Item 1.01 Entry into a Material Definitive Agreement.
On June 14, 2022, Tilray Brands, Inc. (the "Company" or "Tilray") entered into
amendments to improve the terms of its previously-disclosed agreements to
acquire from HT Investments MA LLC ("HTI") all of the outstanding principal and
accrued and unpaid interest under a secured convertible note (as amended and
restated, the "HEXO Note") issued by HEXO Corp. ("HEXO"). These amendments
provide, among other things, for an additional discount to Tilray's purchase
price and that the conversion price of the HEXO Note be adjusted down from
CAD$0.85 to CAD$0.40.
Specifically, Tilray and HTI entered into an amended and restated assignment and
assumption agreement dated as of June 14, 2022 (the "Amended Assignment
Agreement"). Pursuant to the Amended Assignment Agreement, the purchase price
for the HEXO Note will be equal to the outstanding principal balance of the HEXO
Note as of the closing date (approximately $185 million as of the date hereof,
and such amount at closing to be not less than $160 million) less a purchase
price discount equal to 10.8% of the principal outstanding balance. The purchase
price shall be payable by Tilray to HTI in the form of a newly-issued $50
million convertible note (the "Tilray Convertible Note") and the balance, at
Tilray's option (subject to certain conditions and limitations), in cash
consideration, Class 2 Common Stock of Tilray or any combination thereof.
The Tilray Convertible Note will bear interest at a rate of 4.00% per annum
calculated and paid on a quarterly basis. The Tilray Convertible Note will
mature on September 1, 2023, unless earlier repurchased or converted. The Tilray
Convertible Note obligations will be general unsecured obligations and rank
subordinated in right of payment to all of Tilray's current and future
indebtedness to banks, commercial finance lenders or other lending institutions.
The Tilray Convertible Note is convertible at HTI's election in whole or in part
at any time prior to 5:00 p.m. (New York) on the second trading day immediately
preceding the maturity date into shares of Tilray's Class 2 common stock, par
value $0.0001 (the "Common Stock"), at a conversion rate equal to 125% of the
closing price on the issuance date of the Tilray Convertible Note (the
"Conversion Price"). The Conversion Price is subject to adjustment under certain
circumstances in accordance with the terms of the Tilray Convertible Note.
If Tilray undergoes a fundamental change (as defined in the Tilray Convertible
Note), upon not less than 20 or more than 35 business days' notice Tilray shall
offer to repurchase for cash all of the outstanding obligations under the Tilray
Convertible Note at a fundamental change repurchase price equal to 105% of the
outstanding obligations, unless HTI converts the Tilray Convertible Note in
accordance with its terms.
In connection with the Amended Assignment Agreement, each of Tilray, HEXO and
HTI also entered into an amended transaction agreement dated as of June 14, 2022
(the "Amending Agreement"), pursuant to which (i) HEXO agreed to issue the
amended HEXO Note to Tilray, (ii) the outside closing date for the transactions
was extended to August 1, 2022, (iii) HEXO's minimum liquidity covenant is
reduced from $100 million to CAD$70 million, (iv) Tilray will have board
governance rights to appoint two of HEXO's board members and two observers and
(v) the initial conversion price of the HEXO Note has been amended from CAD$0.85
to CAD$0.40.
To the extent that the HEXO Note is acquired with Class 2 Common Stock of
Tilray, the Amended Assignment Agreement provides for a post-closing adjustment,
such that if the purchase price (less any amounts satisfied or to be satisfied
in cash or the Tilray Convertible Note) divided by the daily volume weighted
average price (the "VWAP Price") of the Class 2 Common Stock of Tilray for the
44-trading day period following closing is greater than the number of shares
issued at closing, then Tilray shall deliver to HTI in cash or additional
shares, at Tilray's option (subject to certain conditions and limitations), an
amount equal to such difference multiplied by the VWAP Price.
The issuance of the Tilray Convertible Note and the maximum number of shares of
Class 2 Common Stock of Tilray that may be issued to HTI under the Tilray
Convertible Note and the Amended Assignment Agreement were registered with the
U.S. Securities and Exchange ?Commission under the Company's ?Registration
Statement on Form S-3 (333-233703).
Each of the transactions and agreements described above remain subject to
several closing conditions, including receipt of HEXO shareholder approval;
applicable regulatory approvals; and Tilray and HEXO having entered into
commercial arrangements to achieve production efficiencies and cost-saving
synergies.
Copies of the amendment documents are filed as Exhibits 10.1, 10.2 and 10.3 with
this Current Report on Form 8-K and are incorporated herein by reference.
Item 8.01 Other Events.
On June 14, 2022, the Company issued a press release announcing the amended
terms of its agreement to acquire the HEXO Note. A copy of this press release is
attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit
Number Description of Exhibit
10.1 Amending Agreement to Transaction Agreement, dated as of June 14,
2022, by and among the Company, HT Investments MA LLC and HEXO
10.2 Amended and Restated Assignment and Assumption Agreement, dated as of
June 14, 2022, by and among the Company, HT Investments MA LLC and
HEXO
10.3 Form of Convertible Note due September 1, 2023, issued and owing by the
Company to HTI
99.1 Press Release of Tilray Brands, Inc., dated June 14, 2022
104 Cover Page Interactive Data File (formatted in Inline XBRL document)
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