Rainy Hollow Ventures Inc. Enters into Letter of Intent for Qualifying Transaction with Reciprocity Corp.

February 27, 2020 6:58 PM EST | Source: Freshlocal Solutions Inc.

Vancouver, British Columbia--(Newsfile Corp. - February 27, 2020) - Rainy Hollow Ventures Inc. (TSXV: RHV.P) ("Rainy Hollow") and Reciprocity Corp. ("Reciprocity") are pleased to announce that they have entered into a letter of intent (the "LOI") dated February 26, 2020 (the "Effective Date"). Pursuant to the LOI, Rainy Hollow will acquire all of the issued and outstanding securities of Reciprocity, with such acquisition constituting a reverse take-over of Rainy Hollow (the "Transaction"). Rainy Hollow, a Capital Pool Company, intends that the Transaction will constitute an arm's length Qualifying Transaction (as such terms are defined in Policy 2.4 of the Corporate Finance Manual of the TSX Venture Exchange (the "TSXV")).

In connection with the announcement of the LOI, trading in the common shares of Rainy Hollow have been halted. Trading will remain halted until completion of the Transaction.

Terms of the Transaction

Pursuant to the terms and conditions of the LOI, Rainy Hollow and Reciprocity will negotiate and enter into a definitive agreement (the "Definitive Agreement") incorporating the principal terms of the Transaction as described in this press release. There is no assurance that a Definitive Agreement will be successfully negotiated or entered into.

Subject to the terms of the Definitive Agreement, Rainy Hollow and Reciprocity intend to complete the Transaction by way of a three-cornered amalgamation or other similar transaction, whereby Rainy Hollow will acquire all of the securities of Reciprocity to form the resulting issuer (the "Resulting Issuer"). Prior to the closing of the Transaction, Rainy Hollow will complete a share consolidation on the basis of 1 new Rainy Hollow share for every 4 old Rainy Hollow common shares outstanding (the "Consolidation"). After the Consolidation but prior to completion of the Transaction, Rainy Hollow will have 1,073,533 common shares issued and outstanding. Additionally, Rainy Hollow has securities exercisable into an aggregate of 63,968 Rainy Hollow shares on a post-Consolidation basis (50,000 options exercisable at $0.80 per share and 13,968 broker options exercisable at $0.80 per share).

Prior to the completion of the Concurrent Financing (as hereinafter defined), Reciprocity has the following securities issued and outstanding: (i) 28,787,547 common shares issued and outstanding (the "Reciprocity Shares"); (ii) principal amount US$1,728,697 convertible debentures (the "Convertible Debentures"), which are convertible at CDN$1.00 per share using a CDN$1.33=US$1 exchange rate, subject to a 20% discount if the issue price under the Concurrent Financing is CDN$1.00 or less per Reciprocity Share). The Convertible Debentures also include a penalty provision which will provide for an additional 10% of Reciprocity Shares to be issued if the Transaction is not completed within 6 months of the applicable closing date - to date, there have been three closings of the Convertible Debentures and the first penalty date will occur on April 30, 2020; (ii) 1,500,000 common shares issuable to the CEO of Reciprocity (500,000 on completion of the Transaction and 1,000,000 to vest over three years following completion of the Transaction); (iv) 3,150,000 options exercisable at $0.35 per Reciprocity Share; (v) 68,386 finder warrants exercisable at $0.35 per Reciprocity Share; and (vi) 104,445 finder warrants exercisable at $1.00 per Reciprocity Share. Reciprocity may complete one or more additional closings of the Convertible Debentures prior to the completion of the Concurrent Financing. Reciprocity has agreed to issue 50,000 Reciprocity Shares as a finders fee in connection with the closing of the Transaction.

Upon completion of the Transaction and assuming completion of the maximum Concurrent Financing, the common shares of the Resulting Issuer on a fully-diluted basis shall be held as follows: Reciprocity securityholders - 76.7%; Concurrent Financing subscribers - 21.0%; and, existing Rainy Hollow shareholders - 2.3%.

Concurrent Financing

Reciprocity will be completing a brokered financing of Reciprocity Shares or subscription receipts (the "Concurrent Financing") to raise a minimum CDN$5,000,000 and a maximum of CDN$10,000,000 at a price of between CDN$1.00 and CDN$1.50 per Reciprocity Share to be completed prior to closing of the Transaction.

About Reciprocity

Founded in 2018 by Chad Larsson, Reciprocity has become one of the world's leading esports organizations committed to creating cutting-edge content, investing in player development and building a generation of viewers and enthusiasts globally. Reciprocity's episodic content has garnered recognition across the esports community for its unique approach, solidifying the company as a premium content producer in the industry. As a result, Team Rec brings together industry-leading and experienced team ownership and drives audience engagement among the fastest-growing, most loyal and passionate fanbase in all of esports.

Reciprocity is headquartered in Toronto, Canada. For more information, please visit http://reciprocity.gg/.

Twitter:@TeamReciprocity
Instagram: @TeamReciprocity
YouTube: TeamReciprocity

Management of the Resulting Issuer

As a result of the Transaction, the Resulting Issuer will indirectly carry on the business of the Reciprocity and will change its name to such name as agreed to by the parties and as may be accepted by the TSXV and any other relevant regulatory authorities (the "Name Change"). In addition to the Name Change, Rainy Hollow will also seek the requisite corporate approvals to complete the Consolidation, to set the number of directors to 5 (all Reciprocity nominees) and to elect same.

It is proposed that the following officers be appointed by the Resulting Issuer: David Fawcett as Chief Executive Officer ("CEO"), Chad Larsson as Founder and President and Kaye Lum as Chief Financial Officer ("CFO"). The relevant experience of each of the proposed officers is set forth below:

CHAD LARSSON

Mr. Larsson has an outstanding track record in eSports creating an industry-leading online tournament platform and community. Mr. Larsson established the first eSports arena in Las Vegas, NV and played a pivotal role in taking Pro Gaming League [now Torque Esports Corp.,] public, listed on the TSXV; as the first eSports company in North America to be publicly traded. Mr. Larsson is a persuasive communicator with well-established publisher and pro player relationships, stemming from more than 10 years in the North America eSports business landscape. He has a proven ability to formulate and implement creative digital marketing and content strategy in line with business and client objectives, and possesses strong business development skills, with a flair for identifying new product growth and revenue opportunities.

DAVID FAWCETT

Mr. Fawcett is the founder of Epic Capital Management Inc. and has 25 years of experience in Canadian capital markets. He founded one of the first hedge funds in Canada and grew assets from $1M to $400M which included managing several different strategies. David co-founded the first Canadian Health-Technology venture capital fund in Canada investing in 27 different technology companies. He currently sits on the board of Think Research.

KAYE LUM

Kaye Lum is a seasoned CFO in the entertainment industry with comprehensive television, film and advertising agency experience. Her financial experience includes advertising agencies in the Omnicom media group of companies, Alliance Atlantis Communications Inc. and Universal Music. She holds a Bachelor of Commerce from the University of Toronto, is a Chartered Professional Accountant (CPA) and possesses a Masters in Tax Law (LLM) from Osgoode Hall Law School.

Conditions Precedent

The LOI contemplates that the following condition precedents be met prior to the closing of the Transaction: (i) the entering into and execution of the Definitive Agreement; (ii) receipt of all regulatory approvals with respect to the Transaction and listing of the Resulting Issuer shares on the TSXV; (iii) all third party consents and corporate approvals necessary to complete the Transaction are obtained, including approval of the Name Change and the Consolidation, as applicable; (iv) no adverse material change in the business, affairs, financial condition or operations of Reciprocity or Rainy Hollow has occurred between the Effective Date and the closing date; and (v) the Concurrent Financing shall have been completed. As well, sponsorship of a Qualifying Transaction of a capital pool company is required by the TSXV unless exempt in accordance with the policies of the TSXV. Rainy Hollow intends to make an application for exemption from the sponsorship requirements of the TSXV in connection with the Transaction, however, there is no assurance that the TSXV will exempt Rainy Hollow from all or any part of the applicable sponsorship requirements.

About Rainy Hollow

Rainy Hollow is a CPC governed by the policies of the TSXV. Rainy Hollow's principal business is the identification and evaluation of assets or businesses with a view to complete a Qualifying Transaction.

Investors are cautioned that trading in the securities of a CPC should be considered highly speculative.

Further Information

Rainy Hollow will provide further details in respect of the Transaction in due course by way of press release. However, Rainy Hollow will make available to the TSXV, all information including financial information as required by the TSXV and will provide, in a press release to be disseminated at a later date, required disclosure.

All information contained in this press release with respect to Rainy Hollow and Reciprocity was supplied by the parties respectively, for inclusion herein, without independent review by the other party, and each party and its directors and officers have relied on the other party for any information concerning the other party.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to TSXV requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

The TSXV has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release

For further information:

Rainy Hollow Ventures Inc.
Michael Atkinson - Chief Executive Officer, Chief Financial Officer, Corporate Secretary, and Director
Phone: (604) 689-1428

Reciprocity Corp.
David Fawcett - Chief Executive Officer
Phone: (416) 558-7307

Notice on Forward Looking Information

Neither TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

Information set forth in this news release contains forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this press release. Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance are not statements of historical fact and may be forward-looking statements. These statements reflect management's current estimates, beliefs, intentions and expectations; they are not guarantees of future performance, the entering into of the Definitive Agreement or the closing of the Transaction. Rainy Hollow cautions that all forward-looking statements are inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond the control of Rainy Hollow and Reciprocity. Such factors include, among other things: the receipt of all regulatory approvals with respect to the Transaction and listing of the Resulting Issuer Shares on the TSXV; obtaining all third party consents and corporate approvals necessary to complete the Transaction, including approval of the Name Change and the Consolidation, as applicable; the receipt of an exemption from the TSXV sponsorship requirements; that no adverse material change in the business, affairs, financial condition or operations of Reciprocity or Rainy Hollow have occurred between the Effective Date and the closing date; that the Concurrent Financing is completed; as well as other risks and uncertainties, including those described in Rainy Hollow's final prospectus dated April 30, 2018 filed with the British Columbia Securities Commission, the Alberta Securities Commission and the Ontario Securities Commission and available on www.sedar.com.

Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. Except as required under applicable securities legislation, Rainy Hollow and Reciprocity each undertake no obligation to publicly update or revise forward-looking information.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/52927

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