Mr. Ron Tremblay reports
BUTTE ENTERS CANNABIS INDUSTRY WITH THE PURA CALI GROUP, ANNOUNCES RTO, CHANGE OF BUSINESS AND FINANCING
Butte Energy Inc. has entered into an agreement dated Nov. 16, 2018, with Jonathan Lasser to acquire all of the issued and outstanding equity of Pura Valley LLC, which holds the licensed Price Creek Ranch production facility in Humboldt county, California, and Pura Extractions LLC, which holds a majority interest in a high-capacity extraction lab with locations and immediate plans for two additional high-capacity labs for extraction and distillation.
The acquisition of the Purchased Companies is being done in conjunction with a 10:1 consolidation of Butte's share capital, a change of Butte's name, a financing, and changes to Butte's management (collectively, the "Proposed Transaction"). The parties have agreed to cooperate reasonably and in good faith in finalizing the structure of the Proposed Transaction for optimal tax treatment of the parties and for operational purposes. On completion of the Proposed Transaction, Butte will carry on the business currently carried on by the Purchased Companies.
Among other closing conditions, the Proposed Transaction is subject to the approval of Butte's shareholders, which will be obtained at a general meeting expected to be scheduled for a date in January 2019 (the "Meeting"). Butte's shares will remain halted until the closing of the Proposed Transaction. Further information respecting the Proposed Transaction and the Purchased Companies and their business will be contained in the management information circular to be prepared by the Company and delivered to its shareholders prior to the Meeting, a copy of which will be filed under the Company's profile at www.sedar.com.
About the Purchased Companies
Jon Lasser is the innovative Founder and CEO of Pura Valley and Pura Extraction. For over 15 years, Mr. Lasser has been a leader in the Humboldt Country Organic Cannabis category. Pura Extraction has established new, innovation methods to isolate botanical compounds and to do so more efficiently resulting in better, purer quality outputs. These two entities will be the core of the Pura vision of a complete, organic, seed to consumer sales company. The Pura Team consists of many industry veterans, experienced executives, and stellar operators.
Acquisition of the Purchased Companies
The November 16, 2018 agreement between Butte and Mr. Lasser includes the following terms:
In conjunction with a 10:1 consolidation of its share capital (the "Butte Consolidation"), Butte shall raise funds pursuant to a subscription receipt offering (the "Butte Financing"), which on closing will be contributed to a newly formed wholly owned US subsidiary corporation ("USCo"), which shall invest such funds in the Purchased Companies and become the sole manager of the Purchased Companies.
The operating agreements of the Purchased Companies shall be amended and restated in their entirety to provide members of the Purchased Companies (other than USCo) with a redemption-exchange right which allows the members to exchange their LLC units for Butte shares or at the election of the LLC, a cash equivalent payment (the "Redemption-Exchange Right").
Members of the Purchased Companies shall purchase special voting shares in Butte for a nominal price based on an appraisal, each of which shall entitle the holder to exercise the equivalent voting rights which would attach to the number of Butte shares such member would be entitled to acquire upon exercise of the Redemption-Exchange Right. The number of such votes to which the holders of special voting shares are entitled will be reduced from time to time as the Redemption-Exchange Right is exercised.
Butte will reserve an aggregate of 70,000,000 common shares of Butte ("Consideration Shares") for issuance to the members of the Purchased Companies upon the exercise of the Redemption-Exchange Right and in exchange for all of the issued and outstanding securities of the Purchased Companies. The value of the Consideration Shares for the purpose of the Proposed Transaction is $0.75 per share. The Consideration Shares may be required to be escrowed pursuant to applicable stock exchange requirements.
Following the completion of the purchase of the Purchased Companies, (but prior to the issuance of securities pursuant to the Butte Financing, Mr. Lasser will have the right to exercise approximately 70% of the total votes ascribed to all of the Company's outstanding shares. Mr. Lasser is an arm's length party to the Company. A finder's fee of 2.250,000 shares is payable in connection with the acquisition of the Purchased Companies.
The Proposed Transaction is expected to close in late January, 2019 and is subject to the conditions set out in the purchase agreement between the Company and Mr. Lasser, including the negotiation of a definitive agreement and related documentation respecting the Proposed Transaction on or before December 31, 2018 and the completion of the Butte Financing (described below), it is a condition of Closing of the Proposed Transaction that Butte shall have received conditional approval for the delisting of its common shares from NEX and for listing of its common shares on the CSE. It is a further condition of the transaction that Stone's Throw Capital Corp ("STC"), a company controlled by Ron Tremblay, the current CEO, President and a Director of Butte will vote all of its common shares (representing approximately 95.4%% of the Company's issued and outstanding shares) in favour of the Proposed Transaction and the delisting of the Company's shares from NEX, and a support agreement respecting this commitment is expected to be entered into prior to or concurrently with the execution of the definitive agreement. NEX may require majority of the minority approval of the Company's shareholders for the delisting of the Company's shares from NEX.
The Butte Financing
Prior to closing the acquisition of the Purchased Companies, Butte will complete a financing (the "Butte Financing") to raise proceeds to fund the operation of the purchased business and its further growth and development, including the capitalization of USCo and the Purchased Companies. The Butte Financing shall be in an amount and at a price to be determined by the parties, acting reasonably and having regard to market conditions and the anticipated capital requirements of Butte and its business after closing of the acquisition of the Purchased Companies ("Closing"). The Butte Financing will be effected by the issuance of subscription receipts which will convert into Butte common shares at Closing. Finder's fees may be payable in connection with the Butte Financing.
The common shares of Butte issued pursuant to the Butte Financing will be subject to resale hold periods under applicable Canadian and United States securities laws.
New Management
On Closing, the existing board and management of Butte shall resign, and subject to their consent and the acceptability of such persons to the CSE, the board of directors of Butte shall include Jonathan Lasser. Douglas Meyer, Patrick McEntee and other persons to be determined prior to Closing. Mr. Lasser shall also serve as the Company's President and Chief Executive Officer. Stone's Throw Capital Corp ("STC"), a company controlled by Ron Tremblay, the current CEO, President and a Director of Butte, will be entitled to nominate one director to the board.
Mr. Lasser is the lead force behind the business development, strategic partnerships, team building, and organizational structure of Pura Valley, LLC and Pura Extractions LLC. He has carefully crafted the dynamic foundation of the company through a determined persistence that has manifested rapid growth for the business and its partners. He is a seasoned expert in organic land management and the commercial operation of sustainable outdoor and mixed light cultivation and retail dispensaries with a focus on original heritage strains alongside the newest, best-in-class genetics available and hemp cultivation. An experienced cultivator of twelve years, he has nurtured key industry relationships and assembled a powerful team capable of propelling it to be the most innovative, respected and competitive vertically integrated cannabis company in California.
Douglas Meyer is a senior executive of various Consumer Packaged Goods and Over-the-Counter Medicine companies for almost 40 years. Mr. Meyer has worked at some of the leading United States and Global companies and private equity firms and is respected for his positive management style and successful financial and marketing achievements.
Patrick McEntee has been a leading CEO of technological science oriented companies for almost 20 years. Mr. McEntee has managed major divisions of Oracle, IBM and ABC/Disney. Currently, Mr. McEntee is CEO of Xeriplant, Inc. a company that delivers agricultural compliance, security, and resource systems and services that leverage botanical intelligence, mobility, and cloud computing. XERI is involved in the transformation of urban, rural, and remote agriculture.
Name Change
In conjunction with the Butte Consolidation, the Company will change its name from "Butte Energy Inc." to "Pura Cali Group Inc." or such other name as may be selected by the Butte board of directors.
The Convertible Debenture
STC holds a $300,000 convertible debenture which bears interest at 10% per annum and is repayable on January 3, 2018. STC has agreed to extend the maturity date of the debenture until two years following the Closing.
We seek Safe Harbor.