Canopy Growth to receive exchangeable shares, warrants and debt in TerrAscend, increasing its direct conditional ownership in TerrAscend from approximately 13%[1] to approximately 21% of the issued and outstanding shares on a fully-diluted basis

Canopy Growth to increase ownership in Vert Mirabel from approximately 41% to approximately 67%

In exchange, Canopy Growth to fully retire its ownership interest in Canopy Rivers, which currently represents approximately 27% and approximately 84% of the voting rights, provide cash payment of $115 million and issue 3,750,000 common shares in Canopy Growth to Canopy Rivers.

Canopy Growth Corporation (“Canopy Growth”) (TSX: WEED, NASDAQ: CGC) today announced that it has entered into an arrangement agreement (the “Arrangement Agreement”) with its wholly-owned subsidiary The Tweed Tree Lot Inc. (“Tweed NB”), Canopy Rivers Inc. (“Canopy Rivers”) (TSX: RIV) and its wholly-owned subsidiary Canopy Rivers Corporation (“CRC”) pursuant to which Canopy Growth will acquire certain assets from CRC, as set out below, in exchange for cash, common shares in the capital of Canopy Growth (the “Canopy Growth Shares”) and the surrender of all shares in the capital of Canopy Rivers held by Canopy Growth by way of a plan of arrangement under the Business Corporations Act (Ontario) (the “Arrangement”).

“Canopy Rivers was established in 2017 as a strategic investment vehicle for Canopy Growth, helping us pursue key business opportunities including development of the Vert Mirabel greenhouse which today is a very important component of our Canadian cannabis operations,” said David Klein, CEO, Canopy Growth. “With our new strategy in place, it is appropriate for us to divest our interest in Canopy Rivers to increase our focus as a company.”

Pursuant to the Arrangement, Canopy Growth will increase its fully-diluted conditional ownership in TerrAscend Corp. (“TerrAscend”) from approximately 13% to approximately 21% through the acquisition of (i) 19,445,285 exchangeable shares in the capital of TerrAscend; (ii) 2,225,714 common share purchase warrants in the capital of TerrAscend with an exercise price of $5.95 per share; (iii) 333,723 common share purchase warrants in the capital of TerrAscend with an exercise price of $6.49 per share; and (iv) a $13.2 million loan receivable owing by TerrAscend Canada Inc. to CRC. The securities in the capital of TerrAscend are not currently convertible or exercisable, and will not be convertible or exercisable until federal laws in the United States with respect to marijuana are amended.

Subject to certain rights of first refusal, Canopy Growth will also acquire all of the common shares of Class A preferred shares in the capital of Les Serres Vert Cannabis Inc. (“Vert Mirabel”) held by CRC, thereby increasing Canopy Growth’s ownership of the issued and outstanding common shares in the capital of Vert Mirabel from approximately 41% to approximately 67%.

In addition, all of the obligations of Tweed NB, a Fredericton, New Brunswick based subsidiary of Canopy Growth that was recently closed, owing to CRC pursuant to a royalty agreement between the parties will be terminated. The termination of the royalty agreement will provide Canopy Growth with annual cash savings of approximately $2.9 million per year over the balance of the 24-year term of the agreement.

Canopy Growth currently owns 36,468,318 Class B multiple voting shares (“MVS”) and 15,223,938 Class A subordinate voting shares (“SVS”) in the capital of Canopy Rivers, which represent approximately a 27% ownership interest and 84% of the aggregate voting rights of Canopy Rivers. Pursuant to the Arrangement, all of the MVS and SVS held by Canopy Growth will be repurchased by Canopy Rivers for cancellation on a cashless basis. Canopy Growth will not have any equity, debt or other interest in Canopy Rivers following completion of the Arrangement.

As additional consideration for the assets being transferred and the termination of the royalty agreement, Canopy Growth will make a cash payment to CRC of $115 million and issue an aggregate of 3,750,000 Canopy Growth Shares.

The Arrangement will be subject to approval by 66 2/3 % of the votes cast by holders of MVS and SVS, voting separately on a class basis, as well as a simple majority of disinterested holders of SVS voting at a special shareholder meeting expected to be held in the first quarter of 2021. Certain funds managed by JW Asset Management, LLC and all of the directors and officers of Canopy Rivers holding an aggregate of approximately 24.5% of the issued and outstanding SVS (excluding the SVS held by Canopy Growth) have entered into voting support agreement agreements with Canopy Growth and Canopy Rivers pursuant to which they have agreed, among other things, to vote their SVS in favor of the resolution to approve the Arrangement. The Arrangement does not require the approval of the shareholders of Canopy Growth. In addition to shareholder approval, the Arrangement is subject to applicable approvals by the Ontario Superior Court of Justice, the TSX and Nasdaq and certain other regulatory and closing conditions.

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