TLRY Tilray Brands Inc

On October 10, 2018, Tilray, Inc. (“Tilray”) entered into an indenture relating to the issuance of $450 million aggregate principal amount of 5.00% Convertible Senior Notes due 2023 (the “notes”) (the “Indenture”) by and between Tilray and GLAS Trust Company LLC, as trustee (the “Trustee”).

The notes will bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2019. Additional interest may accrue on the notes in specified circumstances set forth in the Indenture, including upon Tilray’s failure to comply with certain reporting requirements. The notes will mature on October 1, 2023, unless earlier repurchased, redeemed or converted.

The notes are convertible, at a holder’s election, in multiples of $1,000 principal amount, into cash, shares of Tilray’s Class 2 common stock, par value $0.0001 (the “Common Stock”) or a combination of cash and shares of Tilray’s Common Stock, at Tilray’s election, at the applicable conversion rate (i) at any time prior to the close of business on the business day immediately preceding April 1, 2023 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Common Stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale of Common Stock and the conversion rate for the notes on each such trading day; (3) if Tilray calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date and (4) upon the occurrence of specified corporate events as set forth in the Indenture or (ii) at any time on or after April 1, 2023 until the close of business on the second scheduled trading day immediate preceding the maturity date, regardless of the foregoing circumstances.

The initial conversion rate for the notes is 5.9735 shares of Common Stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $167.41 per share of Common Stock), subject to adjustment as provided in the Indenture. The initial conversion rate represents a premium of approximately 15% to the $145.57 per share closing price of Common Stock on October 4, 2018. The conversion rate for the notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date or if Tilray delivers a notice of redemption in respect of the notes, Tilray will, under certain circumstances, increase the conversion rate of the notes for a holder who elects to convert its notes in connection with such a corporate event or notice of redemption, as the case may be.

Tilray may not redeem the notes prior to October 1, 2021. Tilray may redeem for cash all or any portion of the notes, at its option, on or after October 1, 2021 and on or before the 30th scheduled trading day immediately before the maturity date, if the last reported sale price of the Common Stock has been at least 130% of the conversion price for the notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which Tilray provides a notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the relevant redemption date. No sinking fund is provided for the notes.

If Tilray undergoes a fundamental change (as defined in the Indenture), holders may require Tilray to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding the fundamental change repurchase date.

The Indenture includes customary covenants and sets forth certain events of default after which the notes may be declared immediately due and payable and set forth certain types of bankruptcy or insolvency events of default involving Tilray after which the notes become automatically due and payable. The following events are considered “events of default” under the Indenture:

Notwithstanding the foregoing, the Indenture provides that, to the extent Tilray so elects, the sole remedy for an event of default relating to certain failures by Tilray to comply with certain reporting covenants in the Indenture will, for the first 365 days after such event of default, consist exclusively of the right to receive additional interest on the notes.

The notes are Tilray’s general unsecured obligations and rank senior in right of payment to all of Tilray’s indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment with any of Tilray’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of Tilray’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations) of Tilray’s current or future subsidiaries.

The Indenture provides that Tilray shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated properties and assets of Tilray to another person (other than any such sale, conveyance, transfer or lease to one or more of Tilray’s direct or indirect wholly owned subsidiaries), unless (i) the resulting, surviving or transferee person (if not Tilray) is a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, and such corporation (if not Tilray) expressly assumes by supplemental indenture all of Tilray’s obligations under the notes and the Indenture and (ii) immediately after giving effect to such transaction, no default or event of default has occurred and is continuing under the Indenture.

The net proceeds from this offering were approximately $435.0 million, after deducting the initial purchasers’ commissions and other fees and estimated expenses payable by Tilray. Tilray intends to use the net proceeds to repay the approximately $9.1 million existing mortgage related to its facility in Nanaimo, British Columbia. Tilray intends to use the remainder of the net proceeds for working capital, future acquisitions and general corporate purchases.

The summary of the foregoing transactions is qualified in its entirety by reference to the text of the Indenture and the Form of 5.00% Convertible Senior Note due 2023, which are filed as Exhibit 4.1 and 4.2, respectively, hereto and are incorporated herein by reference.

future market conditions. Actual results, performance or achievement could differ materially from that expressed in, or implied by, any forward-looking statements in this Current Report on Form 8-K, and, accordingly, you should not place undue reliance on any such forward-looking statements and they are not guarantees of future results. Forward-looking statements involve significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied in any forward-looking statements. Please see the heading “Risk Factors” in the final prospectuses for Tilray’s initial public offering, which were filed with the Securities and Exchange Commission on July 19, 2018, and Tilray’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, for a discussion of the material risk factors that could cause actual results to differ materially from the forward-looking information. Tilray does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.