In the Matter of Tilray Brands, Inc., 48North Cannabis Corp. and HEXO Corp., 2023 CanLII 56226

Ontario Commission des 22^nd Floor 22e étage

Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest

Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8

In the Matter of

the Securities Legislation of Ontario

(the Jurisdiction)

and

In the Matter of

the Process for Exemptive Relief Applications in Multiple Jurisdictions

and

In the Matter of Tilray Brands, Inc. (Tilray), 48North Cannabis Corp. (48North) and HEXO Corp. (HEXO), collectively, the Filers

Background

The securities regulatory authority or regulator of the Jurisdiction (Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) that:

(a) the continuous disclosure requirements under the Legislation and the requirements of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (together, the Continuous Disclosure Requirements) do not apply to HEXO;

(b) the requirements of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) (the Certification Requirements) do not apply to HEXO;

(c) the insider reporting requirements under the Legislation, the requirements of National Instrument 55-104 Insider Reporting Requirements and Exemptions and the requirement to file an insider profile under National Instrument 55-102 System for Electronic Disclosure by Insiders (together, the Insider Reporting Requirements) do not apply to any insider of HEXO; and

(d) the order of the Decision Maker (the 48North Order) exempting 48North from the Continuous Disclosure Requirements, the Certification Requirements and the Insider Reporting Requirements, subject to the conditions set out in the 48North Order, including the requirements that HEXO continue to be a reporting issuer in a designated Canadian jurisdiction (as defined in NI 51-102) and to file all documents it is required to file under NI 51-102 be revoked and replaced with an updated order granting substantially similar relief,

(collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission (OSC) is the principal regulator for this application; and

(b) the Filers have provided notice that section 4.7(2) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon, and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

(a) HEXO

(i) HEXO is a corporation existing under the Business Corporations Act (Ontario) (OBCA);

(ii) HEXO’s head office is located at 120 de la Rive Road, Gatineau, Quebec and its registered office is located at 222 Bay St. Suite 3000, Toronto, Ontario;

(iii) the authorized capital of HEXO consists of an unlimited number of common shares (the HEXO Common Shares) and an unlimited number of special shares issuable in series (the HEXO Preferred Shares, and together with the HEXO Common Shares, the HEXO Shares);

(iv) the HEXO Common Shares are listed on the Toronto Stock Exchange (TSX) and the Nasdaq Stock Exchange (Nasdaq) under the symbol “HEXO”;

(v) as of June 9, 2023, HEXO was a reporting issuer in each province and territory of Canada;

(vi) as of June 9, 2023, there were issued and outstanding: (A) 43,996,355 HEXO Common Shares; (B) 11,500,000 HEXO Preferred Shares; (C) 2,952,337 options to purchase HEXO Common Shares (HEXO Options); (D) 4,136,559 warrants (including the Listed 48North Warrants, as defined below) exercisable for HEXO Common Shares (HEXO Warrants); (E) 66,987 HEXO restricted share units (HEXO RSUs); and (F) 498,616 HEXO deferred share units (HEXO DSUs); and

(vii) as a result of HEXO’s acquisition of 48North, there are listed warrants outstanding to purchase 17,863 HEXO Common Shares at an exercise price per whole HEXO Common Share of $1,017.76 with an expiry date of April 2, 2024 (Listed 48North Warrants) issued pursuant to a warrant indenture between 48North and Computershare Trust Company of Canada (Computershare) dated April 2, 2019, as supplemented by the supplemental warrant indenture dated September 1, 2021 among HEXO, 48North and Computershare (the Listed 48North Warrant Indenture).

(b) 48North

(i) 48North is a corporation existing under the Canada Business Corporations Act (CBCA) and is a wholly owned subsidiary of HEXO;

(ii) as of June 9, 2023, 48North was a reporting issuer in each province of Canada other than Quebec;

(iii) on September 1, 2021, HEXO and 48North completed an arrangement pursuant to section 192 of the CBCA (48North Arrangement), pursuant to which HEXO acquired all of the issued and outstanding common shares of 48North by way of a court-approved plan of arrangement;

(iv) following closing of the 48North Arrangement, the Listed 48North Warrants that remained outstanding were listed on the TSX under the trading symbol ‘HEXO.WT.A’; and

(v) on August 31, 2021, immediately prior to the consummation of the 48North Arrangement, the OSC issued the 48North Order.

(i) Tilray is a corporation existing under the Delaware General Corporation Law;

(ii) Tilray’s head office and registered office is located at 245 Talbot St W, Leamington, Ontario;

(iii) the authorized capital of Tilray consists of 980,000,000 common shares (the Tilray Shares) and 10,000,000 shares of preferred stock;

(iv) the Tilray Shares are listed on the TSX and the Nasdaq under the trading symbol “TLRY”; and

(v) as of June 9, 2023, Tilray was a reporting issuer in each province and territory of Canada and was an “SEC Foreign Issuer”, as defined in National Instrument 71-102 - Continuous Disclosure and Other Exemptions Related to Foreign Issuers.

(d) Plan of Arrangement

(i) Tilray and HEXO entered into an arrangement agreement on April 10, 2023, as amended on June 1, 2023 (the Arrangement Agreement), pursuant to which, among other things, all of the outstanding HEXO Shares are to be acquired by Tilray by way of a court-approved plan of arrangement (the Plan of Arrangement) carried out under the OBCA (the Arrangement);

(ii) pursuant to the Plan of Arrangement, (i) in exchange for each HEXO Common Share, Tilray will issue to the holders of HEXO Common Shares 0.4352 (the Exchange Ratio) of a Tilray Share (the Common Share Consideration) and (ii) in exchange for each HEXO Preferred Share, Tilray will issue to the holders of HEXO Preferred Shares such number of Tilray Shares equal to the number of HEXO Preferred Shares held by such holder multiplied by the quotient obtained from dividing: (1) US$1.22, by (2) the lower of (a) the closing price of the Tilray Shares on the Nasdaq, and (b) the five day volume-weighted average trading price of a Tilray Share on the Nasdaq, each calculated as of the end of the third business day immediately prior to the Effective Time (the Preferred Share Consideration), subject to the terms of the Plan of Arrangement;

(iii) as a result of the Arrangement, HEXO will become a wholly owned subsidiary of Tilray;

(iv) on May 10, 2023, HEXO obtained an interim order from the Ontario Superior Court of Justice (Commercial List) (the Interim Order) specifying certain requirements and procedures for the HEXO Meeting;

(v) on May 15, 2023, in connection with the Arrangement and the HEXO Meeting, and in accordance with the Interim Order, HEXO mailed to the holders of HEXO Common Shares, HEXO Warrants, HEXO Options, HEXO RSUs and HEXO DSUs a management information circular containing prospectus-level disclosure of the business and affairs of each of HEXO and Tilray and information on the Arrangement, a copy of which has been filed on SEDAR under HEXO’s profile;

(vi) the Arrangement is expected to become effective on or before June 21, 2023 (or on such other date to be mutually agreed by the parties) (the Effective Time), subject to the completion of certain closing conditions set out in the Arrangement Agreement;

(vii) the completion of the Arrangement was conditional on, among other things: (i) approval of the Arrangement by the affirmative vote of (A) at least 66 ⅔% of the votes cast by holders of HEXO Common Shares present or represented by proxy at a special meeting (HEXO Meeting), and (B) a majority of the votes cast by the holders of HEXO Common Shares present or represented by proxy at the HEXO Meeting, excluding the votes of persons whose votes must be excluded in accordance with Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions; and (ii) final approval of the Arrangement by the Ontario Superior Court of Justice (Commercial List) (the Court);

(viii) the holders of HEXO Common Shares approved the Arrangement at the HEXO Meeting held on June 14, 2023 by affirmative vote of: (A) greater than 66 ⅔% of the votes cast by holders of HEXO Common Shares present or represented by proxy at the HEXO Meeting, and (B) a majority of the votes cast by the holders of HEXO Common Shares present or represented by proxy at the HEXO Meeting, excluding the votes of persons whose votes must be excluded in accordance with Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions;

(ix) on June 19, 2023, HEXO obtained a final order from the Court approving the Arrangement;

(x) under the Plan of Arrangement, among other things, the following will occur:

(a) all HEXO Common Shares, other than HEXO Common Shares held by (i) Tilray, and (ii) dissenting shareholders, will be exchanged by the holders thereof, without any further act or formality, for the Common Share Consideration;

(b) HEXO Common Shares held by dissenting shareholders in respect of which dissent rights have been validly exercised and not withdrawn shall be deemed to have been transferred by such dissenting shareholders to HEXO;

(c) all HEXO Preferred Shares, will be exchanged by the holders thereof, without any further act or formality, for the Preferred Share Consideration;

(d) the amended and restated senior secured convertible note of HEXO dated July 12, 2022, held by Tilray will be converted into HEXO Common Shares in accordance with its terms;

(e) each HEXO DSU shall be deemed to be unconditionally redeemed by the holder thereof and such HEXO DSU, without any further action by or on behalf of the holder thereof, shall be assigned and transferred by such holder to the HEXO (free and clear of all liens) in exchange for a cash payment equal to the number of HEXO DSUs credited to such holder multiplied by $1.25, and thereafter each such HEXO DSU shall immediately be cancelled and terminated;

(f) each HEXO RSU, whether vested or unvested, shall be deemed to be unconditionally vested and such HEXO RSU, without any further action by or on behalf of the holder thereof, shall be assigned and transferred by such holder to the HEXO (free and clear of all liens) in exchange for a cash payment equal to the number of HEXO RSUs credited to such holder multiplied by $1.25, and thereafter each such HEXO RSU shall immediately be cancelled and terminated; and

(g) each HEXO Option outstanding immediately prior to the Effective Time shall be adjusted so that, upon exercise of such HEXO Option, the holder shall, upon payment of the exercise price under such HEXO Option, be entitled to receive, in substitution for the number of HEXO Common Shares subject to such HEXO Option, that number of Tilray Shares equal to the product obtained when the number of HEXO Common Shares subject to such HEXO Option immediately prior to the Effective Time is multiplied by the Exchange Ratio (rounded down to the next whole number of Tilray Shares). For greater certainty, the exercise price per Tilray Share under such HEXO Option immediately following the adjustment pursuant to the Plan of Arrangement shall equal the exercise price per HEXO Common Share under such HEXO Option immediately prior to the Effective Time divided by the Exchange Ratio, rounded up to the nearest whole cent; and

(xi) following completion of the Arrangement, the HEXO Warrants, with the exception of any HEXO Warrants that are exercised before the Effective Time, will remain outstanding as warrants of HEXO that upon exercise will entitle the holders thereof to receive the Common Share Consideration such holders would have been entitled to be issued and receive if, immediately prior to the Effective Time, such holder had been the holders of the number of HEXO Common Shares to which such holders were theretofore entitled upon exercise of such HEXO Warrants.

(e) Listing Matters

(i) It is a condition of the Arrangement that the necessary approvals by the Nasdaq and the TSX for the listing on each such exchange of (i) the Tilray Shares to be issued to HEXO shareholders (other than dissenting shareholders) as consideration in exchange for their HEXO Shares pursuant to the Plan of Arrangement; and (ii) the Tilray Shares issuable upon exercise or vesting of the HEXO convertible securities (other than HEXO RSUs and HEXO DSUs deemed to be unconditionally redeemed and assigned and transferred by such holder to HEXO) and HEXO Warrants, have been obtained and maintained. Nasdaq approval is not required for the Arrangement, and Tilray intends to submit to the Nasdaq the applicable notification forms as required under Nasdaq rules. For the purposes of TSX approval, Tilray intends to rely on the exemption set forth in Section 602.1 of the TSX Company Manual, which provides that the TSX will not apply its rules and standards to certain transactions involving an “eligible interlisted issuer”, which is an issuer listed on the TSX that is also listed on another recognized stock exchange (which includes the Nasdaq) and that had less than 25% of the overall trading volume of its listed securities occurring on all Canadian marketplaces in the 12 months immediately preceding the date of an application or notice to the TSX. Tilray qualifies as an “eligible interlisted issuer” in accordance with the foregoing;

(ii) following closing of the Arrangement, (i) the HEXO Common Shares will be delisted from the TSX and Nasdaq, and (ii) the Listed 48North Warrants will continue to be listed on the TSX under the symbol “HEXO.WT.A”;

(iii) following the Effective Time, each Listed 48North Warrant will become exercisable for a Tilray Share at an exercise price of approximately $2,338.60 per whole Tilray Share, adjusted to reflect the Exchange Ratio;

(iv) upon completion of the Arrangement, the only securities of HEXO that will be held by persons other than Tilray are the outstanding HEXO Warrants and HEXO Options;

(v) upon completion of the Arrangement, the only securities of HEXO that will be traded on a marketplace (as defined in National Instrument 21-101 - Marketplace Operation) will be the Listed 48North Warrants;

(vi) pursuant to the terms of the warrant indentures governing HEXO Warrants (the HEXO Indentures) and any supplemental indentures applicable thereto, Tilray and HEXO shall enter into supplemental warrant indentures with Computershare and TSX Trust Company (TSX Trust), as applicable, with respect to the HEXO Warrants (including the Listed 48North Warrants);

(vii) pursuant to the terms of the HEXO Indentures, any supplemental indentures applicable thereto and/or the certificates representing, as applicable, the various unlisted warrants outstanding to purchase HEXO Common Shares (the Unlisted HEXO Warrants), Tilray will be bound by the terms and covenants thereof and upon exercise of such HEXO Warrants and the payment of the applicable aggregate exercise price, holders will be entitled to receive the Common Share Consideration such holders would have been entitled to be issued and receive if, immediately prior to the Effective Time, such holders had been the registered holders of the number of HEXO Common Shares to which such holders were theretofore entitled upon exercise of such HEXO Warrants;

(viii) HEXO has provided notice to Computershare and TSX Trust and to the holders of the HEXO Warrants with respect to the Arrangement containing details of the consideration to be received upon the exercise of the applicable HEXO Warrants following the Effective Time;

(ix) certain of the HEXO Indentures, including the Listed 48North Warrant Indenture, include a covenant that HEXO will make all requisite filings under applicable Canadian securities legislation including those necessary to remain a reporting issuer not in default in each of the provinces and other Canadian jurisdictions where it is or becomes a reporting issuer;

(x) none of the HEXO Indentures or certificates representing the HEXO Warrants requires HEXO to deliver to holders of HEXO Warrants any continuous disclosure materials of HEXO;

(xi) none of the Filers is in default of any of its respective obligations under securities legislation in the jurisdictions in which it is a reporting issuer;

(xii) HEXO cannot rely on the exemption available in Section 13.3 of NI 51-102 for issuers of exchangeable securities because the HEXO Warrants will not be “designated exchangeable securities” as defined in NI 51-102 as none of the holders of the HEXO Warrants will have voting rights in respect of Tilray in their capacity as warrantholders;

(xiii) assuming the completion of the Arrangement and following the Effective Time, HEXO has no intention of accessing the capital markets in the future by issuing any further securities to the public and it has no intention of issuing securities to the public other than those that will be outstanding on completion of the Arrangement;

(xiv) following completion of the Arrangement, it is information relating to Tilray, and not to HEXO, that will be of primary importance to holders of HEXO Warrants as the HEXO Warrants will be ultimately exercisable for only the Common Share Consideration consisting of Tilray Shares;

(xv) following completion of the Arrangement, as HEXO will be a wholly-owned subsidiary of Tilray, Tilray will consolidate HEXO with Tilray for the purposes of financial statement reporting; and

(xvi) as such, the disclosure required by the Continuous Disclosure Requirements and the Insider Reporting Requirements applicable to HEXO would not be meaningful or of any significant benefit to the holders of the HEXO Warrants or HEXO Options and would impose a significant cost on HEXO.

Decision

The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Maker under the Legislation is that, immediately following the Effective Time and the completion of the Plan of Arrangement:

(1) The 48North Order is revoked.

(2) The Continuous Disclosure Requirements do not apply to 48North provided that:

(a) Tilray is the direct or indirect beneficial owner of all of the issued and outstanding voting securities of 48North;

(b) Tilray is a reporting issuer in a designated Canadian jurisdiction (as defined in NI 51-102) and has filed all documents it is required to file under NI 51-102;

(i) the Listed 48North Warrants;

(ii) securities issued to and held by Tilray or an affiliate of Tilray;

(iii) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or

(iv) securities issued under exemptions from the registration requirement and prospectus requirement in section 2.35 of National Instrument 45-106 Prospectus Exemptions (NI 45-106);

(d) 48North files in electronic format:

(i) if Tilray is a reporting issuer in the local jurisdiction, a notice indicating that it is relying on the continuous disclosure documents filed by Tilray and setting out where those documents can be found in electronic format; or

(ii) copies of all documents Tilray is required to file under securities legislation, other than in connection with a distribution, at the same time as the filing by Tilray of those documents with a securities regulatory authority or regulator;

(e) Tilray concurrently sends to all holders of any Listed 48North Warrants all disclosure materials that would be required to be sent to holders of similar warrants of Tilray in the manner and at the time required by securities legislation;

(f) Tilray complies with securities legislation in respect of making public disclosure of material information on a timely basis;

(g) Tilray immediately issues in Canada and files any news release that discloses a material change in its affairs; and

(h) 48North issues in Canada a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of 48North that are not also material changes in the affairs of Tilray.

(3) The Certification Requirements do not, following the Effective Time and the completion of the Plan of Arrangement, apply to 48North provided that:

(a) 48North is not required to, and does not, file its own Interim Filings and Annual Filings (as those terms are defined under NI 52-109);

(b) 48North files in electronic format under its SEDAR profile either: (i) copies of Tilray’s annual certificates and interim certificates at the same time as Tilray is required under NI 52-109 to file such documents; or (ii) a notice indicating that it is relying on Tilray’s annual certificates and interim certificates and setting out where those documents can be found for viewing on SEDAR; and

(c) 48North is exempt from or otherwise not subject to the Continuous Disclosure Requirements and 48North and Tilray are in compliance with the conditions set out in paragraph (2) above.

(4) The Insider Reporting Requirements not apply, following the Effective Time and the completion of the Plan of Arrangement, to any insider of 48North in respect of securities of 48North provided that:

(a) if the insider is not Tilray or HEXO:

(i) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning 48North before the material facts or material changes are generally disclosed; and

(ii) the insider is not an insider of Tilray or HEXO in any capacity other than by virtue of being an insider of 48North;

(b) Tilray is the indirect beneficial owner of all of the issued and outstanding voting securities of 48North;

(c) if the insider is Tilray or HEXO, the insider does not beneficially own any HEXO Warrants other than securities acquired through the exercise of the HEXO Warrants and not subsequently traded by the insider;

(d) Tilray is a reporting issuer in a designated Canadian jurisdiction;

(e) 48North has not issued any securities, and does not have any securities outstanding, other than:

(i) the Listed 48North Warrants;

(ii) securities issued to and held by Tilray or an affiliate of Tilray;

(iv) securities issued under exemptions from the registration requirement and prospectus requirement in section 2.35 of NI 45-106; and

(f) 48North is exempt from or otherwise not subject to the Continuous Disclosure Requirements and 48North and Tilray are in compliance with the conditions set out in paragraph (2) above.

(5) The Continuous Disclosure Requirements do not apply to HEXO provided that:

(a) Tilray is the direct or indirect beneficial owner of all of the issued and outstanding voting securities of HEXO;

(b) Tilray is a reporting issuer in a designated Canadian jurisdiction (as defined in NI 51-102) and has filed all documents it is required to file under NI 51-102;

(i) the HEXO Warrants;

(ii) the HEXO Options;

(iii) securities issued to and held by Tilray or an affiliate of Tilray;

(iv) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or

(v) securities issued under exemptions from the registration requirement and prospectus requirement in section 2.35 of NI 45-106;

(d) HEXO files in electronic format:

(e) Tilray concurrently sends to all holders of any HEXO Warrants all disclosure materials that would be required to be sent to holders of similar warrants of Tilray in the manner and at the time required by securities legislation;

(f) Tilray complies with securities legislation in respect of making public disclosure of material information on a timely basis;

(g) Tilray immediately issues in Canada and files any news release that discloses a material change in its affairs; and

(h) HEXO issues in Canada a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of HEXO that are not also material changes in the affairs of Tilray.

(6) The Certification Requirements do not, following the Effective Time and the completion of the Plan of Arrangement, apply to HEXO provided that:

(a) HEXO is not required to, and does not, file its own Interim Filings and Annual Filings (as those terms are defined under NI 52-109);

(b) HEXO files in electronic format under its SEDAR profile either: (i) copies of Tilray’s annual certificates and interim certificates at the same time as Tilray is required under NI 52-109 to file such documents; or (ii) a notice indicating that it is relying on Tilray’s annual certificates and interim certificates and setting out where those documents can be found for viewing on SEDAR; and

(c) HEXO is exempt from or otherwise not subject to the Continuous Disclosure Requirements and HEXO and Tilray are in compliance with the conditions set out in paragraph (5) above.

(7) The Insider Reporting Requirements not apply, following the Effective Time and the completion of the Plan of Arrangement, to any insider of HEXO or in respect of securities of HEXO provided that:

(a) if the insider is not Tilray:

(i) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning HEXO before the material facts or material changes are generally disclosed; and

(ii) the insider is not an insider of Tilray in any capacity other than by virtue of being an insider of HEXO;

(b) Tilray is the beneficial owner of all of the issued and outstanding voting securities of HEXO;

(c) if the insider is Tilray, the insider does not beneficially own any HEXO Warrants other than securities acquired through the exercise of the HEXO Warrants and not subsequently traded by the insider;

(d) Tilray is a reporting issuer in a designated Canadian jurisdiction;

(e) HEXO has not issued any securities, and does not have any securities outstanding, other than:

(i) the HEXO Warrants;

(ii) the HEXO Options;

(iii) securities issued to and held by Tilray or an affiliate of Tilray;

(v) securities issued under exemptions from the registration requirement and prospectus requirement in section 2.35 of NI 45-106; and

(f) HEXO is exempt from or otherwise not subject to the Continuous Disclosure Requirements and HEXO and Tilray are in compliance with the conditions set out in paragraph (5) above.

DATED at Toronto, Ontario on this 21^st day of June, 2023.

“Lina Creta”

Lina Creta

Manager, Corporate Finance

Ontario Securities Commission

OSC File #: 2023/0223