Viston Adds Conditions and Extends All-Cash Offer to Acquire Petroteq Energy Inc.

Source: www.gulfoilandgas.com 6/17/2022, Location: North America

- Offeror will mail and file a notice of variation and extension varying and adding certain conditions to the Offer
- Time for acceptance of the Offer has been extended to July 22, 2022

Viston United Swiss AG (“Viston”), together with its indirect, wholly-owned subsidiary, 2869889 Ontario Inc. (the “Offeror”) today announced that it is varying and adding certain conditions to, and extending the time for acceptance of, the Offeror’s all-cash offer (the “Offer”) to acquire all of the issued and outstanding common shares (“Common Shares”) of Petroteq Energy Inc. (“Petroteq”) (TSX-V: PQE; OTC: PQEFF; FSE: PQCF) to 5:00 p.m. (Toronto time) on July 22, 2022 (the “Expiry Time”). The Offeror will mail a notice of variation and extension dated June 17, 2022 (the “Notice of Variation and Extension”) to the registered shareholders of Petroteq and will file the Notice of Variation and Extension on Petroteq’s SEDAR profile at www.sedar.com and with the U.S. Securities and Exchange Commission at www.sec.gov.

Background

The Notice of Variation and Extension is being prepared to address the following developments:
On June 13, 2022, the United States Securities and Exchange Commission (the “SEC”) issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order and Notice of Hearing (the “SEC Order”) against Petroteq and Aleksandr Blyumkin, as respondents. The SEC Order discloses, among other things, that in anticipation of the institution of these proceedings, the respondents submitted offers of settlement which the SEC has determined to accept. The SEC imposes significant sanctions agreed to in the respondents’ offers, including that Petroteq shall pay civil penalties of US$1 million to the SEC in four equal instalments over a 12-month period and that Petroteq shall comply with significant compliance undertakings. A copy of the SEC Order is available at www.sec.gov.

On June 14, 2022, Petroteq announced that it and its former officer and director, Alex Blyumkin, had reached a settlement with the SEC to fully resolve an investigation into certain violations by Petroteq and Mr. Blyumkin. Among other things, Petroteq disclosed that pursuant to the terms of the settlement, Petroteq has undertaken to: (i) within 90 days, remediate and correct (A) any material weaknesses in its disclosure controls and procedures and its internal control over financial reporting, including those identified in its Form 10-K filed with the SEC for Petroteq’s fiscal year 2021 and those identified in writing by its independent auditor, and (B) any material misstatements and omissions in Petroteq’s prior Forms 10-K and 10-Q filings with the SEC, including those outlined in the SEC Order; and (ii) retain an independent consultant (“Independent Consultant”) to conduct a comprehensive review of the items identified in (i) above. In addition, within 120 days, the Independent Consultant shall deliver a written report to Petroteq and the SEC.

Given the seriousness of the SEC Order and the limited time to assess the implications of it before the June 17, 2022 expiry date, in connection with the extension of the Expiry Time the Offeror has determined to vary the Offer to add the SEC Order Conditions, as well as the Petroteq Shareholder Meeting Condition and the CEO Search Condition (each as defined and described below).

On June 2, 2022, Petroteq announced a private placement for gross proceeds of up to US$2.5 million (the “Private Placement”). The closing of the Private Placement will exceed the threshold in the No Change in Capitalization Condition (as such term is defined in the First Notice of Variation and Extension dated February 1, 2022, a copy of which is available under Petroteq’s SEDAR profile at www.sedar.com) of 795,000,000 issued and outstanding Common Shares on a fully-diluted basis. On the basis that Petroteq is in need of cash for operational matters and hence the Private Placement is necessary, and that going forward if Petroteq requires additional financing it intends to contact Viston first and give Viston the opportunity to provide any such financing, the Offeror is prepared to vary the No Change in Capitalization Condition to accommodate the Private Placement.

On May 24, 2022, the United States Department of the Treasury notified the Offeror that the voluntary notice filed by the Offeror and Petroteq (the “Notice”) seeking clearance (the “Clearance”) has been accepted by the Committee on Foreign Investment in the United States (“CFIUS”) for review, that the 45 day notice review period commenced on May 24, 2022 and that the review will conclude no later than July 7, 2022.

On May 13, 2022, a notice of meeting was filed on SEDAR by Petroteq’s transfer agent, Computershare, for an annual general and special meeting of shareholders to be held on July 21, 2022 (the “Petroteq Shareholder Meeting”). While Petroteq had confirmed to Viston that it intended to consult with Viston on the business of the Petroteq Shareholder Meeting, including the election of directors and any special business to ensure that such matters will not prejudice the Offer, including completion of the Offer and related transition planning, it has not done so and has instead filed materials on SEDAR on June 15, 2022. The Offeror had already intended to extend the Offer so that the expiry time would occur following the Petroteq Shareholder Meeting and now the Offeror has determined to vary the Offer to add the Petroteq Shareholder Meeting Condition (as defined and described below).

Notice of Variation and Extension

The Offeror will mail and file the Notice of Variation and Extension to the registered shareholders of Petroteq.

(a) Variation of No Change in Capitalization Condition
The Offeror is increasing the threshold under the No Change in Capitalization Condition to 811,000,000 issued and outstanding Common Shares on a fully-diluted basis to accommodate the Private Placement.

(b) New Conditions as a Result of Recent Developments
In addition, the Offeror has been concerned about the Petroteq Shareholder Meeting and the recruitment and hiring of a Chief Executive Officer (the “CEO Search”), as well as the Private Placement. Notwithstanding Petroteq’s confirmation of its intention to consult with Viston on the business of the Petroteq Shareholder Meeting, Petroteq has not done so and has instead filed materials on SEDAR on June 15, 2022. Further, Petroteq did not disclose anything to Viston regarding the SEC Order in the course of its discussions with Viston referenced in their press releases dated June 10, 2022. While Viston publicly expressed its intention to vary the No Change in Capitalization Condition and extend the time for acceptance of the Offer to 5:00 p.m. (Toronto time) on July 22, 2022, the Offeror did so without the knowledge of the SEC Order. Given the seriousness of the SEC Order and the limited time to assess the implications of it before the June 17, 2022 expiry date, as well as the uncertainty regarding Petroteq’s intentions relating to the Petroteq Shareholder Meeting and CEO Search, the Offeror has determined to add the following new conditions to Section 4 of the Original Offer to Purchase entitled “Conditions of the Offer”:

“(m) (i) no matters shall have been approved or adopted by Shareholders at Petroteq’s annual and special meeting of shareholders to be held on July 21, 2022 or at any adjournments or postponements thereof (the “Meeting”) other than those included in the Notice of Annual and Special Meeting of Shareholders dated June 3, 2022 and filed on SEDAR on June 15, 2022; (ii) Petroteq shall not issue any securities under the 2022 Equity Incentive Plan (as such term is defined in Petroteq’s management information circular dated June 3, 2022 and filed on SEDAR on June 15, 2022 in connection with the Meeting (the “Circular”)), if approved by Shareholders at the Meeting, without the prior written consent of the Offeror; and (iii) Petroteq shall not implement the Consolidation (as such term is defined in the Circular), if approved by Shareholders at the Meeting, without the prior written consent of the Offeror;

(n) (i) Petroteq shall have consulted with and involved the Offeror in the recruitment and hiring of a new Chief Executive Officer (“CEO”) to the Offeror’s reasonable satisfaction, (ii) prior to hiring a new CEO, if any, Petroteq shall have obtained the Offeror’s prior written consent to ensure that the selected CEO, if any, is satisfactory to the Offeror, and (iii) Petroteq shall not have entered into any employment or similar agreement with any employee, including the new CEO, if any, containing any change of control or severance provisions, without the prior written consent of the Offeror;

(o) the Offeror shall have been provided with, or been given access to, in a timely manner, all non-public information and data underlying and relating to the Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order and Notice of Hearing issued by the SEC on June 13, 2022 (the “SEC Order”) and any interactions with any other securities regulatory authority (such as the Ontario Securities Commission) or stock exchange (such as the TSX-V), including without limitation unrestricted access to Petroteq’s legal counsel involved in these matters, to the Regulatory Oversight and Advisory Committee and to the SEC and such other securities regulatory authorities and stock exchanges, and the Offeror shall be reasonably satisfied upon completion of its review of such information and data, that such information and data does not reveal a change, event, occurrence or state of facts that is or would reasonably be expected to (i) expose Petroteq, its subsidiaries or any of their respective current or former directors, officers, employees, consultants, agents or other representatives (in each case, acting in such capacity) to material liability for violations of any securities Laws applicable to Petroteq, its subsidiaries or any of their respective current or former directors, officers, employees, consultants, agents or other representatives (in each case, acting in such capacity), (ii) impose a material burden on Petroteq’s ability to engage in its business as currently conducted or to raise future capital, or (iii) impair, in any material manner, the ability of Viston and the Offeror to implement and execute their plans for Petroteq’s business following the acquisition of Common Shares pursuant to the Offer; and

(p) other than as disclosed in the SEC Order, none of Petroteq, its subsidiaries or any of their respective current or former directors, officers, employees, consultants, agents or other representatives (in each case, acting in such capacity) shall have violated, or be the subject of any allegation or investigation with respect to the violation of any securities Laws applicable to Petroteq, its subsidiaries or any of their respective current or directors, officers, employees, consultants, agents or other representatives (in each case, acting in such capacity).”

These new conditions are referred to as the “Petroteq Shareholder Meeting Condition” for subsection (m), the “CEO Search Condition” for subsection (n) and for subsections (o) and (p) collectively, the “SEC Order Conditions”, respectively.

For clarity, the Offeror’s current position is that it does not consent to the adoption of the 2022 Equity Incentive Plan or Consolidation (each as defined in Petroteq’s management information circular dated June 3, 2022 and filed on SEDAR on June 15, 2022 in connection with the Petroteq Shareholder Meeting). If the Offeror changes its position on these matters and provides written consent to Petroteq on either or both of these matters as provided in the Petroteq Shareholder Meeting Condition, the Offeror will issue a press release confirming such consent.

For further clarity, in extending the Offer as discussed below, the Offeror is not waiving any of its rights under Section 4 of the Offer to Purchase, “Conditions of the Offer”, particularly the conditions in subsections (b), (e) and (l).

(c) Extension of Time for Acceptance
The Offeror is extending the time for acceptance of the Offer to 5:00 p.m. (Toronto time) on July 22, 2022 in order to allow additional time for the Clearance to be granted, thereby satisfying one of the conditions to the Offer, and so that the expiry time will occur following the Petroteq Shareholder Meeting. The Offer is also being extended to allow the Offeror time to assess the implications of the SEC Order.

If any of the conditions to the Offer have not been satisfied by the Expiry Time (including in particular, if the CFIUS Clearance has not been obtained by the Expiry Time or if the No Change in Capitalization Condition, the Petroteq Shareholder Meeting Condition, the CEO Search Condition or the SEC Order Conditions have not been satisfied by the Expiry Time), the Offeror may extend the Offer through one or more extensions until the date on which the conditions to the Offer have been satisfied or the Offeror may withdraw the Offer.

Except for the variation and extension of the Offer as described above, all other terms and conditions of the Offer continue to remain in effect and unchanged.

Common Shares Tendered to Offer
Kingsdale Advisors, the Depositary and Information Agent for the Offer, has advised the Offeror that, as of 5:00 p.m. (Toronto time) on June 15, 2022, approximately 540,103,247 Common Shares had been validly tendered to the Offer and had not been validly withdrawn. Based on Viston’s understanding of the share capitalization of Petroteq1, the tendered Common Shares represent approximately 70.298% of the currently issued and outstanding Common Shares, and approximately 68.465% of the Common Shares, measured on a fully diluted basis.2

Holders of Common Shares who have previously validly tendered and not withdrawn their shares do not need to re-tender their Common Shares or take any other action in response to the extension of the Offer.

Summary of Offer Details
Viston reminds Shareholders of the following key terms and conditions of the Offer:
- Shareholders will receive C$0.74 in cash for each Common Share. The Offer represents a significant premium of approximately 279% based on the closing price of C$0.195 per Common Share on the TSX-V on August 6, 2021, being the last trading day prior to the issuance of a cease trade order by the Ontario Securities Commission at which time the TSX-V halted trading in the Common Shares. The Offer also represents a premium of approximately 1,032% to the volume weighted average trading price of C$0.065 per Common Share on the TSX-V for the 52-weeks preceding the German voluntary public purchase offer in April 2021.
- The Offer is expressed in Canadian dollars but Shareholders may elect to receive their consideration in the U.S. dollar equivalent amount.
- The Offer is open for acceptance until 5:00 p.m. (Toronto time) on July 22, 2022, unless the Offer is extended, accelerated or withdrawn by the Offeror in accordance with its terms.
- Registered Shareholders may tender by sending their completed Letter of Transmittal, share certificates or DRS statements and any other required documents to Kingsdale, as Depositary and Information Agent. Registered Shareholders are encouraged to contact Kingsdale promptly to receive guidance on the requirements and assistance with tendering.
- Beneficial Shareholders should provide tender instructions and currency elections to their financial intermediary. Beneficial Shareholders may also contact Kingsdale for assistance.
- The Offer is subject to specified conditions being satisfied or waived by the Offeror. These conditions include, without limitation: the Canadian statutory minimum tender condition of at least 50% +1 of the outstanding Common Shares being validly deposited under the Offer and not withdrawn (this condition cannot be waived); at least 50% +1 of the outstanding Common Shares on a fully diluted basis being validly deposited under the Offer and not withdrawn; the Offeror having determined, in its reasonable judgment, that no Material Adverse Effect exists; and receipt of all necessary regulatory approvals. Assuming that the statutory minimum tender condition is met and all other conditions are met or waived, the Depositary will pay Shareholders promptly following the public announcement of take-up and pay.


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