Mr. Andrew Howard reports

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

Diamond Estates Wines & Spirits Inc. has mailed its management information circular and related voting materials to company shareholders in connection with the annual and special meeting of the shareholders to be held on Sept. 6, 2023, at 10 a.m. Eastern Daylight Time.

The company is also pleased to announce that it signed today a non-binding term sheet for a proposed financing with Lassonde Industries Inc. (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 to Lassonde Industries, on a private placement basis, at an issuance price of 45 cents 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 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 an auditor 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 and Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions) 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 Pierre-Paul Lassonde, chairman of the board of Lassonde Industries and a joint actor of Lassonde Industries, may elect (but are not obliged) to convert up to $500,000 principal amount of a 10.0 per cent unsecured convertible debenture due November, 2023 (together with accrued and unpaid interests thereon, if any, as applicable), and $2.85-million principal amount of a 10.0 per cent unsecured convertible debenture due November, 2023 (together with accrued and unpaid interests thereon, if any, as applicable), 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 Nov. 3, 2022.

Recommendation of the board

The board of directors of the company, 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, shareholder 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 & Spirits Inc.

Diamond Estates 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 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.

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 United States, 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 and radlers from Canada, Landshark lager from the U.S., 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 and 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 45 cents 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 exercisable for 80,000 common shares and 212,755 deferred share units, 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, $2.85-million in principal amount of debentures and 250,000 common share purchase warrants, convertible into 250,000 common shares. As such, the Lassonde group currently holds 5,964,330 common shares, representing approximately 21.40 per cent of the current number of issued and outstanding common shares, $3.35-million 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 per cent of the then issued and outstanding common shares and 54.23 per cent 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 per cent 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 per cent 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 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 Nov. 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; and (b) Lassonde Holding. Copies of the early warning reports with additional information in respect of the foregoing matters will be available on SEDAR+ or by contacting: For Lassonde Industries: Eric Gemme, chief financial officer, Lassonde Industries, at 755 rue Principale, Rougemont, Que., J0L 1M0, or 450-469-4926, extension 10456, and for Lassonde Holding: Pierre Boulais, financial director, 3346625 Canada Inc., 54 rang de la Montagne, Rougemont, Que., J0L 1M0, or 450-469-2912.

We seek Safe Harbor.