CEP Cliffside Capital Ltd

NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRES

HAW Capital Corp. (the “Corporation” or “HAW”) (TSXV- HAW.P), is pleased to announce that on October 22, 2018 it entered into a definitive amalgamation agreement (the “Agreement”) with Merrco Payments Inc. (“Merrco”) and a wholly-owned subsidiary of HAW (“Acquireco”) pursuant to which the parties have agreed to complete an amalgamation involving Acquireco and Merrco that will have the effect of HAW acquiring all of the issued and outstanding common shares of Merrco (the “Transaction”). The Transaction is an arm’s length transaction and, when completed, will be the “Qualifying Transaction” for HAW for the purposes of the policies of the TSX Venture Exchange Inc. (“TSXV”).  It is expected that the Resulting Issuer (as defined below) will be listed as a Tier 1 Industrial Issuer on the TSXV, subject to TSXV approval.

About Merrco

Merrco is a private Toronto-based corporation incorporated under the Business Corporations Act (Alberta) that operates in the payment processing industry, developing and delivering technology, financial services and solutions to facilitate electronic payments for merchants. Merrco actively markets payment solutions to merchant customers to enable them to accept credit, debit and alternative payments online and at the point of sale. In particular, Merrco focuses on facilitating payment processing for Canada’s emerging cannabis industry, including for the sale of recreational cannabis which was legalized on October 17, 2018.

Merrco believes that the legalization of recreational cannabis in Canada presents a significant market opportunity for Merrco’s services. While legalization of recreational cannabis occurred at the federal level in Canada, the implementation of sales and distribution regulations is on a province by province basis. Merrco believes that its proven solution is well placed to capitalize on this opportunity and to enable the payment aspects of regulated sales of cannabis in Canada because it provides merchant customers with an established set of compliance tools including age/identity verification, velocity rules, and geo-fencing capabilities that are embedded in its solution.

While the legalized cannabis market in Canada is currently the primary focus of Merrco, opportunities for growth exist in emerging cannabis markets such as the U.S., Germany and Australia as the legalization of medicinal and/or recreational cannabis proceeds in those jurisdictions.

Merrco acquired Payfirma Corporation, based in Vancouver, in February 2018 pursuant to an amalgamation transaction, with Payfirma now operating as a wholly-owned subsidiary of Merrco.  The Payfirma business offers payment processing services and financial technology that allows businesses to accept and process payments made by way of credit and debit cards. Payfirma’s proprietary technology, PayHQ® provides merchants with several different ways to accept payments, including virtual terminal, recurring billing modules and customized merchant reporting.

Merrco and Payfirma market services directly to merchants and through a network of referral channel and integrated partners. Merrco and Payfirma are registered Independent Sales Organizations with Visa® and registered Member Service Providers with Mastercard®.

Selected Merrco Financial Information

Based on the unaudited condensed consolidated interim financial statements of Merrco for the six-month period ended June 30, 2018, Merrco had revenue of $2,385,221 and had a net loss of ($4,139,083), which included one-time transaction costs for the Payfirma acquisition in February 2018 and non-cash depreciation and amortization of intangible and capital assets.  As at June 30, 2018, Merrco had total assets of $37,935,420, total liabilities of $1,155,192 and $36,780,228 in shareholders equity. All dollar figures are given in Canadian dollars.

The Qualifying Transaction

Merrco, HAW and Acquireco have entered into the Agreement pursuant to which Merrco will amalgamate with Acquireco to form “Amalco”, and HAW (which will be the “Resulting Issuer” from the Transaction, as defined under the policies of the TSXV) will issue common shares to the former Merrco shareholders, on the basis of three common shares of the Resulting Issuer for each one Merrco common share, with such exchange ratio to be adjusted as necessary based on the final terms of the Private Placement (as defined below) and as agreed between HAW and Merrco.  Merrco’s outstanding Special Preferred Shares will be redeemed immediately prior to the effective time of the amalgamation in accordance with their terms. Each outstanding option, warrant and convertible security (if any) of Merrco will remain outstanding and be adjusted, assumed or converted in accordance with its terms or be exchanged for options, warrants or convertible securities of the Resulting Issuer on substantially the same economic terms and conditions as the existing options, warrants and convertible securities of Merrco.  Upon completion of the Transaction, Amalco will be a wholly-owned subsidiary of the Resulting Issuer.

On the date of this press release, Merrco has 7,940,235 common shares, 2,732,235 Special Preferred Shares, 58,110 broker warrants (each exercisable for one Merrco common share), 563,800 common share options (each exercisable for one Merrco common share) and 12,614 unit options (each exercisable for one Merrco common share and one Special Preferred Share) outstanding, and HAW has 13,540,000 HAW common shares, 1,200,000 options (each exercisable for one HAW common share) and 354,000 warrants (each exercisable for one HAW common share). 

As part of the Transaction, HAW will be seeking shareholder approval to consolidate its common shares on the basis of one post-consolidation HAW common share for each 33.3333 HAW common shares currently held by each shareholder, rounded down to the nearest whole common share and with such consolidation ratio to be adjusted as necessary based on the final terms of the Private Placement and as agreed between HAW and Merrco.  On this basis, each post-consolidation HAW common share issued in connection with the Transaction is expected to have a deemed price of $5.00. HAW will also seek applicable approvals to change its name to “Merrco Payfirma Corporation” effective as of the closing of the Transaction. 

Under the Agreement, the obligations of HAW and Merrco to consummate the Transaction are subject to customary conditions to closing for a transaction of this type, including receipt of all requisite regulatory (including the TSXV), third-party and board approvals and consents, Merrco shareholder approval and no material adverse effect on either HAW or Merrco having occurred. 

Private Placement

In conjunction with or prior to the closing of the Transaction, Merrco expects to complete a brokered private placement for aggregate gross proceeds of up to approximately $30 million (the “Private Placement”).  The Private Placement is expected to be comprised of subscription receipts exchangeable for Merrco common shares and convertible debenture units (comprised of convertible debentures and warrants convertible into or exercisable for, as the case may be, Merrco common shares).  Additional details of the Private Placement, including with respect to the amount, nature of the securities to be offered, terms, use of proceeds and the details of the agents’ commissions, will be provided in a subsequent news release and in the Circular (as described below).

Arm’s Length Transaction

The Transaction will take place at arm’s length and will not be a “Non-Arm’s Length Qualifying Transaction” for purposes of the policies of the TSXV.  As a result, although HAW shareholders will be asked to approve the share consolidation, name change and certain other matters (including certain annual meeting matters), in accordance with applicable polices of the TSXV, HAW will not be obtaining approval of the HAW shareholders for the Transaction.

As of the date of this press release, only James McRoberts holds more than 10% of the issued and outstanding common shares of HAW and there are no control persons holding 10% or more of the issued and outstanding shares of Merrco.  Mr. McRoberts currently holds approximately 14.77% of the issued and outstanding HAW common shares and is also a director and the Chief Executive Officer of HAW and a director of Merrco.  As a result, Mr. McRoberts has declared this interest in the Transaction to the boards of directors of both HAW and Merrco and, in accordance with the Business Corporations Act (Alberta), has not voted and will not vote on applicable matters relating to the Transaction. 

Sponsorship

HAW intends to apply to the TSXV for an exemption from sponsorship requirements.  There is no assurance that a sponsorship exemption will be granted by the TSXV.  Should this sponsorship exemption application be denied, sponsorship will be required. 

Joint Management Information Circular

HAW and Merrco will prepare and mail to their respective shareholders a joint management information circular (the “Circular”) in connection with the shareholder approvals to be sought by each of them in connection with the Transaction (in the case of Merrco, approval of the amalgamation and in the case of HAW, approval of the share consolidation, the name change, and certain other matters (including certain annual meeting matters)).  The Circular will also provide additional information with respect to the Transaction, the Private Placement and with respect to HAW, Merrco and the Resulting Issuer.

Trading Halt

Trading in the HAW Shares on the TSXV is halted and is expected to remain so until completion of the Transaction.

Directors and Management of the Resulting Issuer

The following is a brief description of each of the proposed key members of management of the Resulting Issuer:

Fern Glowinsky President and Chief Executive Officer; Director	Ms. Glowinsky was appointed and President and CEO of Merrco on February 26, 2018, following Merrco’s acquisition of Payfirma Corporation, having previously served as a director of Merrco from November 17, 2017. From 2001 to 2016 Ms. Glowinsky was a senior executive at Moneris Solutions Corporation (“Moneris”), a joint venture of RBC and BMO and one of North America’s largest payment processors. As COO of Moneris, Ms. Glowinsky was responsible for enterprise operations, transforming the end-to-end customer experience while leading a comprehensive technology modernization across the operational footprint. Ms. Glowinsky graduated from the joint MBA/JD program at Schulich School of Business and Osgoode Hall Law School, has a Bachelor of Arts, Economics from the University of Western Ontario and holds the ICD.D designation. Ms. Glowinsky was previously CEO and Director of Cliffside Capital Ltd. (TSXV:CEP).
Nicholas Georgakakis Chief Financial Officer	Mr. Georgakakis joined Merrco from HSBC Commercial Banking. Mr. Georgakakis has spent the majority of his career in finance roles in the payments sector. His previous experience includes roles on the management team at Chase Paymentech as Vice President Finance & Business Strategy, as Head of Business Intelligence for TD Merchant Services and as Director of Finance for First Data International. Mr. Georgakakis is a Chartered Professional Accountant and holds a Masters in Business Administration and a Bachelor of Science from McGill University.
Kiki Plytas Chief Operations Officer	Ms. Plytas joined Merrco from Moneris where she held increasingly senior roles. As Vice President, Business Transformation & Customer Enablement Ms. Plytas oversaw a team responsible for driving fundamental business change with the goal of creating lasting continuous improvements that increased competitiveness and accelerated strategic plan implementation.  Ms. Plytas was also responsible for identifying enhancements to customer enablement and establishing systems and processes that more efficiently responded to customers’ needs. In prior roles Ms. Plytas created the Moneris Compliance function from inception and oversaw U.S. Operations. Ms. Plytas attended Ryerson University in Business Management and Communications.
Shakir Tayabali Executive Vice President, Sales	Mr. Tayabali joined Merrco from Global Payments where he was Vice President, Integrated Solutions and managed all partner relationships and developed an eCommerce sales strategy and sales team. In 2012 Mr. Tayabali held the role of Vice President, Customer Experience where he was charged with oversight of customer experience from boarding through ongoing maintenance as well as loyalty programs and the installation of service teams. Prior thereto, Mr. Tayabali was Vice President of Sales, SME overseeing the telephone sales team and merchant retention methodology while managing an annual revenue portfolio of $150 million. Mr. Tayabali holds a Bachelor of Science from the University of Western Ontario.
Colleen Moorehead Chair of the Board	Ms. Moorehead is the Chief Client Officer at Osler, Hoskin & Harcourt LLP since January 2012 and Chair of the Governance Committee and Director of Solium Capital. Previous experience includes being the Cofounder and President of E*TRADE Canada, President and CEO of Nexient Learning and serving as the Entrepreneur in Residence at Signal Hill Equity Partners. Ms. Moorehead holds an honorary doctorate of civil law from St. Mary’s University and a Bachelor of Business Administration in Finance (Honours) from Wilfred Laurier University.
John Rante Director	Mr. Rante was the Executive Chairman, BluePay Processing from 2016 to 2018. He also held a Director position at Payfirma Corporation from May 2011 to February 2018.  He was the Chief Executive Officer of BluePay from 2003 to 2016. He was also the President and CEO of Data Transfer and President, CEO and Chairman of Online Data Corporation. Mr. Rante holds his MBA from DePaul University Chicago.

It is anticipated that an additional director who will be independent for purposes of applicable securities laws will be identified and appointed to the board of directors of the Resulting Issuer following the Transaction.  This individual is currently expected to serve as the chair of the audit committee of the board of the Resulting Issuer. It is also expected that an individual who will serve as the Corporate Secretary of the Resulting Issuer will be appointed at or prior to such time. Merrco and HAW intend to press release the identity of these individuals once they have been identified and have agreed to serve to the extent they are not otherwise disclosed in the Circular.

For further information, please contact:HAW Capital Corp. David Hyman, CFO haw.investors@gmail.com

Merrco Payments Inc. Fern Glowinsky, President & CEOfern.glowinsky@merrco.ca Forward-Looking Information

Certain information set forth in this news release contains forward-looking statements or information (“forward-looking statements”), including details about the Transaction, the Private Placement and the anticipated terms, timelines for completion and other particulars thereof (including the anticipated exchange and conversion ratios, the treatment of options, warrants and convertible securities under the Transaction, the satisfaction of conditions to closing of the Transaction, the timelines, amounts and structure of the Private Placement, the eligibility of the Transaction for an exemption from the sponsorship requirements of the TSXV, that an additional independent director and an individual willing to serve as corporate secretary will be identified and other matters), together with statements regarding the anticipated listing of the Resulting Issuer as a Tier 1 Industrial issuer, the existence of a significant market opportunity for Merrco’s business resulting from the legalization of recreational cannabis in Canada and the positioning of Merrco’s products and services to address this opportunity, the existence of other potential growth opportunities for Merrco and its subsidiaries and other matters. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation’s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, operational risks, competition from other industry participants, stock market volatility, the risks that the parties will not proceed with the Transaction or that the conditions to closing (including receipt of applicable shareholder and other approvals or consents) are not satisfied in the manner or on the timelines anticipated or at all, that the ultimate terms of the Transaction and the Private Placement will differ from those currently contemplated, that the anticipated directors and officers of the Resulting Issuer are not able or willing to continue to act following the closing of the Transaction, that new directors are not identified on the timelines anticipated or at all and the ability to access sufficient capital from internal and external sources.

Although the Corporation believes that the expectations in its forward-looking statements are reasonable, its forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements, as no assurance can be provided as to future results, levels of activity or achievements. Risks, uncertainties, material assumptions and other factors that could affect actual results include that the assumptions regarding the forward-looking statements are not accurate and other risks, uncertainties and material assumptions are discussed in our public disclosure documents available at www.sedar.com. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, the Corporation does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and shareholder approval (if required). The Transaction cannot close until shareholder approval is obtained (if required). 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 on. Trading in the securities of HAW Capital Corp. should be considered highly speculative.

All information contained in this press release with respect to the Corporation and Merrco was supplied by the Corporation and Merrco, respectively, for inclusion herein.

This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) has in any way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of the press release, nor accepts responsibility for the adequacy or accuracy of this release.