Canopy USA Increases Conditional Ownership Of TerrAscend By Converting $91.8M Of Debt To Exchangeable Shares

TerrAscend Corp. TRSSF TER, has entered into an arrangement dated December 9, 2022 with Canopy USA, LLC CGC and certain of its subsidiaries to convert CA$125.5 million ($91.8 million) in aggregate loans plus accrued interest in exchange for 24.6 million exchangeable shares in the capital of TerrAscend at a notional price of CA$5.1 per exchangeable share and 22.5 million new common share purchase warrants to acquire common shares in the capital of TerrAscend at a weighted average exercise price of CA$6.07 per common share.

Jason Wild, executive chairman of TerrAscend, stated, "Canopy USA continues to be a trusted investor and partner. We thank them for their continued support as they increase their conditional ownership in the company. This transaction, combined with the recent $30 million pay down of our Michigan loan, materially improves our balance sheet and reduces annual interest expense by approximately $10 million."

TerrAscend, TerrAscend Canada Inc. and Arise Bioscience, Inc. (collectively, "TerrAscend entities") and Canopy USA, Canopy USA I Limited Partnership and Canopy USA III Limited Partnership entered into a debt settlement agreement pursuant to which the TerrAscend entities shall deliver to Canopy USA LP I and Canopy USA LP III an aggregate of 24.6 million exchangeable shares and new warrants with exercise prices ranging from CA$3.74 to CA$17.19 as consideration for extinguishing the debt obligations, including all principal and interest on the amounts outstanding thereunder.

All of the new warrants expire on December 31, 2032. Additionally, all of the existing warrants held by Canopy USA LP I and Canopy USA LP III consisting of 22.5 million warrants originally issued to Canopy Growth Corporation and RIV Capital Corporation CNPOF between 2019 and 2020 have been canceled.

Following the issuance of the new securities, Canopy USA holds 63.5 million exchangeable shares and 22.5 million new warrants and is deemed to own 1.1 million common shares that are subject to an option for an aggregate exercise price of $1.00. The exchangeable shares can be converted to common shares at Canopy USA LP I and Canopy USA LP III's option, subject to the federal legalization of marijuana in the United States and compliance with applicable exchange listing rules. With the addition of the exchangeable shares, Canopy USA's conditional ownership in TerrAscend increased from 12.0% to 18.2%. Assuming the exercise of the 22.5 million new warrants and the option to acquire 1.1 million common shares, Canopy would hold approximately 23.4% of TerrAscend on a partially-diluted basis.

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