TORONTO, ONTARIO -- (Marketwired) -- 12/24/15 -- Lloyd I. Miller, III, the managing member of the general partner to MILFAM II L.P. ("M2"), acquired today, by way of private placement, a Senior Secured Convertible Promissory Note (the "Promissory Note") of Stonegate Agricom Ltd. ("Stonegate") (TSX: ST) in the principal amount of US$1,000,000, which is due and payable on December 22, 2017, or such earlier date as the principal amount may become due and payable, in accordance with the terms thereof (the "Maturity Date"). Subject to certain restrictions in the Promissory Note including obtaining shareholder approval for the conversion of over a certain number of common shares of Stonegate ("Common Shares"), the principal amount of the Promissory Note or any part thereof is convertible into Common Shares at the option of the holder, at any time and from time to time, up to and including the Maturity Date at a conversion price of CDN$0.015 (the "Conversion Price") per Common Share (converted to US Dollars using the noon exchange rate for Canadian Dollars into US Dollars posted by the Bank of Canada on the business day immediately prior to the date of conversion), as adjusted from time to time in accordance with the terms of the Promissory Note. In connection with the issuance of the Promissory Note, the Chairman and Chief Executive Officer of Stonegate has entered into a voting letter pursuant to which he agrees to vote or cause to be voted all of his shares in support of such shareholder approval.
Under the terms of the Promissory Note, M2 is not entitled to receive, upon conversion, a number of Common Shares that would result in M2 and its affiliates collectively owning or controlling, beneficially or as nominee, directly or indirectly: (a) more than 9.9% of the issued and outstanding Common Shares that would result in M2 and/or its affiliates (or any of them) being considered as an "Insider" under the rules of the Toronto Stock Exchange ("TSX") until M2's Personal Information Form is cleared by the TSX; (b) more than 19.9% of the issued and outstanding Common Shares that would result in M2 and/or its affiliates (or any of them) being considered as a "control person" under the rules of the TSX until shareholder approval, pursuant to the rules of and in the form required by the TSX, is obtained; (c) if the TSX applies its aggregation rules under section 607(f)(v) of the TSX Company Manual to the issuance of the Promissory Note and any private placement(s) completed within three (3) months following the issuance of the Promissory Note, more than 50,988,405 Common Shares (as adjusted for any share splits or consolidations) until shareholder approval, pursuant to the rules of and in the form required by the TSX, is obtained; and (d) notwithstanding anything to the contrary in the Promissory Note, more than 25% of the Common Shares until shareholder approval, pursuant to the rules of and in the form required by the TSX, is obtained.
Assuming conversion of the entire principal amount of the Promissory Note on the date hereof at the Conversion Price (using the Bank of Canada noon exchange rate of 1.386 on December 23, 2015), the Promissory Note is convertible into 92,400,000 Common Shares, representing 25.72% of the then outstanding Common Shares (as reported by Stonegate) on a partially diluted basis taking into account only the outstanding Common Shares, the Common Shares over which Mr. Miller exercises control or direction and the Common Shares issuable on the conversion of the principal amount of the Promissory Note and no others.
Before the acquisition of the Promissory Note, Mr. Miller had control or direction over an aggregate of 18,789,834 Common Shares of Stonegate, representing approximately 5.53% of the issued and outstanding Common Shares (as reported by Stonegate) through (i) Lloyd I. Miller Trust A-4, investment advisor, which owns 2,711,167 Common Shares, (ii) Lloyd I. Miller, III Irrevocable Trust D, investment advisor, which owns 21,000 Common Shares, and (iii) M2, manager, which owns 16,057,667 Common Shares. M2 also owns warrants of Stonegate exercisable for 4,000,000 Common Shares. After giving effect to the acquisition of the Promissory Note, assuming conversion of the Promissory Note on the basis set out above and assuming exercise of the warrants, Mr. Miller would exercise control or direction over approximately 115,189,834 Common Shares representing 26.40% of the issued and outstanding Common Shares (as reported by Stonegate) on a partially diluted basis taking into account only the outstanding Common Shares, the Common Shares over which Mr. Miller currently exercises control and direction, the Common Shares issuable on the conversion of the Promissory Note, the Common Shares issuable on exercise of the warrants and no others.
The Promissory Note was acquired for investment purposes. Depending on the evolution of Stonegate's business, financial condition, the market, if any, for Stonegate's securities, general economic conditions and other factors, Mr. Miller and his joint actors may acquire additional securities of Stonegate, or sell some or all of the securities they hold, in the open market, by private agreement or otherwise, subject to their availability at attractive prices, market conditions and other relevant factors.
Mr. Miller will be filing a report (as contemplated by National Instrument 62-103 - The Early Warning System and Related Takeover Bid and Insider Reporting Issues) in connection with the acquisition of the Promissory Note. A copy of the early warning report in respect of the transactions described above is available on SEDAR at www.sedar.com under Stonegate's profile.
Lloyd I. Miller, III
or Eric W. Fangmann
3300 South Dixie Highway, Suite 1-365
West Palm Beach, Florida, USA 33405