HEXO Announces Closing of Non-Brokered Private Placement and Amendments to Arrangement Agreement and Waiver and Amendment Agreement

HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) (“HEXO” or the “Company”) announced today that it has closed the first of two tranches of a non-brokered private placement (the “Private Placement”) consisting of the issuance of newly created Series 1 Preferred Shares (the “Preferred Shares”) to a single institutional investor. The first tranche consisted of the issuance of 11,500,000 Preferred Shares at an issue price of US$1.00 per Preferred Share for gross proceeds to the Company of US$11,500,000. The Preferred Shares are non-voting and are entitled to a preference over the common shares of the Company with respect to the payment of dividends and distributions and in the event of liquidation or dissolution up to the liquidation and redemption price of US$1.22 per Preferred Share (the “Preferred Share Liquidation and Redemption Price”).

US$13,500,000 was also deposited into escrow by the investor (the “Escrowed Amount”) representing the second tranche of the Private Placement. Upon satisfaction or waiver of all closing conditions set forth in the arrangement agreement (the “Arrangement Agreement”) dated April 10, 2023 between Tilray Brands, Inc. (“Tilray”) and the Company (the “Release Condition”), the Company will receive the Escrowed Amount and will issue 13,500,000 Preferred Shares to the investor. The Escrowed Amount will be returned to the investor if the Release Condition is not satisfied on or before August 31, 2023.

Concurrently with the Private Placement, and in satisfaction of a condition precedent to the obligation of the investor to acquire the Preferred Shares, the Company and Tilray have amended the Arrangement Agreement and the Plan of Arrangement such that Tilray has agreed, subject to the satisfaction or waiver of the conditions precedent set out in the Arrangement Agreement, as amended, to acquire all outstanding Preferred Shares based on the applicable Preferred Share Exchange Ratio pursuant to the Plan of Arrangement (the “Arrangement Amendments”). “Preferred Share Exchange Ratio” means such fraction of a share of Tilray common stock (a “Tilray Share”) equal to the quotient obtained from dividing: (1) the Preferred Share Liquidation and Redemption Price (US$1.22) per Preferred Share, by (2) the lower of (a) the closing price of the Tilray Shares on the Nasdaq Stock Market (“Nasdaq”), and (b) the five day volume-weighted average trading price (“VWAP”) of a Tilray Share on the Nasdaq, each calculated as of the end of the third business day immediately prior to the effective date of the arrangement.