List on May 12, 2025, at 10:00 a.m., or so soon thereafter as the Application may be heard, at 330 University Avenue, Toronto, ON M5G1R7.

THIS APPLICATION will come on for a hearing (choose one of the following)

 

☐

In writing

 

☐

In person

 

☐

By telephone conference

 

☒

By video conference

By Zoom, on May 12, 2025, at 10:00 a.m. (Toronto Time)

 

D - 2

Electronically issued / Délivré par voie électronique : 20-Mar-2025 Toronto Superior Court of Justice / Cour supérieure de justice		Court File No./N° du dossier du greffe :  CV-25-00739458-00CL

 

IF YOU WISH TO OPPOSE THIS APPLICATION, to receive notice of any step in the application or to be served with any documents in the application, you or an Ontario lawyer acting for you must forthwith prepare a notice of appearance in Form 38A prescribed by the Rules of Civil Procedure, serve it on the Applicants’ lawyer or, where the Applicant does not have a lawyer, serve it on the Applicants, and file it, with proof of service, in this court office, and you or your lawyer must appear at the hearing.

IF YOU WISH TO PRESENT AFFIDAVIT OR OTHER DOCUMENTARY EVIDENCE TO THE COURT OR TO EXAMINE OR CROSS-EXAMINE WITNESSES ON THE APPLICATION, you or your lawyer must, in addition to serving your notice of appearance, serve a copy of the evidence on the Applicants’ lawyer or, where the Applicants do not have a lawyer, serve it on the Applicants, and file it, with proof of service, in the court office where the application is to be heard as soon as possible, but not later than two (2) days before the hearing.

IF YOU FAIL TO APPEAR AT THE HEARING, JUDGMENT MAY BE GIVEN IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. IF YOU WISH TO OPPOSE THIS APPLICATION BUT ARE UNABLE TO PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU BY CONTACTING A LOCAL LEGAL AID OFFICE.

 

Date: March 20, 2025		Issued by:
				Local Registrar
		Address of		Superior Court of Justice
		Court office:		330 University Avenue, 9th Floor
				Toronto ON M5G 1R7

 

TO:	SERVICE LIST

 

 

D - 3

Electronically issued / Délivré par voie électronique : 20-Mar-2025 Toronto Superior Court of Justice / Cour supérieure de justice		Court File No./N° du dossier du greffe :  CV-25-00739458-00CL

 

APPLICATION

 

1.	THE APPLICANTS MAKES AN APPICATION FOR:

 

(a)

an interim order for advice and directions pursuant to subsection 192(4) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended (the “CBCA”), authorizing The Cannabist Company Holdings (Canada) Inc. (“The Cannabist Canada Company”) to convene a special meeting (the “Meeting”) of the holders of (i) the six percent (6.0%) senior secured convertible notes due June 29, 2025 (the “2025 Notes”); (ii) the nine and one half percent (9.5%) senior secured notes due February 3, 2026 (the “2026 Notes”); and (iii) the nine percent (9.0%) senior secured convertible notes due March 19, 2027 (the “2027 Notes”, and together with the 2025 Notes and the 2026 Notes, the “Senior Notes” and holders of such Senior Notes, the “Senior Noteholders”) to consider and vote on a special resolution to approve a plan of arrangement under section 192 of the CBCA (the “Plan” or the “Arrangement”) involving The Cannabist Canada Company and The Cannabist Company Holdings Inc. (“The Cannabist Company”), among others;

 

(b)

a final order (the “Final Order”) approving the Arrangement pursuant to subsections 192(3) and 192(4) of the CBCA;

 

(c)

an order abridging the time for the service and filing or dispensing with service of the Notice of Application and Application Record, if necessary; and

 

(d)

such further and other relief as this Honourable Court deems just.

 

D - 4

Electronically issued / Délivré par voie électronique : 20-Mar-2025 Toronto Superior Court of Justice / Cour supérieure de justice		Court File No./N° du dossier du greffe :  CV-25-00739458-00CL

 

2.	THE GROUNDS FOR THE APPLICATION ARE:

 

(a)

The Cannabist Canada Company and 16834434 Canada Inc. (“168Co” and together with The Cannabist Canada Company, the “Applicants”) are corporations governed by the provisions of the CBCA with their registered offices located in Toronto, Ontario. The Cannabist Canada Company is a co-issuer of the Senior Notes to be arranged pursuant to the Arrangement. The Applicants are wholly-owned subsidiaries of The Cannabist Company, which operates a U.S. based fully integrated cannabis business. The Cannabist Company is a public company with its shares traded on the Cboe Canada Inc. exchange under the symbol “CBST” and is incorporated pursuant to the Business Corporations Act (British Columbia);

 

(b)

the Applicants wish to effect a fundamental change in the nature of an arrangement under the provisions of the CBCA;

 

(c)

pursuant to the Arrangement, among other things and as further described in the Plan, the 2025 Notes and 2026 Notes will be exchanged for: (i) an equal principal amount of new 9.25% secured notes due December 31, 2028 co-issued by the The Cannabist Canada Company and The Cannabist Company and guaranteed by The Cannabist Company’s other subsidiaries (the “New Senior Notes”); and (ii) shares in the capital of The Cannabist Company equal to 24.99% of its share capital (the “New Cannabist Shares”), which shall be distributed pro-rata among holders of 2025 Notes, 2026 Notes and 2027 Notes electing to receive New Senior Notes;

 

(d)

pursuant to the Arrangement, holders of 2027 Notes will have the option of either exchanging their 2027 Notes for (i) the same consideration being received by holders of 2025 Notes and 2026 Notes, being New Senior Notes and their pro-rata shares of the New Cannabist Shares; or (ii) new 9.0% convertible notes due December 31, 2028 but with the convertibility feature remaining the same as the existing 2027 Notes (the “New Convertible Notes”);

 

D - 5

Electronically issued / Délivré par voie électronique : 20-Mar-2025 Toronto Superior Court of Justice / Cour supérieure de justice		Court File No./N° du dossier du greffe :  CV-25-00739458-00CL

 

(e)

pursuant to the Arrangement, The Cannabist Company’s existing shareholders will receive new warrants to acquire an aggregate of 118,246,947 newly issued Cannabist Shares, representing 20.0% of the issued and outstanding Cannabist Shares (defined below), on a pro-forma and fully-diluted basis;

 

(f)

the Arrangement is an “arrangement” within the meaning of subsection 192(1) of the CBCA;

 

(g)

all statutory requirements under section 192 and other applicable provisions of the CBCA either have been fulfilled or will be fulfilled by the return date of this Application;

 

(h)

the directions set out and the approvals required pursuant to any interim order this Court may grant have been followed and obtained, or will be followed and obtained, by the return date of this Application;

 

(i)

the Applicants meet the solvency requirements of subsection 192(2) of the CBCA;

 

(j)

it is not practicable for the Applicants to effect a fundamental change in the nature of the Arrangement other than pursuant to the provisions of section 192 of the CBCA;

 

D - 6

Electronically issued / Délivré par voie électronique : 20-Mar-2025 Toronto Superior Court of Justice / Cour supérieure de justice		Court File No./N° du dossier du greffe :  CV-25-00739458-00CL

 

(k)

the Application has been put forward in good faith for a bona fide business purpose, and has a material connection to the Toronto region as the Applicants’ registered office is located in Toronto, Ontario, among other things;

 

(l)

the Arrangement is fair and reasonable;

 

(m)

certain of the Senior Noteholders and other parties to be served are resident outside of Ontario and will be served pursuant to the terms of the Interim Order and rule 17.02(n) of the Rules of Civil Procedure;

 

(n)

section 192 of the CBCA;

 

(o)

National Instrument 54-101-Communication with Beneficial Owners of Securities of a Reporting Issuer;

 

(p)

Rules 3.02(1), 14.05(2), 16.04(1), 17.02, 37 and 38 of the Rules of Civil Procedure; and

 

(q)

such further and other grounds as counsel may advise and this Honourable Court may permit.

 

3.	THE FOLLOWING DOCUMENTARY EVIDENCE WILL BE USED AT THE HEARING OF THE APPLICATION:

 

(a)

the Affidavit of David Hart, to be sworn, and the exhibits thereto; and

 

(b)

such further and other materials as counsel may advise and this Honourable Court may permit.

 

D - 7