The Warrant Indenture will provide that, from time to time, the Company may amend or
supplement the Warrant Indenture for certain purposes, without the consent of the holders of the Warrants, including curing defects or inconsistencies or making any change that does not prejudice the rights of any holder. Any amendment or supplement
to the Warrant Indenture that would prejudice the interests of the holders of Warrants may only be made by extraordinary resolution, which will be defined in the Warrant Indenture as a resolution either: (i) passed at a meeting of
the holders of Warrants at which there are holders of Warrants present in person or represented by proxy representing at least 20% of the aggregate number of the then outstanding Warrants by the affirmative vote of the holders of Warrants
representing not less than 662/3% of the aggregate number of Warrants represented at the meeting and voted on the poll upon such resolution; or (ii) adopted by an instrument in writing signed
by the holders of Warrants representing not less than 66 2/3% of the aggregate number of all the then outstanding Warrants.
The foregoing summary of certain anticipated provisions of the Warrant Indenture does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Warrant Indenture in the form to be agreed upon by the parties. Reference should be made to the Warrant Indenture for the full text of attributes of the Warrants which will be filed by the Company under
its corporate profile on SEDAR and EDGAR following the closing of the Offering.
DIVIDEND POLICY
HEXO has never paid any dividends on its Common Shares. HEXO does not intend to pay dividends on any of its Common Shares in the
foreseeable future. In addition, HEXO is restricted from paying dividends pursuant to certain solvency tests prescribed under the Business Corporations Act (Ontario) and is currently subject to contractual restrictions on the payment of
dividends under its Credit Facility and, if there is any event of default thereunder, the Debentures issued under the Debenture Private Placement.
PLAN OF DISTRIBUTION
Pursuant to the Underwriting Agreement, the Company has agreed to sell and the Underwriters have agreed to purchase on the Closing Date
55,600,000 Units at the Offering Price for aggregate gross proceeds of $50,040,000, payable in cash (net of the Underwriters Fee) to the Company against delivery of the Units, subject to and in compliance with all necessary legal requirements
and the conditions contained in the Underwriting Agreement. The Offering Price was determined by arms length negotiation between the Company and the Lead Underwriters, on behalf of the Underwriters, with reference to the prevailing market
price of the Common Shares.
The obligations of the Underwriters under the Underwriting Agreement are several and are not joint, nor joint
and several, and may be terminated at their discretion upon the occurrence of certain stated events as set out in the Underwriting Agreement. These include certain market disruption events, the suspension of trading in the Common Shares, a banking
moratorium or related disruption events, certain material inquiries, investigations or proceedings, certain changes in law that prevent or materially restrict the distribution or trading of the Common Shares, certain material changes, a breach of
material terms, conditions or covenants in the Underwriting Agreement or certain events relating to outbreak (including, without limitation, matters caused by, related to or resulting from the COVID-19
outbreak), escalation of hostilities, acts of terrorism and other events that may make it impracticable or inadvisable to proceed with the Offering. The Underwriters are, however, obligated to take up and pay for all of the Units (other than the
Additional Units issuable pursuant to the Over-Allotment Option) if any of the Units are purchased under the Underwriting Agreement. In connection with the Offering, certain of the Underwriters or securities dealers may distribute this
Prospectus Supplement and the Shelf Prospectus electronically.
The Offering is being made concurrently in all of the provinces and
territories of Canada and in the United States pursuant to the multi-jurisdictional disclosure system implemented by the SEC and the securities regulatory authorities in Canada. The Units will be offered in the United States and Canada by the
Underwriters either directly or through their respective U.S. or Canadian broker-dealer affiliates or agents, as applicable. Subject to applicable law, the Underwriters may offer the Units outside of Canada and the United States. Canaccord Genuity
LLC and A.G.P. / Alliance Global Partners are not registered to sell the securities being distributed under the Offering in any Canadian jurisdiction and, accordingly, will only sell Units outside of Canada.
The Company has agreed to pay the Underwriters the Underwriters Fee equal to 5.0% of the gross proceeds from the Offering (including any
gross proceeds resulting from the exercise of the Over-Allotment Option), subject to a reduced fee of 2.5% for Units sold by the Underwriters to certain purchasers designated by the Company on a Presidents List. An aggregate of
4,493,400 Units are expected to be allocated to purchasers under the Presidents List. We have also agreed to reimburse the Underwriters for reasonable expenses incurred in connection with the Offering, including reasonable legal fees.
The Company has granted the Underwriters the Over-Allotment Option, exercisable in whole or in part, at any time and from time to time, at the
sole discretion of the Underwriters, for a period of 30 days from the Closing Date, to purchase up to an additional amount of Units equal to 15% of the Units sold pursuant to the Offering, being 8,340,000 Additional Units, at the Offering Price, to
cover over-allotments, if any, and for market stabilization purposes. This Prospectus Supplement, together with the Shelf Prospectus, qualifies the grant of the Over-Allotment Option and the Additional Securities issuable upon exercise of the
Over-Allotment Option, as well as the Warrant Shares issuable upon exercise of any Additional Warrants. A purchaser who acquires Additional Securities issuable on the exercise of the Over-Allotment Option acquires such Additional Securities under
this Prospectus Supplement regardless of whether the over-allotment position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. If the Over-Allotment Option is exercised in full, and assuming no
Units are purchased under the Presidents List, the total price to the public, the Underwriters Fee and the net proceeds to the Company (before payment of the expenses of the Offering) will be approximately $57,546,000, $2,877,300 and
$54,668,700, respectively.
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