Aumento Capital VII and Emerge Commerce Enter into a Letter of Intent for Proposed Reverse Takeover Transaction
Toronto, Ontario--(Newsfile Corp. - May 19, 2020) - Aumento Capital VII Corporation (TSXV: AUOC) ("Aumento") and Emerge Commerce Inc. ("Emerge") are pleased to announce that they have entered into a letter of intent (the "LOI") to complete a business combination transaction (the "RTO Transaction") that will result in the reverse take-over of Aumento by Emerge. The entity resulting from the RTO Transaction (the "Resulting Issuer") will continue to carry on the business of Emerge. The LOI was negotiated at arm's length and is dated May 14, 2020.
Emerge is a private company incorporated under the Business Corporations Act (British Columbia) headquartered in Toronto, Ontario, and has operations in the United States through its subsidiary, The Underpar Group. Emerge has developed an e-commerce network by acquiring and operating niche market leaders in the digital deals space across North America with a variety of offers on groceries, essentials, golf, online subscriptions, retailer coupons and experiences, among other categories. Emerge brands include UnderPar, WagJag, JustGolfStuff, Buytopia and Shop.ca. Emerge leverages shared technology, data, and resources of its portfolio companies through its e-commerce software solutions for increased growth and profitability of its acquired businesses. The largest shareholder of Emerge is Ghassan Halazon, resident of Toronto.
Aumento is a capital pool company as defined under TSX Venture Exchange ("TSXV" or the "Exchange") Policy 2.4 - Capital Pool Companies. Aumento intends that the RTO Transaction will constitute its Qualifying Transaction, as such term is defined in the policies of the Exchange. Following completion of the RTO Transaction. Aumento was incorporated under the Business Corporations Act of Ontario on December 13, 2017. The common shares of Aumento (the "Aumento Shares") are listed for trading on the TSXV under the stock symbol "AUOC.P". Aumento has not commenced commercial operations other than to enter into discussions for the purpose of identifying potential acquisitions or interests.
Prior to entering into the LOI, David Danziger, CEO and CFO and a director of Aumento, resigned from all of these positions and was replaced on the board by James Walker and by Roger Daher as CEO and CFO. Mr. Danziger also divested himself of all equity interests in Aumento. This was done in order to facilitate the signing of the LOI as Mr. Danziger is a partner at MNP and MNP is the auditor for Emerge.
Terms of the RTO Transaction
The RTO Transaction is expected to be completed by way of a share exchange, amalgamation or other form of business combination determined with input from the legal and tax advisors to each of Aumento and Emerge, which will result in Emerge becoming a wholly-owned subsidiary of Aumento.
Upon the satisfaction or waiver of the conditions set out in the definitive transaction agreement to be entered into by Aumento and Emerge (the "Definitive Agreement"), the following, among other things, will be completed in connection with the RTO Transaction:
a) Aumento will consolidate its outstanding common shares on the basis of three quarters (0.75) of a post-consolidation common share for every one (1) common share of Aumento (the "Consolidation");
b) the holders of common shares of Emerge ("Emerge Shares") will receive common shares of the Resulting Issuer in exchange for their Emerge Shares on the basis of an exchange ratio of one (1) Aumento post-Consolidation common share for every one (1) Emerge Share issued and outstanding as at the Closing (the "Exchange Ratio");
c) all outstanding warrants and stock options of Emerge either automatically adjust in accordance with the terms thereof such that following completion of the RTO Transaction, the holders thereof shall acquire the post-Consolidation common shares of Aumento in lieu of the common shares of Emerge adjusted to reflect the Exchange Ratio, with the exercise prices adjusted by the inverse of the Exchange Ratio, or will be replaced with equivalent convertible or exchangeable securities of Aumento entitling the holders thereof to acquire post-Consolidation common shares of Aumento in lieu of common shares of Emerge adjusted to reflect the Exchange Ratio, and otherwise bearing the same terms of the securities they replace;
d) All outstanding convertible debentures of Emerge will either automatically adjust in accordance with the terms thereof or be exchanged for convertible debentures of Aumento on similar terms and adjusted in accordance with the Exchange Ratio and Consolidation; and
e) The management and board of directors of the Resulting Issuer will be replaced with Ghassan Halazon as a director, President and CEO, Fazal Khaishgi as COO and Jonathan Leong as CFO, together with four other nominees of Emerge to the board of directors.
The RTO Transaction constitutes an Arm's Length Transaction under the policies of the TSXV.
A more comprehensive news release will be issued by Aumento disclosing details of the RTO Transaction, including financial information respecting Emerge and details of insiders and proposed directors and officers of the Resulting Issuer, once an agreement has been finalized and certain conditions have been met, including:
a) approval of the RTO Transaction by Aumento's Board of Directors;
b) satisfactory completion of due diligence; and
c) execution of the Definitive agreement.
Following the announcement of the LOI, Emerge intends to take "commercially reasonable efforts" to complete a private placement (the "Private Placement") of subscription receipts at a price of $0.75 per share for aggregate gross proceeds of approximately $5,000,000 (although the amount raised in such private placement may increase) through Canaccord Genuity Corp. and Gravitas Securities Inc., as joint book runners (the "Agents"). It is intended that the Agents will be paid a cash commission of 8.0% of the gross proceeds raised in respect of the Private Placement, and will also be granted broker warrants equal to 8.0% of the number of subscription receipts issued. The subscription receipts are proposed to be ultimately exchanged, upon satisfaction of certain conditions, for securities of the Resulting Issuer in connection with the RTO Transaction.
An application will be made to TSXV to list the Resulting Issuer Shares on TSXV subject to all applicable shareholder and regulatory approvals.
No finder's fee shall be payable by either party with respect to the Transaction.
Conditions of the RTO Transaction
Completion of the RTO Transaction is subject to the satisfaction of customary closing conditions, including: (i) the satisfactory completion of due diligence by each of Aumento and Emerge; (ii) receipt of all required approvals and consents relating to the RTO Transaction, including without limitation all approvals of the shareholders of Aumento and Emerge, as required by the TSXV and under applicable corporate or securities laws; (iii) completion of the Private Placement; and (iv) the TSXV's approval for listing the Resulting Issuer Shares.
Secured Bridge Loan
On the date of the Definitive Agreement and subject to completion of the Private Placement and the prior approval of the TSXV, Aumento will advance an aggregate of $250,000 to Emerge by way of secured loan (the "Aumento Loan"). The Aumento Loan will be interest free until the earlier of closing of the RTO Transaction or the date the Definitive Agreement is terminated. Emerge will apply the proceeds of the Aumento Loan to fund the costs of the Transaction, and will be secured against the assets of Emerge or such other security as necessary to obtain such approval, but will rank behind all existing registered security of Emerge. On closing of the RTO Transaction, the Aumento Loan will be consolidated as a debt assumed by the Resulting Issuer.
Additional Information Regarding the RTO Transaction
Further details of the RTO Transaction (including business and financial information in respect of Emerge) and the Private Placement will be included in a comprehensive press release and other disclosure documents to be filed by Aumento in connection with the RTO Transaction.
To Aumento's knowledge, at the time of entering into the LOI none of its directors, officers or significant shareholders of Aumento had any direct or indirect interest in, nor any other relationships with, Emerge or its assets.
For further information please contact:
Aumento Capital VII Corporation
Roger Daher, President
Emerge Commerce Inc.
Ghassan Halazon, CEO
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange 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.
Investors are cautioned that, except as disclosed in the management information circular or 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.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
The statements made in this Press Release may contain forward-looking statements that may involve a number of risks and uncertainties. Actual events or results could differ materially from the companies' expectations and projections.
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