Diamond Estates Wines & Spirits Announces the Execution of a Non-Binding Term Sheet for a Proposed Non-Brokered Financing and the Mailing of its Information Circular

NIAGARA-ON-THE-LAKE, Ontario–(BUSINESS WIRE)–Diamond Estates Wines & Spirits Inc. (TSXV: DWS) (“Diamond Estates” or the “Company”) announces today that it has mailed its management information circular and related voting materials (collectively, the “Meeting Materials”) to Company shareholders (the “Shareholders”) in connection with the annual and special meeting of the Shareholders to be held on September 6, 2023 at 10 a.m. Eastern Daylight Time (the “Meeting”).

The Company is also pleased to announce that it has signed today a non-binding term sheet (the “Non-Binding Term Sheet”) for a proposed financing (the “Financing”) with Lassonde Industries Inc. (“Lassonde Industries”) (or one of its affiliates), an insider of the Company. The proposed Financing would consist of the issuance of 20 million common shares of the Company (“common shares”) to Lassonde Industries, on a private placement basis, at an issuance price of $0.45 per common share, representing an aggregate consideration of $9.0 million. Lassonde Industries would subscribe for the shares by paying approximately $8.25 million in cash, and converting the $750,000 principal amount (plus accrued and unpaid interest thereon) owing under the advance agreement between the Company and Lassonde Industries dated May 30, 2023 (the “Settlement”). The Company intends to use the net proceeds from the Financing to reduce the Company’s debt and accounts payable, and to pay transaction fees.

At the Meeting, Shareholders will be asked to approve annual routine matters, such as the election of directors, the appointment of auditors and stock-based compensation matters. Shareholders will also be asked to consider and vote upon a matter of special business concerning the Financing, the Settlement and related matters.

As the Financing and the Settlement may be considered related-party transactions under the meaning of Policy 5.9 of the TSX Venture Exchange (the “TSXV”) and Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61‑101”), and while the Company is relying on exemptions from the formal valuation, these transactions will need to be approved by a simple majority of the disinterested Shareholders voting at the Meeting, with the votes attached to the common shares beneficially held by Lassonde Industries and its related parties excluded from the vote.

Concurrently or immediately following the Financing and the Settlement, Lassonde Industries and 3346625 Canada Inc., a corporation controlled by Mr. Pierre-Paul Lassonde, Chairman of the Board of Lassonde Industries and a joint actor of Lassonde Industries (“Lassonde Holding” and together with Lassonde Industries, the “Lassonde Group”), may elect (but are not obliged to) to convert up to, $500,000 principal amount of a 10.0% unsecured convertible debenture due November 2023 (together with accrued and unpaid interests thereon, if any, as applicable) (the “Lassonde Industries Debenture”) and $2.85 million principal amount of a 10.0% unsecured convertible debenture due November 2023 (together with accrued and unpaid interests thereon, if any, as applicable) (the “Lassonde Holding Debenture”, and together with the Lassonde Industries Debenture, the “Debentures”), at the same conversion price as the issuance price of the common shares being issued pursuant to the Financing, upon the terms and conditions of the Financing, the whole in accordance with the terms of their respective subscription agreements and debenture certificates dated November 3, 2022.

Recommendation of the Board

The board of directors of the Company (the “Board”), with interested directors abstaining, after careful consideration, has unanimously determined that the Financing is fair and in the best interests of the Company and recommends that Shareholders vote in favour of the resolutions supporting the Financing and the Settlement.

Other Material Terms of the Financing

Closing. If the parties decide to complete the proposed Financing and the Settlement, these transactions are expected to close after the Meeting at a date to be determined by the parties.

Conditions to Closing. The Financing would have conditions to closing, including accuracy of each party to the Financing’s representations and warranties, compliance with covenants, due diligence, shareholders’ and regulatory approval, and other customary closing conditions.

Other Participants. The Company would be able to seek additional participants, other than Lassonde Industries, in the Financing, for additional gross proceeds of up to $2 million (for aggregate gross proceeds of up to $11 million).

Commercial Support Agreement. The parties to the Financing would discuss the opportunity to enter into commercial support agreements pursuant to which Lassonde Industries would provide services to the Company. The service areas under the agreements would be mutually agreed upon and may relate to, without limitation: (i) retail sales/distribution/logistics; (ii) marketing and brand management; and (iii) government affairs.

Voting Support Agreements. Directors, officers and certain shareholders of the Company would enter into voting and support agreements with Lassonde Industries in support of the Financing and the Settlement.

Governance. Upon closing of the Financing and the Settlement, it is anticipated that the Board would consist of seven members, and Lassonde Industries would have the right to nominate four directors to the Board, including the chairman, and at least a proportionate number of member(s) on each of the Board’s committees. A special committee would be formed to oversee the debt reduction program of the Company to be put in place, as well as the executives’ day-to-day management, notably by approving certain management decisions.

Four Month Hold. Common shares issued pursuant to the Financing and the Settlement would be subject to a four-month hold period in accordance with applicable securities regulations.

About Diamond Estates Wines and Spirits Inc.

Diamond Estates Wines and Spirits Inc. is a producer of high-quality wines and ciders as well as a sales agent for over 120 beverage alcohol brands across Canada. The Company operates five production facilities, four in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, Creekside, EastDell, Lakeview Cellars, Mindful, Queenston Mile, Shiny Apple Cider, Fresh, Proud Pour, Red Tractor, Seasons, Serenity, Persona and Backyard Vineyards. The Company’s head office is located at 1067 Niagara Stone Rd., Niagara-On-The-Lake, Ontario, L0S 1J0, Canada.

Through its commercial division, Trajectory Beverage Partners, the Company is the sales agent for many leading international brands in all regions of the country as well as being a distributor in the western provinces. These recognizable brands include Josh wines from California, Fat Bastard, Meffre, Pierre Chavin and Andre Lurton wines from France, Brimincourt Champagne from France, Merlet and Larsen Cognacs from France, Kaiken wines from Argentina, Blue Nun and Erben wines from Germany, Calabria Family Estate Wines and McWilliams Wines from Australia, Saint Clair Family Estate Wines and Yealands Family Wines from New Zealand, Redemption Bourbon and Rye whiskies from the U.S., Gray Whale Gin from California, Storywood and Cofradia Tequilas from Mexico, Magnum Cream Liqueur from Scotland, Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro wines from Portugal, Waterloo Beer & Radlers from Canada, Landshark Lager from the USA, Edinburgh Gin, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies from Scotland, Islay Mist, Grand MacNish and Waterproof whiskies from Scotland, C. Mondavi & Family wines including C.K Mondavi & Charles Krug from Napa, Wize Spirits, Hounds Vodka and Valley of Mother of God Gins from Canada, Bols Vodka from Amsterdam, Koyle Family Wines from Chile and Pearse Lyons whiskies and gins from Ireland.

Early Warning Disclosure

Today, Lassonde Industries, Lassonde Holding and the Company entered into the Non-Binding Term Sheet with respect to the Financing and the Settlement, pursuant to which the Company would issue to Lassonde Industries, on a private placement basis, 20 million common shares at an issuance price of $0.45 per common share, representing an aggregate consideration of $9.0 million.

Lassonde Industries currently directly owns 5,346,506 common shares, $500,000 in principal amount of Debentures, 80,000 options (the “Options”) exercisable for 80,000 common shares and 212,755 deferred share units (the “DSUs”), which may be settled, at the Company’s discretion, for up to 212,755 common shares. Lassonde Holding currently directly owns 617,824 common shares, $2,850,000 in principal amount of Debentures and 250,000 common share purchase warrants (the “Warrants”), convertible into 250,000 common shares. As such, the Lassonde Group currently holds 5,964,330 common shares, representing approximately 21.40% of the current number of issued and outstanding common shares, $3,350,000 in principal amount of Debentures, 80,000 Options, 250,000 Warrants and 212,755 DSUs.

Following the closing of the proposed Financing and Settlement, Lassonde Industries would own 25,346,506 common shares, representing 52.94% of the then issued and outstanding common shares and 54.23% of the then issued and outstanding common shares with Lassonde Holding (based on the number of issued and outstanding common shares after giving effect to the Financing (without other subscribers) and the Settlement, without additional issuance or conversion of securities (including the Debentures)).

If Lassonde Industries were to convert all of its Debentures (exclusive of accrued interest) at the same conversion price as the issuance price of the common shares being issued pursuant to the Financing, upon the terms and conditions of the Financing, it would own approximately 26,457,617 common shares representing 54.00% of the then issued and outstanding common shares (based on the number of issued and outstanding common shares after giving effect to the Financing (without other subscribers) and the Settlement, without additional issuance or conversion of securities).

Furthermore, if Lassonde Holding were to convert all of its Debentures (exclusive of accrued interest) at the same conversion price as the issuance price of the common shares being issued pursuant to the Financing, upon the terms and conditions of the Financing, it would directly own approximately 6,951,157 common shares.

Accordingly, following the Financing, the Settlement and the conversion of all of the Debentures, the Lassonde Group would own approximately 33,408,774 common shares, representing approximately 60.39% of the then issued and outstanding common shares (assuming no additional issuance or conversion of securities).

Lassonde Industries and Lassonde Holding will each file an early warning report (the “Early Warning Reports”) in connection with the Financing, the Settlement and the potential conversion of the Debentures, which will amend information disclosed in earlier reports filed by Lassonde Industries and Lassonde Holding, respectively, on November 10, 2022.

The participation by the Lassonde Group in the Financing, the Settlement and the potential conversion of the Debentures, as a consequence of which the Lassonde Group may acquire a controlling interest in the Company, would be undertaken to assist the Company with the execution of its strategic plan. This would result in certain changes to the governance structure, as described above. The Lassonde Group may, from time to time, acquire additional securities of the Company for investment purposes and may, from time to time, increase or decrease its beneficial ownership or control of the Company depending on market or other conditions.

This news release is being issued as required by National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues and National Instrument 62-104 – Take-Over Bids and Issuer Bids and relates to: (a) Lassonde Industries, whose head office is located at 755 rue Principale, Rougemont, Québec, J0L 1M0; and (b) Lassonde Holding, whose head office is located at 54 rang de la Montagne, Rougemont, Québec, J0L 1M0. Copies of the Early Warning Reports with additional information in respect of the foregoing matters will be available on www.sedarplus.ca or by contacting:

For Lassonde Industries:

Éric Gemme, Chief Financial Officer

Lassonde Industries Inc.

755 rue Principale, Rougemont, Québec, J0L 1M0

450-469-4926, ext 10456

For Lassonde Holding:

Pierre Boulais, Financial Director

3346625 Canada Inc.

54 rang de la Montagne, Rougemont, Québec, J0L 1M0

450-469-2912

Forward Looking Statements

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Diamond Estates Wines and Spirits Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the economy generally; consumer interest in the services and products of the Company; financing; competition; and anticipated and unanticipated costs. While the Company acknowledges that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the views of the Company as of any date subsequent to the date of this press release. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

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

Contacts

For more information about Diamond Estates, please contact:


Andrew Howard

President & CEO

Diamond Estates Wines & Spirits Inc.

[email protected]

Ryan Conte, CPA, CA, CBV

Chief Financial Officer

Diamond Estates Wines & Spirits Inc.

[email protected]