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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:
☒ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☐ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to § 240.14a-12
Tilray, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
1.
Title of each class of securities to which transaction applies:
 
 
Class 2 Common Stock, $0.0001 par value per share (“Common Stock”)
 
2.
Aggregate number of securities to which transaction applies:
 
 
The following number of shares of Common Stock the Registrant will be issuing upon completion of the proposed business combination with Aphria Inc., a corporation existing under the laws of the Province of Ontario (“Aphria”), pursuant to the terms of an Arrangement Agreement, dated December 15, 2020, as amended, by and among the Registrant and Aphria: 265,464,463 shares of Common Stock, 4,389,312 shares of Common Stock issuable upon the exercise of Aphria stock options to be assumed by the Registrant; 3,128,522 shares of Common Stock underlying restricted stock units of Aphria to be assumed by the Registrant; 290,582 shares of Common Stock underlying deferred stock units of Aphria to be assumed by the Registrant; and 6,053,153 shares of Common Stock issuable upon the exercise of Aphria warrants to be assumed by the Registrant.
 
3.
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated by multiplying (x) 279,326,032, the aggregate number of securities to which the transaction applies, by (y) $31.08, representing the average of the high and low prices reported on the Nasdaq Global Select Market for a share of Common Stock on February 18, 2021.
 
4.
Proposed maximum aggregate value of transaction:
 
 
$8,681,453,075
 
5.
Total fee paid:
 
 
$947,147
In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filed fee was determined by multiplying $8,681,453,075 by .0001091.
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
1.
Amount Previously Paid:
 
 
 
 
2.
Form, Schedule or Registration Statement No.:
 
 
 
 
3.
Filing Party:
 
 
 
 
4.
Date Filed:
 
 
 

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PRELIMINARY MATERIALS – SUBJECT TO COMPLETION
Information contained in this preliminary form of joint proxy statement/management information circular
is not be complete and may have to be amended.


VOTE FOR THE BUSINESS COMBINATION OF APHRIA AND TILRAY TO CREATE THE
LARGEST GLOBAL CANNABIS COMPANY
[•], 2021
Dear Aphria Shareholders and Tilray Stockholders:
We are excited to invite you to attend the special meeting of shareholders (the “Aphria Meeting”) of Aphria Inc. (“Aphria”) and the special meeting of the stockholders (the “Tilray Meeting”) of Tilray Inc. (“Tilray”), both to be held on [•] to approve the proposed business combination between the two companies (the “Transaction”). The Aphria Meeting will take place via live audio webcast at www.virtualshareholdermeeting.com/APHA2021 on [•], 2021 at [•] (Eastern time) and the Tilray Meeting will take place via live audio webcast at www.virtualshareholdermeeting.com/TLRY2021SM, on [•], 2021 at [•] (Eastern time).
YOUR VOTE IS IMPORTANT. Whether or not you expect to attend the Aphria Meeting or the Tilray Meeting virtually, please submit your vote as soon as possible. We urge you to read the enclosed materials carefully and to promptly vote by following the instructions in the enclosed materials.
We thank you for your consideration and continued support.
Sincerely,
Irwin D. Simon
Chief Executive Officer and Chair of the
Board of Directors of Aphria Inc.
Brendan Kennedy
President, Chief Executive Officer, and Chair of
the Board of Directors of Tilray, Inc.

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EXECUTIVE SUMMARY
TRANSACTION DETAILS
The transaction (the “Transaction”) is to be completed pursuant to an arrangement (the “Arrangement”) under the Business Corporations Act (Ontario). Under the terms of the Arrangement, shareholders of Aphria will receive 0.8381 of a share of Tilray common stock for each Aphria share held. Tilray stockholders will continue to hold their Tilray common stock, which will remain outstanding. Upon the completion of the Transaction, it is expected that the Exchange Ratio will result in shareholders of each of Aphria and of Tilray will own approximately 62% and 38%, respectively, of the post-closing outstanding Tilray common stock (on a fully diluted basis), assuming there is no change in the issued and outstanding Tilray share numbers prior to closing, resulting in the reverse acquisition of Tilray.
Following the completion of the Transaction, the resulting company of the Arrangement (the “Combined Company”) will operate under the Tilray corporate name with shares trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “TLRY”. In addition, Tilray currently expects to list the Tilray common stock on the Toronto Stock Exchange (“TSX”) at, or as soon as practicable following, the completion of the Transaction.
STRATEGIC RATIONALE
Each of Aphria’s and Tilray’s respective boards of directors RECOMMEND THAT YOU VOTE “FOR” THE TRANSACTION as the combination of the two companies is expected to unlock significant shareholder value as follows:
The combination of Aphria and Tilray will create the world’s largest global cannabis company with pro forma revenue of US$685 million (C$874 million) for the last 12 months as reported by each company prior to the date of the announcement of the Transaction on December 16, 2020, the highest in the global cannabis industry.

The Combined Company is expected to have the strategic footprint and operational scale necessary to compete more effectively in today’s consolidating cannabis market with a strong, flexible balance sheet, strong cash balance and access to capital which Aphria and Tilray believe will give it the ability to accelerate growth and deliver long-term sustainable value for stockholders.
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The demand of the Combined Company will be supported by low-cost state-of-the-art cultivation, processing, and manufacturing facilities, and it will have a complete portfolio of branded cannabis 2.0 products in order to strengthen its leadership position in Canada.


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Internationally, the Combined Company will be well-positioned to pursue growth opportunities with its strong medical cannabis brands, distribution network in Germany and end-to-end European Union Good Manufacturing Practices (“EU-GMP”) supply chain, which includes its production facilities in Portugal and Germany.

In the United States, the Combined Company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater Brewing Company, LLC, a leading cannabis lifestyle branded craft brewer, and Manitoba Harvest USA, LLC, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. In the event of federal permissibility, the Combined Company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis products.

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The combination of Aphria and Tilray is expected to deliver approximately US$78 million (C$100 million) of annual pre-tax cost synergies within 24 months of the completion of the Transaction. The Combined Company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing, and corporate expenses.

BOARD RECOMMENDATIONS
Each of Aphria’s and Tilray’s respective boards of directors has unanimously approved the Transaction and recommends that you vote “FOR” the resolutions necessary to implement the Transaction and the respective proposals set forth in this Circular.
VOTE YOUR SHARES FOR THE TRANSACTION
We urge you to vote FOR the resolutions necessary to implement the Transaction and the respective proposals set forth in this Circular by promptly submitting your signed and dated proxy or voting instruction form in the postage-paid envelope provided, or alternatively, voting by telephone or via the internet as described in the easy instructions included on your form of proxy or voting instruction form.
VOTING INSTRUCTIONS FOR APHRIA SHAREHOLDERS
Registered and beneficial Aphria shareholders may vote using the following methods:
Internet: Go to www.proxyvote.com and enter the 16-digit control number printed on the form of proxy or voting instruction form or scan the QR Code on the Aphria form of proxy to access the website and follow the instructions on the screen.
Telephone: Call the toll-free telephone number provided on the form of proxy or voting instruction form and follow the prompted voting instructions. You will need to enter the 16-digit control number.
Mail: Enter voting instructions, sign and date the form of proxy or voting instruction form and return your completed form of proxy or voting instruction form in the enclosed postage paid envelope to:
Data Processing Centre
P.O. Box 3700 STN Industrial Park
Markham, ON L3R 9Z9
If you hold your Aphria shares through an intermediary, please follow the instructions on the voting instruction form provided by such intermediary to ensure that your vote is counted at the Aphria Meeting.
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VOTING INSTRUCTIONS FOR TILRAY STOCKHOLDERS
Tilray registered and beneficial shareholders may vote using the following methods:
Internet: Go to www.proxyvote.com and enter the 16-digit control number printed on the form of proxy or voting instruction form and follow the instructions on the screen.
Telephone: Call the toll-free telephone number provided on the form of proxy or voting instruction form and follow the prompted voting instructions. You will need to enter the 16-digit control number.
Mail: Enter your voting instructions, sign and date the form of proxy or voting instruction form and return the completed form of proxy or voting instruction form in the enclosed postage paid envelope to:
Vote Processing, c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717
VOTE YOUR SHARES TODAY
If you are an Aphria Shareholder and have questions or require assistance with voting, you may contact our proxy
solicitation agent:
LAUREL HILL ADVISORY GROUP
North American Toll-Free Number: 1-877-452-7184
Collect Calls Outside North America: 416-304-0211
Email: assistance@laurelhill.com
If you are a Tilray Stockholder and have questions or require assistance with voting, you may contact our proxy
solicitation agent:
MACKENZIE PARTNERS, INC.
North American Toll-Free Number: 1-800-322-2885
Collect Calls Outside North America: 1-212-929-5500
Email: proxy@mackenziepartners.com
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PRELIMINARY MATERIALS – SUBJECT TO COMPLETION
Information contained in this preliminary form of joint proxy statement/management information circular
is not be complete and may be amended.

NOTICE OF SPECIAL MEETING OF APHRIA SHAREHOLDERS

to be held [•], 2021
NOTICE IS HEREBY GIVEN that, pursuant to an order of the Ontario Superior Court of Justice (Commercial List) (the “Court”) dated [] (the “Interim Order”), a special meeting (the “Aphria Meeting”) of holders (“Aphria Shareholders”) of common shares (“Aphria Shares”) of Aphria Inc. (“Aphria”) will be held online on [], 2021 at [] (Eastern time) via live audio webcast at www.virtualshareholdermeeting.com/APHA2021. There will be no physical location for Aphria Shareholders to attend. Online check-in will begin at [] a.m. (Eastern time), and we encourage you to allow ample time for the online check-in procedures. To participate in the Aphria Meeting, Aphria Shareholders will need their unique 16-digit control number included on the Aphria form of proxy or the voting instruction form.
The Aphria Meeting is being called for the following purposes:
1.
to consider and, if thought advisable, to pass a special resolution (the “Aphria Resolution”), the full text of which is set forth in Appendix “C” to the accompanying joint proxy statement/management information circular (the “Circular”), approving an arrangement (the “Arrangement”) pursuant to Section 182 of the Business Corporations Act (Ontario) (the “OBCA”) involving, among other things, the acquisition by Tilray, Inc. (“Tilray”), of all of the outstanding Aphria Shares, all as more particularly described in the Circular, including in the section entitled “The Arrangement Agreement and Related Agreements” beginning on page [•] of the Circular, which resolution, to be effective, must be passed by an affirmative vote of at least two-thirds of the votes cast at the Aphria Meeting by Aphria Shareholders either online, by proxy or by voting instruction form, as applicable; and
2.
to transact such further and other business as may properly be brought before the Aphria Meeting or any postponement or adjournment thereof.
Specific details of the matters proposed to be put before the Aphria Meeting are set forth in the Circular which accompanies this Notice of Special Meeting of Aphria Shareholders. A copy of the arrangement agreement dated December 15, 2020, as amended on February 19, 2021, between Aphria and Tilray is attached as Appendix “A” to the Circular and is available for inspection by Aphria Shareholders on SEDAR at www.sedar.com under Aphria’s SEDAR profile and at Aphria’s records office at 1 Adelaide Street East, Suite 2310, Toronto, Ontario M5C 2V9 during statutory business hours until the date of the Aphria Meeting.
The record date for determining the Aphria Shareholders entitled to receive notice of and vote at the Aphria Meeting is the close of business on [•], 2021 (the “Aphria Record Date”). Only Aphria Shareholders whose names have been entered in the register of Aphria Shareholders as of the close of business on the Aphria Record Date are entitled to receive notice of and to vote at the Aphria Meeting.
Whether or not you are able to virtually attend the Aphria Meeting, you are encouraged to provide voting instructions in accordance with the instructions on the enclosed form of proxy or voting instruction form provided to you by your broker, investment dealer or other intermediary as soon as possible by (1) visiting the internet site listed on the Aphria form of proxy or voting instruction form, (2) calling the toll-free number listed on the Aphria form of proxy or voting instruction form or (3) submitting your enclosed Aphria form of proxy or voting instruction form by mail by using the provided self-addressed, stamped envelope. To be counted at the Aphria Meeting, an Aphria Shareholder’s voting instructions must be received by [•] (Eastern time) on [•], 2021 or if the Aphria Meeting is postponed or adjourned, at least 48 hours (excluding non-Business Days) prior to the date of the postponed or adjourned Aphria Meeting). Please note, if you received a voting instruction form and you hold your shares through a broker, investment dealer or other intermediary, you must provide your instructions to your broker, investment dealer or other intermediary as specified in the voting instruction form and by the deadline set out therein (which may be an earlier time than set out above). Aphria reserves the right to accept late proxies and to waive the proxy cut-off, with or without notice, but is under no obligation to accept or reject any particular late proxy.

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The Aphria Board unanimously recommends that Aphria Shareholders vote FOR the Aphria Resolution.
Aphria Shareholders who are planning to provide voting instructions in accordance with the enclosed form of proxy or voting instruction form are encouraged to review the Circular carefully before submitting such form.
Registered Aphria Shareholders have the right to dissent with respect to the Aphria Resolution and, if the Arrangement becomes effective, to be paid the fair value of their Aphria Shares in accordance with the provisions of Section 185 of the OBCA, as modified by the Interim Order and the plan of arrangement (“Plan of Arrangement”). A registered Aphria Shareholder’s right to dissent is more particularly described in the Circular under the heading “Aphria Dissenting Shareholders’ Rights”. Copies of the Plan of Arrangement, the Interim Order and the text of Section 185 of the OBCA are set forth in Appendix “B”, Appendix “D” and Appendix “K”, respectively, to the Circular.
Failure to strictly comply with the requirements set forth in Section 185 of the OBCA, as modified by the Interim Order and the Plan of Arrangement, may result in the loss of any right of dissent.
It is strongly suggested that any Aphria Shareholder wishing to dissent seek independent legal advice, as the failure to comply strictly with the provisions of the OBCA, as modified by the Interim Order and the Plan of Arrangement, may result in the loss of such Aphria Shareholder’s right to dissent.
If you are an Aphria Shareholder and have any questions, please contact Laurel Hill, our proxy solicitation agent, by telephone at 1-877-452-7184 toll-free in North America or at 416-304-0211 for collect calls outside of North America or by email at assistance@laurelhill.com.
DATED [•], 2021.
 
BY ORDER OF THE BOARD OF DIRECTORS
 
 
 
(signed) “Irwin D. Simon”
 
Irwin D. Simon
 
Chief Executive Officer and Chair of the Board of Directors

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NOTICE TO APHRIA SHAREHOLDERS IN THE UNITED STATES
THE TILRAY SHARES TO BE ISSUED IN CONNECTION WITH THE ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY AUTHORITY IN ANY STATE IN THE UNITED STATES, NOR HAVE THE SEC OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE IN THE UNITED STATES PASSED ON THE ADEQUACY OR ACCURACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
The Tilray shares to be issued under the Arrangement will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state of the United States. Such securities will be issued in reliance upon the exemption from registration provided by section 3(a)(10) of the U.S. Securities Act on the basis of the approval of the Court, which will consider, among other things, the fairness of the Arrangement to the persons affected. See “Description of the Arrangement – Court Approval”. The Tilray shares to be issued under the Arrangement will not be subject to resale restrictions under the U.S. Securities Act, except for restrictions imposed by the U.S. Securities Act on the resale of Tilray shares received pursuant to the Arrangement by persons who are, or within three months before the resale were, “affiliates” of Tilray. See “U.S. Securities Law Matters”.
Aphria Shareholders who are citizens or residents of the United States should be aware that the Arrangement described herein may have both U.S. and Canadian tax consequences to them which may not be fully described in this Circular. For a general discussion of the Canadian and U.S. federal income tax consequences to investors who are resident in the United States, see “Certain Canadian Federal Income Tax Considerations” and “Certain U.S. Federal Income Tax Considerations”. U.S. holders are urged to consult their own tax advisors with respect to such U.S. and Canadian income tax consequences and the applicability of any federal, state, local, foreign and other tax laws.
Aphria is a “foreign private issuer” within the meaning of Rule 3b-4 of the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”), and, therefore, this solicitation of proxies is not subject to the proxy requirements of section 14(a) of the U.S. Exchange Act. Accordingly, the solicitation of proxies contemplated herein is made in accordance with Canadian corporate and securities laws, and this Circular has been prepared in accordance with the disclosure requirements of Canadian securities laws. Aphria Shareholders located or resident in the United States should be aware that, in general, such Canadian disclosure requirements are different from those applicable to proxy statements, prospectuses or registration statements prepared in accordance with U.S. laws. The financial statements of Aphria incorporated by reference herein have been prepared in accordance with international financial reporting standards (“IFRS”) as issued by the International Accounting Standards Board and have been subject to Canadian generally accepted auditing standards. Accordingly, the financial statements of Aphria may not be comparable to financial statements prepared in accordance with U.S. GAAP. The principal differences between IFRS and accounting principles generally accepted in the United States of America (“U.S. GAAP”) as they apply to Aphria are summarized in the notes to the unaudited pro forma condensed combined financial statements of Tilray that give effect to the Arrangement, which are set forth in Appendix “L” to this Circular.
The enforcement by investors of civil liabilities under U.S. Securities Laws may be affected adversely by the fact that Aphria is organized under the laws of a jurisdiction outside the United States, that its officers and directors include residents of countries other than the United States, that some or all of the experts named in this Circular may be residents of countries other than the United States, or that all or a substantial portion of the assets of Aphria, and such persons are located outside the United States. As a result, it may be difficult or impossible for shareholders in the United States to effect service of process within the United States on Aphria, or such persons, or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under the securities laws of the United States. In addition, the shareholders in the United States should not assume that the courts of Canada: (a) would enforce judgments of U.S. courts obtained in actions against such persons predicated upon civil liabilities under the securities laws of the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the securities laws of the United States.

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PRELIMINARY MATERIALS – SUBJECT TO COMPLETION
Information contained in this preliminary form of joint proxy statement/management information circular
is not be complete and may have to be amended.

NOTICE OF SPECIAL MEETING OF TILRAY STOCKHOLDERS

to be held [•], 2021
NOTICE IS HEREBY GIVEN that a special meeting (the “Tilray Meeting”) of the holders (“Tilray Stockholders”) of shares of class 2 common stock of Tilray, Inc., a Delaware corporation (“Tilray”) will be held online on [], 2021 at [] a.m. (Eastern time) via live webcast at www.virtualshareholdermeeting.com/TLRY2021SM. There will be no physical location for Tilray Stockholders to attend. Online check-in will begin at [] a.m. (Eastern time), and we encourage you to allow ample time for the online check-in procedures. To participate in the Tilray Meeting, Tilray Stockholders will need their unique 16-digit control number included on their Tilray proxy card (printed in the box and marked by the arrow) or the instructions that accompanied the proxy materials.
The Tilray Meeting is being called for the following purposes:
1.
To consider and vote on a proposal to increase the authorized capital stock of Tilray from 743,333,333 shares to 900,000,000 shares of capital stock, consisting of 890,000,000 shares of Class 2 common stock and 10,000,000 shares of preferred stock, as reflected in the amendment to the second amended and restated certificate of incorporation of Tilray attached as Appendix “F” to the Circular (the “Tilray Charter Amendment”), which is further described in the accompanying joint circular and proxy statement (the “Circular”) and a copy of the Tilray Charter Amendment is attached as Appendix “F” (the “Tilray Charter Amendment Proposal”).
2.
To consider and vote on a proposal to issue Tilray Class 2 common stock (the “Tilray Shares”) to Aphria Shareholders pursuant to the arrangement agreement dated December 15, 2020, as amended on February 19, 2021 between Aphria Inc. and Tilray (the “Arrangement Agreement”), which is further described in the Circular, including in the section entitled “The Arrangement Agreement and Related Agreements” beginning on page [•] of the Circular, and a copy of the Arrangement Agreement is attached as Appendix “A” (the “Tilray Share Issuance Proposal”);
3.
To consider and approve, on an advisory (non-binding) basis, the compensation that may be paid to Tilray’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Arrangement Agreement, which is further described in the Circular, including in the section entitled “Interests of Tilray’s Directors and Management in the Arrangement” beginning on page [•] of the Circular (the “Tilray Advisory Compensation Proposal”); and
4.
To approve the adjournment of the Tilray Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Tilray Meeting to approve the Tilray Charter Amendment Proposal or the Tilray Share Issuance Proposal (the “Tilray Adjournment Proposal”).
The Tilray Charter Amendment Proposal, the Tilray Share Issuance Proposal, the Tilray Advisory Compensation Proposal and the Tilray Adjournment Proposals are together referred to as the “Tilray Proposals”.
Specific details of the matters proposed to be put before the Tilray Meeting are set forth in this Circular, which accompanies this Notice of Special Meeting of Tilray Stockholders (“Notice of Tilray Meeting”). A copy of the Arrangement Agreement is attached as Appendix “A” to the Circular and is available for inspection by Tilray Stockholders on the U.S. Securities and Exchange Commission website at www.sec.gov under Tilray’s SEC profile.
The record date for determining the Tilray Stockholders entitled to receive notice of and vote at the Tilray Meeting is the close of business on [•], 2021 (the “Tilray Record Date”). Only Tilray Stockholders of record at the close of business on the Tilray Record Date are entitled to vote at the Tilray Meeting or any adjournment thereof.
Whether or not you are able to virtually attend the Tilray Meeting, you are encouraged to provide voting instructions in accordance with the instructions on the enclosed form of proxy or voting instruction form provided to you by your

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broker, investment dealer or other intermediary as soon as possible by (1) visiting the internet site listed on the enclosed Tilray proxy card, (2) calling the toll-free number listed on the enclosed Tilray proxy card, or (3) submitting your enclosed Tilray proxy card by mail by using the provided self-addressed, stamped envelope. To be counted at the Tilray Meeting, a Tilray Stockholder’s voting instructions must be received by [•] p.m. (Eastern time) on [•]. Please note, if you received a voting instruction form and you hold your shares through a broker, investment dealer or other intermediary, you must provide your instructions to your broker, investment dealer or other intermediary as specified in the voting instruction form and by the deadline set out therein (which may be an earlier time than set out above).
The Tilray Board unanimously recommends that Tilray Stockholders vote FOR the Tilray Proposals.
Please note that the approval of Tilray Stockholders to each of the Tilray Charter Amendment Proposal and the Tilray Share Issuance Proposal is required in order to complete the Arrangement.
Tilray Stockholders should carefully read this Circular, including any documents incorporated by reference, and the appendices in their entirety for more detailed information concerning the Arrangement and the other transactions contemplated by the Arrangement Agreement.
Tilray Stockholders who are planning to provide voting instructions in accordance with the enclosed form of proxy or voting instruction form are encouraged to review the Circular carefully before submitting such form.
If you are a Tilray Stockholder and have any questions, please contact MacKenzie Partners, our proxy solicitation agent, by telephone at 1-800-322-2885 toll-free in North America or at 1-212-929-5500 for collect calls outside of North America or by email at proxy@mackenziepartners.com.
DATED [•], 2021.
 
BY ORDER OF THE BOARD OF DIRECTORS
 
 
 
(signed) “Brendan Kennedy”
 
Brendan Kennedy
 
Chief Executive Officer

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JOINT PROXY STATEMENT/MANAGEMENT INFORMATION CIRCULAR
This Circular is being furnished in connection with the solicitation of proxies by management of Aphria Inc. (“Aphria”) for use at the special meeting of Aphria Shareholders (the “Aphria Meeting”) to be held at the date, time and place and for the purposes set forth in the attached Notice of Aphria Meeting.
This Circular is also being furnished to holders of Class 2 common stock of Tilray, Inc. (“Tilray”), a Delaware corporation, in connection with the solicitation of proxies by management of Tilray for use at the special meeting of Tilray Stockholders (the “Tilray Meeting”) to be held at the date, time and place and for the purposes set forth in the attached Notice of Tilray Meeting.
DEFINED TERMS
This Circular contains defined terms. For a glossary of defined terms used herein, see Appendix “M” to this Circular.
QUESTIONS AND ANSWERS ABOUT THE ARRANGEMENT AND THE MEETINGS
General Questions and Answers
Q:
What are Aphria and Tilray proposing?
A:
Aphria and Tilray are proposing to combine their businesses pursuant to an Arrangement under the OBCA. Under the terms of the Arrangement, Aphria Shareholders will receive 0.8381 of a Tilray Share for each Aphria Share. Tilray Stockholders will continue to hold their Tilray Shares, which will remain outstanding. The Transaction will, among other things, include the following:
All outstanding Aphria Shares will be exchanged for Tilray Shares as described under “What will I receive for my shares under the Arrangement?” below;
Tilray Stockholders will retain their Tilray Shares;
Aphria will become a wholly-owned subsidiary of Tilray; and
Tilray, a Delaware corporation, will make an amendment to its certificate of incorporation to implement the arrangement, all as described in this Circular and if approved at the Tilray meeting;
The Arrangement will be carried out in accordance with the Arrangement Agreement dated December 15, 2020, as amended on February 19, 2021, between Aphria and Tilray, and the documents referred to in the Arrangement Agreement. Upon the completion of the Arrangement, it is expected that the Exchange Ratio will result in Aphria Shareholders will own approximately 62% of the outstanding Tilray Shares on a fully diluted basis, and Tilray Stockholders will own approximately 38% of the outstanding Tilray Shares on a fully diluted basis, resulting in the reverse acquisition of Tilray.
Q:
Why are Aphria and Tilray proposing to combine?
A:
The Aphria Board and the Tilray Board each believe that, at this stage of development and expansion of the global cannabis market, companies with financial strength, a strategic footprint and scale, a diverse product range, brand expertise and strong leadership are most likely to succeed in the long-term. The following are the key benefits of the combination:
World’s Largest Global Cannabis Company. The combination of Aphria and Tilray will create the world’s largest global cannabis company with pro forma revenue of US$685 million (C$874 million) for the last 12 months as reported by each company prior to the date of the announcement of the Transaction on December 16, 2020, the highest in the global cannabis industry.
Strategic Footprint and Operational Scale. The Combined Company is expected to have the strategic footprint and operational scale necessary to compete more effectively in today’s consolidating cannabis market with a strong, flexible balance sheet, strong cash balance and access to capital, which Aphria and Tilray believe will give it the ability to accelerate growth and deliver long-term sustainable value for stockholders.
Low-Cost State-of-the-Art Production & The Leading Canadian Adult-Use Cannabis Producer. The demand of the Combined Company will be supported by low-cost state-of-the-art cultivation, processing, and manufacturing facilities and it will have a complete portfolio of branded Cannabis 2.0 products in order to strengthen its leadership position in Canada.
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Positioned to Pursue International Growth. Internationally, the Combined Company will be well-positioned to pursue growth opportunities with its strong medical cannabis brands, distribution network in Germany and end-to-end European Union Good Manufacturing Practices (“EU-GMP”) supply chain, which includes its production facilities in Portugal and Germany.
Enhanced Consumer Packaged Goods Presence and Infrastructure in the U.S. In the United States, the Combined Company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater, a leading cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. In the event of federal permissibility, the Combined Company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis products.
Substantial Synergies. The combination of Aphria and Tilray is expected to deliver approximately US$78 million (C$100 million) of annual pre-tax cost synergies within 24 months of the completion of the Transaction. The Combined Company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses.
For more information see “Description of the Arrangement – Our Reasons for the Arrangement”.
Q:
What will I receive for my shares under the Arrangement?
A:
Aphria Shareholders. Under the Arrangement and subject to the terms of the Plan of Arrangement, each Aphria Shareholder will receive, for each Aphria Share held, 0.8381 of a Tilray Share. You will no longer own any Aphria Shares, but instead will own Tilray Shares. As an example, if you owned 1,000 Aphria Shares on the closing day of the Transaction, after the closing, you will own 838 Tilray Shares (since no fractional Tilray Shares are issued).
Tilray Stockholders. Under the Arrangement, Tilray Stockholders will retain their Tilray Shares.
Q:
Why am I receiving 0.8381 of a Tilray Share for each of my Aphria Shares?
A:
The agreed Exchange Ratio is 0.8381. This means that on closing, each holder of Aphria shares will receive 0.08381 of a Tilray Share for each Aphria Share. Since Tilray currently has approximately 165,387,000 shares outstanding and Aphria has approximately 321,953,000 outstanding, each on a fully diluted basis, on the closing of the Transaction, it is expected that the Exchange Ratio will result in Aphria Shareholders owning approximately 62% of the outstanding shares of Tilray, and existing Tilray Stockholders owning approximately 38% of the outstanding shares of Tilray. If there is no change in the issued and outstanding share numbers prior to closing, Tilray is expected to issue approximately 269,841,400 new shares to Aphria Shareholders (269,841,400 / (165,387,000 + 269,841,400) = 62%) in exchange for their Aphria Shares.
Expressed graphically:(1)



(1) This graph assumes no change in the number of current issued and outstanding shares.
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Q:
How do I calculate the value of the Tilray Shares that I receive?
A:
The value of the Tilray Shares that you will receive on closing of the Transaction in exchange for your Aphria Shares will depend on the trading price of Tilray Shares on the day the Transaction is completed. To help you value what you will receive under the Transaction for your Aphria Shares, see the example below:
If you bought your Aphria Shares on the TSX, then:
Step 1: Calculate the number of Tilray Shares that you will receive.
Calculate the number of Tilray Shares that you will receive on closing by multiplying the number of Aphria Shares that you own by 0.8381 (which is the Exchange Ratio).
Step 2: Calculate the value of the Tilray Shares that you will receive in US$.
Multiply the answer from Step 1 by the current value of each Tilray Share.
Step 3: Calculate the value of the Tilray Shares that you will receive in C$.
Multiply the answer from Step 2 by the US$ to C$ foreign exchange rate since the Tilray Shares currently trade in US$. This will give you the value of the Tilray Shares to be received in C$.
As an example, assume that:
The value of each Tilray Share is US$20.00.
1 US dollar = 1.2756 Canadian dollar
You own 1,000 Aphria Shares
1,000 Aphria Shares X 0.8381 = 838 Tilray Shares
838 Tilray Shares X US$20.00 per Tilray Share =US$16,760.00
US$16,760.00 X 1.2756 = C$21,379.06 (or C$21.38 per Aphria Share that you own)
If you bought your Aphria Shares on the Nasdaq, then:
Step 1: Calculate the number of Tilray Shares that you will receive
Calculate the number of Tilray Shares that you will receive on closing by multiplying the number of Aphria Shares that you own by 0.8381 (which is the Exchange Ratio).
Step 2: Calculate the value of the Tilray Shares that you will receive in US$.
Multiply the answer from Step 1 by the current value per Tilray Share.
1,000 Aphria Shares X 0.8381 = 838 Tilray Shares
838 Tilray Shares X the current value per Tilray Share
Current and recent share price and trading data, and US$/C$ exchange rates, can be found at your preferred market data sources, or the following:
APHA trading on TSX: https://money.tmx.com/en/quote/APHA
APHA trading on Nasdaq: https://www.nasdaq.com/market-activity/stocks/apha
TLRY trading on Nasdaq: https://www.nasdaq.com/market-activity/stocks/tlry
US$:C$ exchange rate: https://www.oanda.com/us-en/trading/instruments/usd-cad/
Q:
Will I receive fractional Tilray Shares?
A:
No. If the total number of Tilray Shares that you will be entitled to receive would result in a fraction of a Tilray Share being issuable, the number of Tilray Shares you will receive will be rounded down to the nearest whole Tilray Share.
Q:
What approvals are required for the Arrangement to be implemented?
A:
The completion of the Arrangement requires the approval from the Aphria Shareholders and the Tilray Stockholders, receipt of the Final Order from the Court, and receipt of the Required Regulatory Approvals. See
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“Regulatory Matters – Competition Act Approval”, “Regulatory Matters – HSR Act Approval”, Regulatory Matters – German FDI Approval”, “Description of the Arrangement – Court Approval” and “Description of the Arrangement – Stock Exchange Listing”.
Q:
When will the Arrangement become effective?
A:
Subject to obtaining the approvals described above, as well as the satisfaction or waiver of all other conditions precedent set out in the Arrangement Agreement, it is anticipated that the Arrangement will be completed on or about [•], 2021.
Q:
What will happen to Aphria if the Arrangement is completed?
A:
If the Arrangement is completed, Tilray will acquire all outstanding Aphria Shares and Aphria will become a wholly-owned subsidiary of Tilray. Tilray intends to have the Aphria Shares delisted from the TSX.
Q:
Are the Tilray Shares listed on a stock exchange?
A:
Tilray Shares are currently listed on the Nasdaq under the symbol “TLRY” and trade in U.S. dollars. In addition, Tilray currently expects to list the Tilray Shares on the TSX at, or as soon as practicable following, the Effective Time, which will trade in Canadian dollars. Consequently, following the closing, Aphria Shareholders are expected to be able to trade their Tilray Shares on either exchange, in either currency. See “The Arrangement Agreement and Related Agreements – Covenants”.
Q:
What are the Canadian federal income tax consequences of the Arrangement?
A:
Aphria Shareholders who are residents of Canada for purposes of the Tax Act should be aware that the exchange of Aphria Shares for Tilray Shares under the Arrangement will be a taxable transaction for Canadian federal income tax purposes. Aphria Shareholders who are non-residents of Canada for purposes of the Tax Act and that do not hold their Aphria Shares as “taxable Canadian property” will generally not be subject to tax under the Tax Act on the exchange of their Aphria Shares for Tilray Shares under the Arrangement.
For a summary of certain of the principal Canadian federal income tax consequences of the Arrangement applicable to Aphria Shareholders, see below under the heading “Certain Canadian Federal Income Tax Considerations”. Such summary is not intended to be legal, business or tax advice. Aphria Shareholders should consult their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.
Q:
What are the U.S. federal income tax consequences of the Arrangement?
A:
Aphria Shareholders should not recognize gain or loss as a result of the Arrangement for U.S. tax purposes. Each holder’s aggregate tax basis in Tilray Shares received should equal the aggregate tax basis of the holder’s Aphria Shares surrendered in the Arrangement, as applicable. Each holder’s holding period for Tilray Shares received in the Arrangement should include such holder’s holding period for the Aphria Shares surrendered in the Arrangement.
Holders who acquired different blocks of Aphria Shares with different holding periods and tax bases must generally apply the foregoing rules separately to each identifiable block of Aphria Shares. Any such holder should consult its tax advisor with regard to identifying the bases or holding periods of the particular shares of Tilray Shares received in the Arrangement.
However, since your tax circumstances may be unique, you should consult your tax advisor to determine the tax consequences of the Arrangement.
See “Certain U.S. Federal Income Tax Considerations” for a more detailed discussion of the U.S. federal income tax treatment of the Arrangement.
Q:
What will happen if the Aphria Resolution is not approved or the Tilray Resolutions are not approved or the Arrangement Agreement is terminated?
A:
If the Aphria Resolution is not approved, the Arrangement Agreement may be terminated by either Aphria or Tilray, and in the event it is terminated, Aphria will be required to pay to Tilray its Transaction Expenses (up
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to a maximum of C$10 million) provided that the Tilray Resolutions have been approved. If the Tilray Resolutions have not been approved, the Arrangement Agreement may be terminated by either Aphria or Tilray, and in the event it is terminated, Tilray will be required to pay to Aphria its Transaction Expenses (up to a maximum of C$10 million), provided that the Aphria Resolution has been approved. A Party may be required to pay the other Party a Termination Amount of C$65 million if the Arrangement Agreement is terminated in certain circumstances as described in this Circular. If the Arrangement Agreement is terminated and the Arrangement is not completed, the market price of Aphria Shares and the Tilray Shares may be materially adversely affected. See “The Arrangement Agreement and Related Agreements – Termination” and “Risk Factors – Risks Related to the Arrangement”.
Q:
Are there risks I should consider in deciding whether to vote for the proposed Arrangement?
A:
Yes. The proposed Arrangement is subject to a number of risks and uncertainties. There can be no certainty that all conditions precedent to the Arrangement will be satisfied or waived, and, accordingly, the Arrangement may not be completed. For example: (i) the Required Regulatory Approvals may not be obtained and, therefore, the market price of Aphria Shares and Tilray Shares may be affected; (ii) the Arrangement may be terminated in certain circumstances and the termination amount provided under the Arrangement Agreement may discourage other parties from attempting to acquire Aphria or Tilray; and (iii) if the Arrangement is consummated, the difficulties that management of the Combined Company may encounter in the process of integrating the business and operations of Aphria and Tilray could have an adverse effect on the revenues, level of expenses and operating ‎results of the Combined Company.
Before deciding whether to vote for or against the Transaction, you should carefully consider these and other risks as well as the more detailed discussion of risks found at “Risk Factors – Risks Related to the Arrangement” and other information included in this Circular.
Aphria Shareholder Questions and Answers
Q:
When and where is the Aphria Meeting?
A:
The Aphria Meeting will be held on [•] 2021 at [•] (Eastern time). In light of the recent coronavirus (COVID-19) pandemic and in order to address potential issues arising from the unprecedented public health impact of COVID-19, comply with applicable public health directives that may be in force at the time of the Aphria Meeting and to limit and mitigate risks to the health and safety of our communities, Aphria Shareholders, employees, directors and other stakeholders, the Aphria Meeting will be held in a virtual format. Aphria Shareholders may participate by logging in online at www.virtualshareholdermeeting.com/APHA2021, where they will be able to virtually attend the Aphria Meeting via live audio webcast. Online check-in will begin at [•] a.m. (Eastern time), and we encourage you to allow ample time for the online check-in procedures. To participate in the Aphria Meeting, Aphria Shareholders will need their unique 16-digit control number included on the form of proxy or voting instruction form, as applicable.
Q:
What am I voting on?
A:
You are being asked to consider and approve the Arrangement involving, among other things, the acquisition by Tilray of all of the outstanding Aphria Shares pursuant to the Arrangement Agreement.
Q:
Does the Aphria Board support the Arrangement?
A:
Yes. The Aphria Board has unanimously determined that the Arrangement is in the best interests of Aphria and recommends that Aphria Shareholders vote FOR the Aphria Resolution.
In making its recommendation, the Aphria Board considered a number of factors as described in this Circular under “Description of the Arrangement – Our Reasons for the Arrangement”, “Description of the Arrangement – Recommendation of the Aphria Board”, and “Description of the Arrangement – Factors Considered by the Aphria Board”, including the opinion from Jefferies to the effect that, as of the date of such opinion, based upon and subject to the limitations and assumptions set out therein and such other matters as Jefferies considered relevant, the Exchange Ratio is fair, from a financial point of view, to Aphria Shareholders. See “Description of the Arrangement – Opinion of Aphria’s Financial Advisor”.
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Q:
What approvals are required by Aphria Shareholders at the Aphria Meeting?
A:
To be effective, the Aphria Resolution must be approved by the affirmative vote of at least two-thirds of the votes cast on the Aphria Resolution by Aphria Shareholders, virtually present or represented by proxy at the Aphria Meeting. See “General Information about the Aphria Meeting and Voting – Purpose of the Aphria Meeting”.
Q:
Are Aphria Shareholders entitled to Dissent Rights?
A:
Yes. Registered holders of Aphria Shares are entitled to Dissent Rights only if they follow the procedures specified in the OBCA, as modified by the Interim Order and the Plan of Arrangement. Persons who are beneficial owners of Aphria Shares registered in the name of an Intermediary who wish to dissent should be aware that only registered Aphria Shareholders are entitled to Dissent Rights.
If you wish to exercise Dissent Rights, you should review the requirements summarized in this Circular carefully and consult with your legal advisor. See “Aphria Dissenting Shareholders’ Rights”.
Q:
How do I vote on the Aphria Resolution?
A:
You should carefully read and consider the information contained in this Circular. Registered Aphria Shareholders should then vote by (1) visiting the internet site listed in the enclosed Aphria form of proxy or voting instruction form, (2) calling the toll-free number listed on the enclosed Aphria form of proxy or voting instruction form, or (3) submitting your enclosed Aphria form of proxy or voting instruction form by mail by using the provided self-addressed, pre-paid envelope. To be counted at the Aphria Meeting, an Aphria Shareholder’s voting instructions must be received by [•] (Eastern time) on [•], 2021, or if the Aphria Meeting is postponed or adjourned, at least 48 hours (excluding non-Business Days) prior to the date of the postponed or adjourned Aphria Meeting. Aphria reserves the right to accept late proxies and to waive the proxy cut-off, with or without notice, but is under no obligation to accept or reject any particular late proxy. See “General Information about the Aphria Meeting and Voting – Registered Aphria Shareholders”.
Registered Aphria Shareholders and non-registered Aphria Shareholders who wish to appoint a person other than the management nominees identified on the applicable form of proxy or voting instruction form to represent them at the Aphria Meeting will also need to appoint such proxyholder online at www.proxyvote.com or by completing the “Appointee” section on the form of proxy or voting instruction form. If you do not designate the “Appointee Information” when completing your form of proxy or voting instruction form or if you do not provide the exact “Appointee Identification Number” and “Appointee Name” to any other person (other than the named proxyholders) who has been appointed to access and vote at the Aphria Meeting on your behalf, that other person will not be able to access the Aphria Meeting and vote on your behalf.
If you hold your Aphria Shares through an Intermediary, please follow the instructions on the voting instruction form provided by such Intermediary to ensure that your vote is counted at the Aphria Meeting. See “General Information about the Aphria Meeting and Voting – Voting Instructions – Beneficial Aphria Shareholders”.
Q:
Should I send in my proxy now?
A:
Yes. To ensure your vote is counted, you should immediately complete and submit the enclosed form of proxy or voting instruction form. You are encouraged to vote well in advance of the proxy cut-off at [•] (Eastern time) on [•] 2021 (or if the Aphria Meeting is postponed or adjourned, at least 48 hours (excluding non-Business Days) prior to the date of the postponed or adjourned Aphria Meeting). See “General Information about the Aphria Meeting and Voting – Voting Instructions”.
Q:
Should I send in my Letter of Transmittal and Aphria share certificates now?
A:
Yes. It is recommended that all registered Aphria Shareholders complete, sign and return the Letter of Transmittal with accompanying Aphria share certificate(s) or DRS Statement(s) to the Depositary as soon as possible. Please be sure to use the Letter of Transmittal. See “Description of the Arrangement – Exchange Procedure”.
Q:
If my Aphria Shares are held by an Intermediary, will they vote my Aphria Shares for me?
A:
An Intermediary will vote the Aphria Shares held by you only if you provide instructions to such Intermediary on how to vote or which election to make. If you fail to give proper instructions, those Aphria Shares will not
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be voted on your behalf. Aphria Shareholders should instruct their Intermediaries to vote their Aphria Shares on their behalf by following the directions on the voting instruction form provided to them by their Intermediaries. Unless your Intermediary gives you its proxy to vote the Aphria Shares at the Aphria Meeting, you cannot vote those Aphria Shares owned by you at the Aphria Meeting. See “General Information about the Aphria Meeting and Voting – Voting Instructions – Beneficial Aphria Shareholders”.
Q:
What happens if I hold my Aphria Shares in an RESP, TFSA or RRSP account?
A:
For Canadian resident shareholders that hold Aphria Shares in an RESP, TFSA, RRSP or other registered account, no immediate Canadian tax will arise as a result of the Arrangement, whether or not any gain is realized on the disposition of Aphria Shares. Further, Tilray Shares will remain qualified investments for an RESP, TFSA and RRSP or other registered accounts.
For a summary of certain of the principal Canadian federal income tax consequences of the Arrangement applicable to Aphria Shareholders, see below under the heading “Certain Canadian Federal Income Tax Considerations”. Such summary is not intended to be legal, business or tax advice. Aphria Shareholders should consult their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.
Q:
When will I receive the Tilray Shares in exchange for my Aphria Shares under the Arrangement?
A:
You will receive the Tilray Shares due to you under the Arrangement as soon as practicable after the Arrangement becomes effective and your Letter of Transmittal, Aphria share certificate(s) or DRS Statement(s), and all other required documents are properly completed and received by the Depositary. It is anticipated that the Arrangement will be completed on [•], 2021 assuming the Aphria Resolution is approved, all Court and all other approvals have been obtained, and all other conditions of closing have been satisfied or waived.
Q:
What happens if I send in my Aphria share certificate(s) or DRS Statement(s) and the Aphria Resolution is not approved or the Arrangement is not completed?
A:
If the Aphria Resolution is not approved or if the Arrangement is not otherwise completed, your Aphria share certificate(s) or DRS Statement(s) will be returned promptly to you by the Depositary.
Q:
Can I revoke my vote after I have voted by proxy?
A:
Yes. An Aphria Shareholder executing the enclosed form of proxy has the right to revoke it by voting again on the internet or by telephone, or by any other means permitted by law. Registered Aphria Shareholders may also revoke their instructions by delivering a signed written notice changing their instructions to Chief Legal Officer of Aphria no later than [•], 2021 at [•] (or at least 48 hours (excluding non-Business Days) prior to the date of any adjournment, if the Aphria Meeting is adjourned) at 1 Adelaide Street East, Suite 2310, Toronto, ON, M5C 2V9, Attention: Christelle Gedeon, Chief Legal Officer. (email: info@aphria.com).
If you hold your shares through an Intermediary, the methods to revoke your proxy may be different and you should carefully follow the instructions provided to you by your Intermediary. See “General Information about the Aphria Meeting and Voting – Revocation of Proxies”.
Q:
Who can help answer my questions?
A:
If you have any questions about this Circular or the matters described in this Circular, please contact your professional advisor. Aphria Shareholders who would like additional copies, without charge, of this Circular or have additional questions about the procedures for voting Aphria Shares or making an election, should contact their Intermediary or Laurel Hill by email, or at one of the numbers below.
North American Toll-Free Number:
1-877-452-7184
Outside of North America Collect Calls Number:
416-304-0211
By Email:
assistance@laurelhill.com
Tilray Stockholder Questions and Answers
Q:
When and where is the Tilray Meeting?
A:
The Tilray Meeting will be held on [•] 2021 at [•] (Eastern time). In light of the recent coronavirus (COVID-19) pandemic and in order to address potential issues arising from the unprecedented public health impact of
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COVID-19, comply with applicable public health directives that may be in force at the time of the Tilray Meeting and to limit and mitigate risks to the health and safety of our communities, Tilray Stockholders, employees, directors and other stakeholders, the Tilray Meeting will be held in a virtual format. Tilray Stockholders may participate by logging in online at www.virtualshareholdermeeting.com/TLRY2021SM, where they will be able to virtually attend the Tilray Meeting via live audio webcast. Online check-in will begin at [•] a.m. (Eastern time), and we encourage you to allow ample time for the online check-in procedures. To participate in the Tilray Meeting, Tilray Stockholders will need their unique 16-digit control number included on their Tilray proxy card (printed in the box and marked by the arrow) or the instructions that accompanied the proxy materials.
Q:
What am I voting on?
You are being asked to consider and vote on the following proposals:
1.
To consider and vote on a proposal to increase the authorized capital stock of Tilray from 743,333,333 shares to 900,000,000 shares of capital stock, consisting of 890,000,000 shares of Class 2 common stock and 10,000,000 shares of preferred stock, as reflected in the amendment to the second amended and restated certificate of Tilray attached as Appendix “F” to the Circular (the “Tilray Charter Amendment”), which is further described in this Circular, including in the section entitled “Amendments to Tilray’s Organizational Documents” beginning on page [•] of this Circular and a copy of the Tilray Charter Amendment is attached as Appendix “F” (the “Tilray Charter Amendment Proposal”).
2.
To consider and vote on a proposal to issue Tilray Class 2 common stock (the “Tilray Shares”) to Aphria Shareholders pursuant to the Arrangement Agreement which is further described in this Circular, including in the section entitled “The Arrangement Agreement and Related Agreements” beginning on page [•] of this Circular, and a copy of the Arrangement Agreement is attached as Appendix “A” (the “Tilray Share Issuance Proposal”);
3.
To consider and approve, on an advisory (non-binding) basis, the compensation that may be paid to Tilray’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Arrangement Agreement, which is further described in this Circular, including in the section entitled “Interests of Tilray’s Directors and Management in the Arrangement” beginning on page [•] of this Circular (the “Tilray Advisory Compensation Proposal”);
4.
To approve the adjournment of the Tilray Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Tilray Meeting to approve the Tilray Charter Amendment Proposal or the Tilray Share Issuance Proposal (the “Tilray Adjournment Proposal”).
The Tilray Charter Amendment Proposal, the Tilray Share Issuance Proposal, the Tilray Advisory Compensation Proposal and the Tilray Adjournment Proposals are together referred to as the “Tilray Proposals”.
Please note that the approval of Tilray Stockholders to each of the Tilray Charter Amendment Proposal and the Tilray Share Issuance Proposal is required in order to complete the Arrangement.
Q:
Does the Tilray Board support the Tilray Proposals
A:
Yes. The Tilray Board has unanimously determined that the Tilray Proposals are in the best interests of Tilray and recommends that the Tilray Stockholders vote FOR the Tilray Proposals.
In making its recommendation regarding the Tilray Proposals, the Tilray Board considered a number of factors as described in this Circular under “Description of the Arrangement – Our Reasons for the Arrangement” and “Description of the Arrangement – Recommendation of the Tilray Board”, and “Description of the Arrangement – Factors Considered by the Tilray Board”, including the opinions from Cowen and Imperial to the effect that, as of the date of such opinions, subject to the various assumptions, qualifications and limitations set forth therein, the Exchange Ratio of 0.8381 of a Tilray Share in exchange for each Aphria Share that is issued and outstanding, was fair, from a financial point of view, to Tilray. See “Description of the Arrangement – Opinion of Tilray’s Financial Advisors” and Appendix “H” and Appendix “I” to this Circular.
In making its recommendation regarding the Tilray Charter Amendment Proposal, the Tilray Board considered the benefits of the amendment to the Tilray Stockholders contained in the Tilray Charter Amendment Proposal
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and the Tilray Charter Amendment Proposal is further described in this Circular, including in the section titled “Amendments to Tilray’s Organizational Documents “ beginning on page [•].
The Tilray Advisory Compensation Proposal and Tilray Adjournment Proposals are further described in this Circular, including the section titled “Interests of Tilray’s Directors and Management in the Arrangement“ beginning on page [•], and “Purpose of the Tilray Meeting” beginning on page [•], respectively.
Q:
What approvals are required by Tilray Stockholders at the Tilray Meeting?
A:
Except for the Tilray Adjournment Proposal, the vote required to approve all of the proposals listed herein assumes the presence of a quorum.
No.
Proposal
Votes Necessary
1.
Tilray Charter Amendment Proposal
Approval requires the affirmative vote of the holders of a majority of the Tilray Shares outstanding and entitled to vote on the Tilray Charter Amendment Proposal.

A failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST the Tilray Charter Amendment Proposal.
2.
Tilray Share Issuance Proposal
Approval requires the affirmative vote of a majority of votes cast at the Tilray Meeting on the Tilray Share Issuance Proposal.

An abstention will have the same effect as a vote AGAINST the Tilray Share Issuance Proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the Tilray Share Issuance Proposal, so long as a quorum is present.
3.
Tilray Advisory Compensation Proposal
Approval requires the affirmative vote of the holders of a majority of the outstanding Tilray Shares, present or represented by proxy at the Tilray Meeting, and entitled to vote on the Tilray Advisory Compensation Proposal.

A failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST the Tilray Advisory Compensation Proposal.
4.
Tilray Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the voting power of the shares of Tilray Shares present or represented by proxy at the Tilray Meeting and entitled to vote on such proposal.

An abstention will have the same effect as a vote AGAINST the Tilray Adjournment Proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the Tilray Adjournment Proposal.
Q:
How do I vote on the Tilray Proposals?
A:
You should carefully read and consider the information contained in this Circular. Registered Tilray Stockholders should then vote by (1) visiting the internet site listed on the enclosed Tilray proxy card, (2) calling the toll-free number listed on the enclosed Tilray proxy card or (3) submitting your enclosed Tilray proxy card by mail by using the provided self-addressed, pre-paid envelope. If you submit a proxy to vote your Tilray Shares via the internet or by telephone, you must do so no later than 11:59 p.m. on [•] (Eastern time). If you submit a proxy to vote your shares by mail, your completed Tilray proxy card must be received no later than 11:59 p.m. on [•] (Eastern time) (or if the Tilray Meeting is postponed or adjourned prior to the date of the postponed or adjourned Tilray Meeting). See “General Information about the Tilray Meeting and Voting – Registered Tilray Stockholders”.
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If you hold your Tilray Shares through a broker, please follow the instructions on the voting instruction form provided by such broker to ensure that your vote is counted at the Tilray Meeting. See “General Information about the Tilray Meeting and Voting – Beneficial Tilray Stockholders”.
Q:
Should I send in my proxy now?
A:
Yes. To ensure your vote is counted, you should immediately complete and submit the enclosed form of proxy or voting instruction form. You are encouraged to vote well in advance of the proxy cut-off at 11:59 p.m. (Eastern time) on [•] 2021 (or if the Tilray Meeting is postponed or adjourned, prior to the date of the postponed or adjourned Tilray Meeting).
Q:
If my Tilray Shares are held by a broker, will they vote my Tilray Shares for me?
A:
A broker will vote the Tilray Shares held by you only if you provide instructions to such broker on how to vote or which election to make. If you fail to give proper instructions, those Tilray Shares will not be voted on your behalf. Tilray Stockholders should instruct their brokers to vote their Tilray Shares on their behalf by following the directions on the voting instruction form provided to them by their Intermediaries. Unless your Intermediary gives you its proxy to vote the Tilray Shares at the Tilray Meeting, you cannot vote those Tilray Shares owned by you at the Tilray Meeting. See “General Information about the Tilray Meeting and Voting – Beneficial Tilray Stockholders”.
Q:
Can I revoke my vote after I have voted by proxy?
A:
Yes. A Tilray Stockholder executing the enclosed form of proxy has the right to revoke it by either attending the Tilray Meeting and voting at the Tilray Meeting or providing a new proxy dated as at a later date, provided that the new proxy is received by Broadridge before 11:59 p.m. (Eastern time) on [•], 2021 (or if the Tilray Meeting is postponed or adjourned, prior the date of the postponed or adjourned Tilray Meeting). A registered Tilray Stockholder may also revoke any prior proxy without providing new voting instructions by clearly indicating in writing that such Tilray Stockholder wants to revoke his, her or its proxy and delivering this written document to (i) the registered office of Tilray at Tilray, Inc., c/o Corporate Secretary, 1100 Maughan Road, Nanaimo, BC, Canada, V9X IJ2, at any time up to and including the last Business Day preceding the day of the Tilray Meeting, or any adjournment of the Tilray Meeting, or (ii) the Chair of the Tilray Meeting at the Tilray Meeting or any postponement or adjournment thereof and prior to the vote in respect of the Tilray Charter Amendment Proposal or the Tilray Share Issuance Proposal or in any other way permitted by law.
If you hold your shares through a broker, the methods to revoke your proxy may be different and you should carefully follow the instructions provided to you by your Intermediary. See “General Information about the Tilray Meeting and Voting – Revocation of Proxies”.
Q:
Who can help answer my questions?
A:
If you have any questions about this Circular or the matters described in this Circular, please contact your professional advisor. Tilray Stockholders who would like additional copies, without charge, of this Circular or have additional questions about the procedures for voting Tilray Shares or making an election, should contact their broker or MacKenzie Partners by email, or at the numbers below.
Toll-Free Number:
1-800-322-2885
Call Collect:
1-212-929-5500
By Email:
proxy@mackenziepartners.com
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ACCOUNTING PRINCIPLES
All financial statements and financial data derived therefrom included or incorporated by reference in this Circular pertaining to Aphria have been prepared in accordance with IFRS as issued by the International Accounting Standards Board, and are audited in accordance with Canadian generally accepted auditing standards and all financial statements and financial data derived therefrom included or incorporated by reference in this Circular pertaining to Tilray, including the unaudited pro forma condensed combined financial statements of Tilray, have been prepared and presented in accordance with U.S. GAAP. Accordingly, the presentation of the consolidated financial statements of Tilray and the unaudited pro forma condensed combined financial statements of Tilray may vary in material ways from financial statements prepared in accordance with IFRS. Management of Aphria and Tilray has reviewed the consolidated financial statements of Tilray and the unaudited pro forma condensed combined financial statements of Tilray included in this Circular and has determined that there are material U.S. GAAP to IFRS measurement differences applicable to such financial statements. For further details, see the notes to the unaudited pro forma condensed combined financial statements of Tilray set out in Appendix “L” to this Circular.
Pro forma financial information included in this Circular is for informational purposes only and is unaudited. All unaudited pro forma financial information contained in this Circular has been derived from underlying financial statements prepared and adjusted in accordance with U.S. GAAP and IFRS to illustrate the effect of the Arrangement. The pro forma financial information set forth in this Circular should not be considered to be what the actual financial position or other results of operations would have necessarily been had Aphria and Tilray operated as a single combined company as, at, or for the periods stated.
EXCHANGE RATE INFORMATION
The following table sets forth, for the periods indicated, the high, low, average and period-end daily average rates of exchange for US$1.00, expressed in Canadian dollars, posted by the Bank of Canada:
Year Ended December 31
 
2020
2019
2018
 
(C$)
(C$)
(C$)
Highest rate during the period
1.45
1.36
1.36
Lowest rate during the period
1.27
1.30
1.23
Average rate for the period
1.34
1.33
1.30
Rate at the end of the period
1.27
1.30
1.36
On [•], 2021, the daily average rate of exchange posted by the Bank of Canada for conversion of U.S. dollars into Canadian dollars was US$1.00 equals C$[•].
NOTICE REGARDING INFORMATION
NO CANADIAN OR U.S. SECURITIES REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/MANAGEMENT INFORMATION CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE.
Neither Aphria nor Tilray has authorized any Person to give any information or to make any representation in connection with the Arrangement or any other matters to be considered at the Aphria Meeting or the Tilray Meeting other than those contained in this Circular. If any such information or representation is given or made, such information or representation should not be relied upon as having been authorized or as being accurate. For greater certainty, to the extent that any information provided on either Aphria’s or Tilray’s website or by the proxy solicitation agent is inconsistent with this Circular, the information provided in this Circular should be relied upon.
This Circular does not constitute an offer to buy, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.
Aphria Shareholders and Tilray Stockholders should not construe the contents of this Circular as legal, tax or financial advice and should consult with their own legal, tax, financial or other professional advisors.
All summaries of, and references to, the Arrangement Agreement, the Plan of Arrangement, the Aphria Support Agreements and the Tilray Support Agreements in this Circular are qualified in their entirety by, in
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the case of the Arrangement Agreement, the complete text of the Arrangement Agreement, a copy of which is attached as Appendix “A” to this Circular and is available on Aphria’s SEDAR profile at www.sedar.com and on Tilray’s EDGAR profile at www.sec.gov, and in the case of the Plan of Arrangement, the complete text of the Plan of Arrangement, a copy of which is attached as Appendix “B” to this Circular, in the case of the Aphria Support Agreements, the complete text of the Aphria Support Agreements available on Aphria’s SEDAR profile at www.sedar.com and on Tilray’s EDGAR profile at www.sec.gov, and in the case of the Tilray Support Agreements, the complete text of the Tilray Support Agreements available on Aphria’s SEDAR profile at www.sedar.com and on Tilray’s EDGAR profile atwww.sec.gov. Aphria Shareholders and Tilray Stockholders are urged to carefully read the full text of the Plan of Arrangement and the Arrangement Agreement.
This Circular contains industry, market and competitive position data from our own internal estimates and research as well as industry and general publications and research surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third party sources. While we believe our internal company research is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.
This Circular is dated [•], 2021. Information contained in this Circular is given as of [•], 2021, unless otherwise specifically stated and except for information contained in documents incorporated by reference herein, which is given as at the respective dates stated in such documents.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements in this Circular, including the documents incorporated by reference herein, constitutes forward-looking information or forward-looking statements under Canadian Securities Laws and within the meaning of Section 27A of the U.S. Securities Act and Section 21E of the U.S. Securities Exchange Act, which are intended to be covered by the safe harbour created by such sections and other applicable Laws. The forward-looking statements are expressly qualified by this cautionary statement. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future, and readers are cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of Aphria, Tilray or the Combined Company. Forward-looking statements are typically identified by words such as “expect”, “intend”, “anticipate”, “believe”, “contemplate”, “foresee”, “forecast”, “future”, “could”, “enable”, “potential”, “estimate”, “project”, “goal”, “plan”, “seek”, “strive”, “will”, “would” “may” and “should” and similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements reflect current beliefs of management of Aphria and Tilray with respect to future events and are based on information currently available to each respective management including based on reasonable assumptions, estimates, internal and external analysis and opinions of management of Aphria and Tilray concerning their experience, perception of trends, current conditions and expected developments as well as other factors that each respective management believes to be relevant as at the date such statements are made. Forward-looking statements involve significant known and unknown risks and uncertainties. Many factors could cause actual results, performance or achievement to be materially different from any future forward-looking statements. Aphria’s and Tilray’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. Aphria and Tilray can give no assurance that such estimates, beliefs and assumptions will prove to be correct. In particular, certain statements included in the sections entitled “Description of the Arrangement – Our Reasons for the Arrangement” and “Risks Related to the Combined Company” are forward-looking statements.
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Any information or statements that are contained in this Circular, including the documents incorporated by reference herein, that are not statements of historical fact may be deemed to be forward-looking statements, including, but not limited to, statements with regards to:
expectations regarding whether the Arrangement will be consummated, including whether conditions to the consummation of the Arrangement will be satisfied, or the anticipated timing or closing of the Arrangement;
expectations regarding receipt of all Required Regulatory Approvals and the expiration of relevant waiting periods, shareholder approvals, court approvals and satisfaction of other customary closing conditions;
estimates of pro-forma financial information of the Combined Company, including in respect of expected revenues, margins, cash flow, profitability, and production of cannabis;
estimates of future costs applicable to sales, future capital expenditures, future cost reductions, and projected synergies including pre-tax synergies, cost savings and efficiencies;
the Combined Company anticipating to have scalable medical and adult-use cannabis platforms expected to strengthen the leadership position in Canada, internationally, and eventually in the United States;
the Combined Company being well positioned in the European cannabis markets Combined Company’s ability to leverage Tilray’s current European platforms;
the legalization of cannabis in the United States and the Combined Company being well positioned to compete in the United States market;
the Combined Company expecting to offer a diversified and branded product offering and distribution footprint, world-class cultivation, processing and manufacturing facilities;
the financial projections by Aphria, and the Aphria estimated synergies, including operational efficiencies expected to be generated as a result of the Arrangement in the amount of more than US$78 million (C$100 million) of pre-tax annual cost synergies;
anticipated tax treatment of the Arrangement for Aphria Shareholders;
expectations of future balance sheet strength and future equity, including expectations for the effects of the Arrangement on the Combined Company’s financial position, cash flow and growth prospects;
expectations that the Combined Company is expected to unlock significant shareholder value and realize the benefit of the Synergies;
any other strategic and financial benefits in connection with the Arrangement, including any anticipated future results and pro-forma financial information relating to the Combined Company;
the anticipated value of the Consideration to be received by the Aphria Shareholders, which may fluctuate in value due to trading prices of the Tilray Shares forming part of the Consideration;
expectations regarding the size and composition of the board of directors of the Combined Company;
expectations regarding the listing of Tilray Shares on the TSX following the Effective Time;
the number of Tilray Shares issuable to Aphria Shareholders and the expected ownership percentages of Tilray and Aphria Stockholders after the closing of the Arrangement; and
expectations that the Arrangement will allow the Combined Company to benefit from significant geographic diversification and economies of scale.
Certain material factors or assumptions are applied in making forward-looking statements. With respect to the Arrangement and this Circular, the expectations and assumptions expressed or implied in the forward-looking statements, include, but are not limited to the ability of the parties to receive, in a timely manner and on satisfactory terms, Aphria Shareholder Approval, Tilray Stockholder Approval, Regulatory Approvals and stock exchange and Court approvals for the Arrangement, the ability of the parties to satisfy, in a timely manner, the conditions to the closing of the Arrangement and other expectations and assumptions concerning the Arrangement.
The forward-looking statements contained in this Circular, including documents incorporated by reference herein, are subject to inherent risks and uncertainties and other factors which could cause actual results to differ materially from
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those anticipated by the forward-looking statements. The factors which could cause results to differ from current expectations include, but are not limited to:
the inherent uncertainty associated with financial or other projections or outlooks;
risks assumptions and expectations described in Aphria’s and Tilray’s critical accounting policies and estimates;
the adoption and impact of certain accounting pronouncements;
Aphria’s and Tilray’s future financial and operating performance;
the commercial and business plans of Aphria and Tilray;
the intention to grow the business, operations and potential activities of Aphria and Tilray;
the ability of Aphria and Tilray to complete the Arrangement;
Aphria’s and Tilray’s ability to maintain a strong financial position and manage costs;
the ability of Aphria and Tilray to maximize the utilization of their existing assets and investments;
that the completion of the Arrangement is subject to the satisfaction or waiver of a number of conditions as set forth in the Arrangement Agreement;
some or all the expected benefits of the Arrangement may fail to materialize or may not occur within the time periods anticipated by Aphria and Tilray;
the prompt and effective integration of the Combined Company;
the ability to achieve the anticipated synergies and value-creation contemplated by the Transaction;
the risk associated with Aphria’s and Tilray’s ability to obtain the approval of the Transaction by their shareholders required to consummate the Transaction and the timing of the closing of the Transaction, including the risk that the conditions to the Transaction are not satisfied on a timely basis or at all;
the risk that a consent or authorization that may be required for the Transaction is not obtained or is obtained subject to conditions that are not anticipated;
the outcome of any legal proceedings that may be instituted against the parties and others related to the Arrangement Agreement;
unanticipated difficulties or expenditures relating to the Transaction, the response of business partners and retention as a result of the announcement and pendency of the Transaction;
risks relating to the value of Tilray Shares to be issued in connection with the Transaction;
the impact of competitive responses to the announcement of the Transaction;
the diversion of management time on Transaction-related issues;
there can be no assurance that the Arrangement will occur or that the anticipated strategic benefits and operational, competitive and cost synergies will be realized;
the exchange ratio is fixed and there can be no assurance that the market value of the Tilray Shares that the holders of Aphria Shares may receive on the Effective Date will equal or exceed the market value of the Aphria Shares held by such Aphria Shareholders prior to the Effective Date;
changes in tax laws, regulations or future assessments;
failure to realize anticipated results, including revenue growth, anticipated cost savings or operating efficiencies from the Combined Company’s major initiatives, including those from restructuring;
assumptions and estimates required for the preparation of the pro forma financial statements may be materially different from the Combined Company’s actual results and experience in the future; and
risks or delays arising from or relating to the ongoing COVID-19 pandemic.
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The foregoing risks or other risks arising in connection with the failure of the Arrangement, including the diversion of management attention from conducting the business of Aphria and Tilray may have a material adverse effect on Aphria’s and Tilray’s business operations, financial results and share price.
Readers are cautioned that the foregoing list of factors is not exhaustive. Other risks and uncertainties not presently known to Aphria and Tilray or that Aphria and Tilray presently believe are not material could also cause actual results or events to differ materially from those expressed in the forward-looking statements contained herein.
Additional information on these and other factors that could affect the operations or financial results of Aphria, Tilray or the Combined Company are included in reports filed by Aphria and Tilray with applicable securities regulatory authorities and may be accessed through EDGAR (www.sec.gov) and SEDAR (www.sedar.com), respectively. These risks and other factors are also discussed in more detail in this Circular under “Risk Factors”. Readers are encouraged to read such section in detail.
The forward-looking statements contained in this Circular, including the documents incorporated by reference herein, are expressly qualified in their entirety by this cautionary statement. Aphria and Tilray cannot guarantee that the results or events expressed or implied in any forward-looking statement and information will materialize and accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Aphria’s and Tilray’s expectations only as of the date of this Circular (or in the case of forward-looking statements in a document incorporated by reference herein, as of the date indicated in such document). Aphria and Tilray disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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SUMMARY
This summary highlights the key aspects of the matters to be considered at the Aphria Meeting and the Tilray Meeting, but does not contain all of the information that is important to you. You should carefully read this entire document and the other documents we refer you to for a more complete understanding of the matters being considered at the meetings. This summary is qualified in its entirely by the more detailed information appearing elsewhere in this Circular, including the Appendices (which are incorporated into and form part of this Circular). Certain capitalized terms used in this summary are defined in the Glossary of Defined Terms found in Appendix “M” of this Circular.
The Companies
Aphria
Aphria Inc. is a leading global cannabis-lifestyle consumer packaged goods company, with operations in Canada, the United States, Europe and Latin America. Aphria’s mission is to be the trusted partner for our patients and consumers by providing them with a cultivated experience and health and wellbeing through high-quality, differentiated brands and innovative products. Headquartered in Leamington, Ontario, Aphria cultivates, processes, markets and sells medical and adult-use cannabis, cannabis-derived extracts and derivative cannabis products in Canada under the provisions of the Cannabis Act and globally pursuant to applicable international regulations. Aphria, through its SweetWater subsidiary, also manufactures, markets and sells alcoholic beverages in the United States.
Aphria Inc. exists under the laws of the OBCA and Aphria Shares are listed under the symbol “APHA” on the TSX in Canada and the Nasdaq in the U.S. Aphria Shares began trading on the TSX and Nasdaq on March 22, 2017 and June 8, 2020, respectively. Prior to being listed on the TSX and Nasdaq, the Aphria Shares were listed on the TSX Venture Exchange and the NYSE, respectively. Aphria’s head office is located at 98 Talbot Street West, Leamington, Ontario N8H 1M8, and its registered office is located at 1 Adelaide Street East, Suite 2310, Toronto, Ontario M5C 2V9.
For additional information about Aphria, see “Information Concerning Aphria”.
Tilray
Tilray, Inc. has supplied high-quality medical cannabis products to tens of thousands of patients in fifteen countries spanning five continents across the world through Tilray’s Subsidiaries in Australia, Canada, Germany, Latin America and Portugal and through agreements with established pharmaceutical distributors. Tilray cultivates medical and adult-use cannabis in Canada and medical cannabis in Europe.
The Tilray Shares are listed on the Nasdaq under the symbol “TLRY”. The Tilray Shares began trading on Nasdaq on July 20, 2018. Tilray’s head office and registered office is located at 1100 Maughan Road, Nanaimo, British Colombia V9X 1J2.
For additional information about Tilray, see “Information Concerning Tilray”.
Background to the Arrangement
On December 15, 2020, Aphria and Tilray entered into the Arrangement Agreement, which sets out the terms and conditions for implementing the Arrangement. The Arrangement Agreement is the result of extensive arm’s length negotiations conducted since December 2019 among Representatives of Aphria and Tilray.
A summary of the material events leading to the negotiation of the Arrangement and the material meetings, negotiations and discussions between Aphria and Tilray and their respective advisors that preceded the execution of the Arrangement Agreement and public announcement of the Arrangement is included in this Circular under “Description of the Arrangement – Background to the Arrangement”.
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Reasons for the Arrangement
The Aphria Board and the Tilray Board each believe that, at this stage of development and expansion of the global cannabis market, companies with financial strength, a strategic footprint and scale, diverse product range, brand expertise and strong leadership are most likely to succeed in the long-term. The following are the key strategic and financial benefits of the Transaction:
World’s Largest Global Cannabis Company. On a pro forma basis for the last twelve months reported by each company prior to the date of the announcement of the Arrangement on December 16, 2020, the Combined Company would have had revenue of approximately US$685 million (C$874 million), which would have been the highest among publicly reporting cannabis companies globally over that period.
Strategic Footprint and Operational Scale. The Combined Company is expected to have the strategic footprint and operational scale necessary to compete more effectively in today’s consolidating cannabis market with a strong, flexible balance sheet, strong cash balance and access to capital which Aphria and Tilray believe will give it the ability to accelerate growth and deliver long-term sustainable value for stockholders.
Low-Cost State-of-the-Art Production & The Leading Canadian Adult-Use Cannabis Producer. The Combined Company is expected to have one of the lowest cost production operations with its state-of-the-art facilities. In addition, the Combined Company will have a portfolio of carefully curated brands across all consumer segments and a complete portfolio of Cannabis 2.0 products. In the adult-use market in Canada, the Combined Company, on a pro forma basis for the last twelve months reported by each company prior to the date of the announcement of the execution of the Arrangement Agreement on December 16, 2020, would have had gross revenue of US$232 million (C$296 million), which would have been the most of any Canadian licensed producer.
Positioned to Pursue International Growth. The Combined Company will be well-positioned to pursue growth opportunities with its end-to-end EU-GMP supply chain and distribution. Aphria is one of three companies selected in Germany to receive a license for the in-country cultivation of medical cannabis and has distribution capabilities that will support the Aphria and Tilray medical cannabis brands. Tilray’s EU-GMP cultivation and production facility in Portugal will provide the Combined Company with the capacity to cultivate and produce EU-GMP medical cannabis products in order to meet international demand and the Combined Company will be able to export products produced in such facility on a tariff-free basis to EU countries.
Enhanced Consumer Packaged Goods Presence and Infrastructure in the U.S. The Combined Company is expected to have an improved position from a corporate, branding and products perspective if cannabis is legalized under U.S. federal law and allow the Combined Company to leverage several established third-party partnerships. In the United States, the Combined Company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars: SweetWater, a leading cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America.
Substantial Synergies. The combination of Aphria and Tilray is expected to deliver meaningful synergies arising from cost leadership and scale opportunities in the Canadian adult-use and medical cannabis sector. Within 24 months of the completion of the Transaction, the Combined Company expects to achieve approximately US$78 million (C$100 million) annual pre-tax cost synergies. The Combined Company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses.
Proven Leadership Team. The Combined Company will be led by a best-in-class management team and board of directors, with strong track records in consumer-packaged goods and cannabis experience internationally.
Recommendations of the Boards of Directors
Aphria Board Recommendation
After careful consideration, consultation with its legal and financial advisors and reviewing the Aphria Fairness Opinion, the Aphria Board unanimously determined that the Arrangement is in the best interests of Aphria and the Arrangement is fair to Aphria Shareholders.
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The Aphria Board unanimously recommends that Aphria Shareholders vote FOR the Aphria Resolution.
Tilray Board Recommendation
On December 15, 2020, after careful consideration, consultation with its legal and financial advisors and reviewing the Tilray Fairness Opinions, the Tilray Board unanimously determined that the Arrangement Agreement and related transactions and agreements, are in the best interests of, and are advisable to, Tilray and the Tilray Stockholders.
On February 19, 2021, the Tilray Board also determined that the Tilray Charter Amendment Proposal is advisable and in the best interests of the Tilray Stockholders.
Accordingly, the Tilray Board unanimously recommends that Tilray Stockholders vote FOR the Tilray Proposals.
Opinions of Financial Advisors
Aphria Fairness Opinion
Aphria retained Jefferies LLC (“Jefferies”) to render an opinion to the Aphria Board as to the fairness, from a financial point of view, to Aphria Shareholders of the Exchange Ratio. On December 15, 2020, Jefferies delivered its opinion, subsequently confirmed in writing, to the Aphria Board to the effect that, as at the date thereof, based upon the scope of review and subject to the assumptions, limitations, qualifications, procedures and other factors set out therein, the Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders. See “Description of the Arrangement – Opinion of Aphria’s Financial Advisor”.
The full text of Jefferies’ fairness opinion, setting out the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the Jefferies opinion, is attached as Appendix “G” to this Circular. This summary of the Aphria Fairness Opinion is qualified in its entirety by reference to the full text of the Aphria Fairness Opinion. Aphria Shareholders are urged to read the Aphria Fairness Opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Jefferies.
Tilray Fairness Opinions
Tilray retained Cowen and Company, LLC (“Cowen”) and Imperial Capital, LLC (“Imperial”) to render opinions to the Tilray Board as to the fairness, from a financial point of view, to Tilray of the Exchange Ratio provided for under the terms of the Arrangement Agreement (together, the “Tilray Fairness Opinions”).
On December 15, 2020, Cowen delivered certain of its written analyses and its oral opinion to the Tilray Board, subsequently confirmed in writing, as of the same date, to the effect that and subject to the various assumptions, qualifications and limitations set forth therein, as of December 15, 2020, the Exchange Ratio of 0.8381 of a Tilray Share in exchange for each Aphria Share that is issued and outstanding, was fair, from a financial point of view, to Tilray. See “Description of the Arrangement – Opinion of Tilray’s Financial Advisors – Opinion of Cowen”.
On December 15, 2020, Imperial delivered certain of its written analyses and its oral opinion to the Tilray Board, subsequently confirmed in writing as of the same date, to the effect that and subject to the various assumptions, qualifications and limitations set forth therein, the Exchange Ratio of 0.8381 was fair, from a financial point of view, to Tilray. See “Description of the Arrangement – Opinion of Tilray’s Financial Advisors”.
The full text of the Tilray Fairness Opinions, which sets forth the assumptions made, general procedures followed, matters considered and limitations on the review undertaken by Cowen and Imperial, is reproduced as Appendix “H” and Appendix “I”, respectively, to this Circular. The full text of the written opinions of Cowen, dated December 15, 2020, and the written opinion of Imperial, dated December 15, 2020, are incorporated by reference. This summary of the Tilray Fairness Opinions is qualified in its entirety by reference to the full text of the Tilray Fairness Opinions. Tilray Stockholders are urged to read the Tilray Fairness Opinions in their entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Cowen and Imperial, respectively.
Interests of Directors and Management in the Arrangement
In considering the respective recommendations of the Aphria Board and Tilray Board with respect to the Arrangement, Aphria Shareholders and Tilray Stockholders should respectively be aware that certain members of the
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Aphria Board and Tilray Board and of Aphria’s and Tilray’s management, respectively, have interests in connection with the transactions contemplated by the Arrangement that may be different from, or in addition to, the interests of Aphria Shareholders and Tilray Stockholders, respectively. Each of the Aphria Board and Tilray Board is aware of these interests and considered them along with the other matters described above in “Description of the Arrangement – Our Reasons for the Arrangement”.
Court Approval
Interim Order
On [•], 2021, the Court granted the Interim Order ratifying and confirming the calling of the Aphria Meeting and confirming certain procedural matters in respect of the Aphria Meeting, and other matters. A copy of the Interim Order is attached as “Appendix “D” ” to this Circular.
Final Order
An arrangement under the OBCA requires Court approval. Subject to the terms of the Arrangement Agreement, and upon obtaining Aphria Shareholder Approval in the manner required by the Interim Order, Aphria will apply to the Court for the Final Order. The application for the Final Order approving the Arrangement is scheduled for [•], 2021 at 10:00 a.m. (Eastern time), or as soon after that date as is practicable. At the Final Order hearing, any Aphria Shareholder or holder of Aphria Options, Aphria RSUs, Aphria DSUs or Aphria Warrants or other interested party who wishes to participate or to be represented or to present evidence or argument may do so, subject to filing with the Court and serving upon Aphria and Tilray a Notice of Appearance in accordance with the terms of the Interim Order. In the event that the hearing is postponed, adjourned or rescheduled then, subject to further order of the Court, only those persons having previously served a Notice of Appearance in compliance with the Interim Order will be given notice of the postponement, adjournment or rescheduled date. Such persons should consult their legal advisors as to the necessary requirements. See “Appendix “E” – Notice of Application of Final Order”.
The Court will be advised, prior to the hearing, that the Court’s approval of the Arrangement (and determination of the fairness thereof), will constitute the basis for reliance on the exemption from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof, with respect to the issuance and distribution of the Tilray Shares to be issued by Tilray to Aphria Shareholders pursuant to the Arrangement and with respect to the issuance and distribution of the Replacement Options, Replacement RSUs, Replacement DSUs and Replacement Warrants to be issued to holders of Aphria Options, Aphria RSUs, Aphria DSUs, and 2016 Aphria Warrants respectively. See “U.S. Securities Law Matters”.
The Court has broad discretion under the OBCA when making orders with respect to the Arrangement and the Court, in hearing the application for the Final Order, will consider, among other things, the fairness and reasonableness of the Arrangement to the parties affected, including Aphria Shareholders and holders of Aphria Options, Aphria RSUs, Aphria DSUs, Aphria Warrants and other stakeholders as the Court determines appropriate, both from a substantive and a procedural point of view. The Court may approve the Arrangement as proposed or as amended, in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court thinks fit. Depending on the nature of any required amendments, Aphria and Tilray may determine not to proceed with the Arrangement.
Letter of Transmittal
A Letter of Transmittal has been mailed, together with this Circular, to each person who was a registered Aphria Shareholder on the Aphria Record Date. Each registered Aphria Shareholder must forward a properly completed and signed Letter of Transmittal, with accompanying Aphria share certificate(s) or DRS Statement(s) and all other required documents, as applicable as set out in the Letter of Transmittal, in order to receive the Consideration to which such Aphria Shareholder is entitled under the Arrangement. It is recommended that Aphria Shareholders complete, sign and return the Letter of Transmittal with accompanying Aphria share certificate(s) or DRS Statement(s) to the Depositary as soon as possible.
Any Letter of Transmittal, once deposited with the Depositary, shall be irrevocable and may not be withdrawn by an Aphria Shareholder except that all Letters of Transmittal will be automatically revoked if the Depositary is notified in writing by Aphria and Tilray that the Arrangement Agreement has been terminated or that the Arrangement is not completed. If a Letter of Transmittal is automatically revoked, the share certificate(s) or DRS Statement(s) for the Aphria Shares received with the Letter of Transmittal will be promptly returned to the Aphria Shareholder submitting the same at the address specified in the Letter of Transmittal.
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See “Description of the Arrangement – Letter of Transmittal”.
Regulatory Matters
Competition Act Approval
The Competition Act requires that, subject to limited exceptions, parties to a Notifiable Transaction, cannot complete such transaction until the earlier of (i) the expiry or the termination of the applicable waiting period by the Commissioner, or (ii) the date that an ARC or “no-action” letter has been issued by the Commissioner.
The Arrangement is a Notifiable Transaction and constitutes a “merger” for the purposes of the Competition Act. The Commissioner issued a “no-action” letter in respect of the Arrangement on February 10, 2021.
See “Regulatory Matters Competition Act Approval”.
HSR Act Approval
Under the HSR Act, parties to transactions that meet certain thresholds must notify in advance the Antitrust Division of the DOJ and the FTC and observe a statutory waiting period before the Transaction can close. The Arrangement is subject to these notifications and waiting period requirements under the HSR Act. On or about January 4, 2021, the Parties submitted to the DOJ and FTC the notifications required under the HSR Act. The statutory waiting period expired on February 3, 2021.
See “Regulatory Matters HSR Act Approval”.
German FDI Approval
Germany’s review of foreign direct investments is governed by the Foreign Trade and Payments Act and the German Foreign Trade and Payments Ordinance. A filing can be mandatory or voluntary depending on the activities of the target and the nationality of the acquirer. If a filing is mandatory, the transaction cannot be consummated until it is cleared by the German Federal Ministry of Economic Affairs and Energy (the “Ministry”). Clearance is deemed to be granted if the Ministry does not open a full review within two months of the initial notification. Aphria and Tilray have made a voluntary filing on January 28, 2021. See “Regulatory Matters – German FDI Approval”.
Health Canada Notification
On January 5, 2020, Aphria submitted the required formal notification to Health Canada. Since then, Aphria has responded to further information requests from Health Canada. See “Regulatory Matters – Health Canada Notification”.
Issue and Resale of Tilray Shares Received in the Arrangement
The issuance of Tilray Shares pursuant to the Arrangement will constitute distributions of securities which are exempt from the prospectus requirements of the Canadian Securities Laws and, subject to the satisfaction of certain conditions, will not be subject to resale restrictions. Recipients of Tilray Shares are urged to obtain legal advice to ensure that their resale of such securities complies with laws applicable to them, including Canadian Securities Laws. See “Canadian Securities Law Matters – Qualification – Resale of Tilray Shares”.
The Tilray Shares to be issued pursuant to the Arrangement have not been and will not be registered under the U.S. Securities Act and will be issued in reliance on the exemption afforded by section 3(a)(10) of the U.S. Securities Act and corresponding exemptions from the registration or qualification requirements of state securities laws. Section 3(a)(10) of the U.S. Securities Act exempts from registration the offer and sale of a security which is issued in specified exchange transactions where, among other things, the fairness of the terms and conditions of such exchange are approved after a hearing on the fairness of such terms and conditions, at which all persons to whom it is proposed to issue securities in such exchange have the right to appear, by a court or governmental authority expressly authorized by Law to grant such approval and to hold such a hearing. Accordingly, the Final Order, if granted by the Court, constitutes a basis for the exemption from the registration requirements of the U.S. Securities Act with respect to the Tilray Shares issued in connection with the Arrangement. See “U.S. Securities Law Matters – Exemption Relied Upon from the Registration Requirements of the U.S. Securities Act”.
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The Tilray Shares to be issued under the Arrangement will not be subject to resale restrictions under the U.S. Securities Act, except that the U.S. Securities Act imposes restrictions on the resale of Tilray Shares received pursuant to the Arrangement by persons who are at the time of a resale, or who were within three months before the resale, “affiliates” of Tilray. An “affiliate” of an issuer is a person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the issuer. Typically, persons who are executive officers, directors or 10% or greater shareholders of an issuer may be considered to be its “affiliates”. See “U.S. Securities Law Matters – Resale of Tilray Shares Within the United States”.
Pro Forma Economic Ownership of the Combined Company
Upon completion of the Transaction, it is estimated that the Exchange Ratiao will result in Aphria Shareholders and Tilray Stockholders owning approximately 62% and 38%, respectively, of the outstanding economic interest in the Combined Company on a fully diluted basis. See “Description of the Arrangement – Pro Forma Economic Ownership of the Combined Company”.
Stock Exchange Listing and Reporting Issuer Status
The Tilray Shares currently trade on the Nasdaq under the symbol “TLRY”. Tilray will apply to list the Tilray Shares issuable under the Arrangement on the Nasdaq and it is a condition of closing that Tilray will have obtained approval for this listing (subject to customary conditions).
If the Arrangement is completed, Tilray intends to have the Aphria Shares delisted from the TSX. In addition, Tilray currently expects to list the Tilray Shares on the TSX at, or as soon as practicable following, the Effective Time, which will trade in Canadian dollars. Consequently, following the closing, Aphria Shareholders are expected to be able to trade their Tilray Shares on either exchange, in either currency.
Upon completion of the Arrangement, Tilray will become a reporting issuer in all of the provinces and territories of Canada by virtue of the completion of the Arrangement with Aphria. Tilray may be exempted from certain Canadian statutory financial and certain other continuous and timely reporting requirements. See “U.S. Securities Law Matters” and “Canadian Securities Law Matters”.
Treatment of Outstanding Aphria Convertible Securities
All outstanding Aphria Options (other than any Continuing Aphria Option), Aphria RSUs (other than any Continuing Aphria RSU), Aphria DSUs (other than any Continuing Aphria DSU), whether vested or unvested, and 2016 Aphria Warrants shall be exchanged at the Effective Time for Replacement Options, Replacement RSUs, Replacement DSUs and Replacement Warrants, respectively.
All outstanding 2020 Aphria Warrants, Continuing Aphria DSUs, Continuing Aphria Options and Continuing Aphria RSUs shall cease to represent a warrant, deferred share unit, option, restricted share unit or other right to acquire Aphria Shares and shall represent a right to receive Tilray Shares in accordance with their terms. See “Description of the Arrangement – Recommendation of the Aphria Board”.
The Arrangement Agreement
The Arrangement Agreement provides for, among other things, the conditions that need to be satisfied or waived prior to the filing of the Articles of Arrangement and the implementation of the Plan of Arrangement. The following is a summary of certain terms of the Arrangement Agreement and is qualified in its entirety by the full text of the Arrangement Agreement, a copy of which is attached to this Circular as Appendix “A” and is available on SEDAR at www.sedar.com under Aphria’s SEDAR profile and on EDGAR at www.sec.gov under Tilray’s EDGAR profile.
See “The Arrangement Agreement”.
Covenants, Representations and Warranties
The Arrangement Agreement contains certain customary and negotiated covenants and representations and warranties for an agreement of this type, which are summarized in this Circular.
See “The Arrangement Agreement and Related Agreements – Covenants” and “The Arrangement Agreement and Related Agreements – Representations and Warranties”.
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Conditions to the Arrangement
The obligations of Aphria and Tilray to complete the Arrangement are subject to the satisfaction or waiver of certain conditions set out in the Arrangement Agreement which are summarized in this Circular. These conditions include, among other things, obtaining the Aphria Shareholder Approval and the Tilray Stockholder Approval, the Final Order and the Required Regulatory Approvals and the absence of a Material Adverse Effect with respect to Aphria and Tilray.
See “The Arrangement Agreement and Related Agreements – Conditions to Completion of the Arrangement”.
Non-Solicitation Provisions
Each of Aphria and Tilray is subject to restrictions on its ability to solicit proposals from third parties with respect to Acquisition Proposals, to provide non-public information to, or to participate or engage in discussions or negotiations with third parties or take certain other actions regarding any Acquisition Proposal, with customary exceptions for unsolicited Acquisition Proposals in the event, among other things, that such Party’s board of directors determines in good faith that such Acquisition Proposals are, or could reasonably be expected to lead to, a Superior Proposal.
See “The Arrangement Agreement and Related Agreements – Covenants Regarding Non-Solicitation”.
Termination
Termination of the Arrangement Agreement
The Arrangement Agreement contains certain termination rights for each of Aphria and Tilray, subject to certain limitations on termination set out in the Arrangement Agreement and in certain circumstances the payment of the Aphria Termination Amount or the Tilray Termination Amount, as applicable, including but not limited to the right of either Party to terminate in the event that: (a) the Arrangement has not occurred on or before the Outside Date, which Outside Date may be extended for up to 60 days in the event that the Required Regulatory Approvals have not been obtained; (b) no Law being in effect that makes the Transaction illegal or otherwise prevents the Parties from completing the Transaction, (c) the approval of the Aphria Resolution by Aphria Shareholders is not obtained; (d) the approval of the Tilray Resolutions by Tilray Stockholders is not obtained; (e) there is an Aphria Change in Recommendation; (f) there is a Tilray Change in Recommendation, or (g) it enters into a written agreement with respect to a Superior Proposal.
See “The Arrangement Agreement and Related Agreements – Termination”.
Termination Amount
The obligations of Aphria and Tilray to consummate the Arrangement are subject to certain conditions, including, but not limited to, (a) obtaining the Final Order, (b) obtaining the Aphria Shareholder Approval and the Tilray Stockholder Approval, (c) the Required Regulatory Approvals having been obtained, (d) no Law being in effect that makes the Transaction illegal or otherwise prevents the parties from completing the Transaction, (e) no Material Adverse Effect having occurred in respect of the other Party, (f) subject to certain materiality exceptions, the accuracy of the representations and warranties of the other Party, and (g) the performance in all material respects by the other Party of its covenants under the Arrangement Agreement.
A termination amount of C$65 million is payable in certain circumstances. These include if (i) the Arrangement Agreement is terminated by either Party (A) due to a Change in Recommendation by the other Party; (B) if the other Party is in material breach of its non-solicitation covenants under the Arrangement Agreement; (ii) the Arrangement Agreement is terminated by the other Party to enter into an agreement with respect to a Superior Proposal; or (iii) the other Party is unable to obtain shareholder approval or has committed a willful breach of its representations, warranties or covenants and (A) prior to such termination, an Acquisition Proposal was publicly announced for the other party, and (B) within 12 months of the termination of the Arrangement Agreement, the other party completes an Acquisition Proposal or enters into an Acquisition Proposal and such Acquisition Proposal is subsequently completed (provided that the term “Acquisition Proposal” in this paragraph has the meaning given to such term in this Circular except that a reference to “20 per cent” should instead refer to “50 per cent”).
See “The Arrangement Agreement and Related Agreements – Termination Amounts”.
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Procedure for the Arrangement to Become Effective
The Arrangement will be implemented by way of a Court approved Plan of Arrangement under the OBCA pursuant to the terms of the Arrangement Agreement. The following procedural steps must be taken in order for the Arrangement to become effective:
the Arrangement must be approved by the Aphria Shareholders in the manner set forth in the Interim Order;
the Court must grant the Final Order approving the Arrangement; and
if all other conditions precedent to the Arrangement set out in the Arrangement Agreement, including the Tilray Stockholder Approval and the approvals under the HSR Act and the Competition Act, have been satisfied or waived by the appropriate party, Aphria will file the Articles of Arrangement to effect the Arrangement. For a description of the other conditions precedent see “The Arrangement Agreement and Related Agreements – Conditions to Completion of the Arrangement”.
Effect of the Arrangement
If the Aphria Resolution is passed, the Tilray Proposals are approved and all other conditions to closing of the Arrangement are satisfied or waived and the Arrangement is completed, among other things, Tilray will acquire all of the issued and outstanding Aphria Shares and Aphria will become a wholly-owned subsidiary of Tilray.
Pursuant to the Arrangement, each Aphria Shareholder (other than Aphria Dissenting Shareholders) will receive, for each Aphria Share held, 0.8381 of a Tilray Share.
See “Description of the Arrangement – Recommendation of the Aphria Board”.
The Aphria Board believes that the Arrangement is in the best interest of Aphria and is fair to the Aphria Shareholders. The Aphria Board unanimously recommends that Aphria Shareholders vote FOR the Aphria Resolution.
Board of Directors of the Combined Company
The Arrangement Agreement and related documents provide that, after completion of the Transaction, the board of directors of the Combined Company will consist of nine members. The board of directors of the Combined Company will include the seven existing Aphria Board members, being Irwin D. Simon, Renah Persofsky, Jodi Butts, John M. Herhalt, David Hopkinson, Tom Looney and Walter Robb, the current Tilray Chief Executive Officer, being Brendan Kennedy, and one remaining director to be designated by the Tilray Board who shall be a Canadian citizen or qualifying permanent resident and shall have applied to obtain security clearances as required by applicable law. See “Governance and Management of the Combined Company – Board of Directors of the Combined Company”.
Irwin D. Simon will be the chairman of the board of directors of the Combined Company.
Executive Officers and Principal Offices of Combined Company
The Combined Company’s executive officers will be selected from Aphria and Tilray management. See “Governance and Management of the Combined Company”.
Following the completion of the Transaction, the Combined Company will have principal offices in Canada (Toronto, Leamington and Vancouver Island), the United States (New York and Seattle), Portugal and Germany.
The Meetings
Aphria Meeting
The purpose of the Aphria Meeting is for Aphria Shareholders to consider and, if thought advisable, approve, with or without variation, the Aphria Resolution with respect to the Arrangement pursuant to the OBCA involving, among other things, the acquisition by Tilray of all of the outstanding Aphria Shares pursuant to the Arrangement Agreement.
The Aphria Board recommends that Aphria Shareholders vote FOR the Aphria Resolution. To be effective, the Aphria Resolution must be approved, with or without variation, by the affirmative vote of at least two-thirds of the votes cast on the Aphria Resolution by Aphria Shareholders, virtually present or represented by proxy at the Aphria Meeting.
See “Description of the Arrangement – Interests of Aphria’s Directors and Management in the Arrangement”.
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Tilray Meeting
The purpose of the Tilray Meeting is for Tilray Stockholders to consider and vote on a proposal to approve, the Tilray Share Issuance Proposal, the Tilray Charter Amendment Proposal, the Tilray Advisory Compensation Proposal and the Tilray Adjournment Proposal.
The Tilray Board recommends that Tilray Stockholders vote FOR the Tilray Share Issuance Proposal, the Tilray Charter Amendment Proposal, the Tilray Advisory Compensation Proposal and the Tilray Adjournment Proposal.
See “General Information about the Tilray Meeting and Voting – Required Vote”.
Aphria Shareholder Approval
The procedures for approval of the Aphria Resolution by Aphria Shareholders are subject to the Interim Order. In accordance with the Interim Order, each holder of Aphria Shares is entitled to vote on the Aphria Resolution at the Aphria Meeting. The Aphria Resolution must be approved by Aphria Shareholders holding at least two-thirds of the votes cast by Aphria Shareholders, whether present in person or represented by proxy, at the Aphria Meeting.
Approval for Tilray Proposals
Except for the Tilray Adjournment Proposal, the vote required to approve all of the proposals listed herein assumes the presence of a quorum.
No.
Proposal
Votes Necessary
1.
Tilray Charter Amendment Proposal
Approval requires the affirmative vote of the holders of a majority of the Tilray Shares outstanding and entitled to vote on the Tilray Charter Amendment Proposal.

A failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST the Tilray Charter Amendment Proposal.
2.
Tilray Share Issuance Proposal
Approval requires the affirmative vote of a majority of votes cast at the Tilray Meeting on the Tilray Share Issuance Proposal.

An abstention will have the same effect as a vote AGAINST the Tilray Share Issuance Proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the Tilray Share Issuance Proposal, so long as a quorum is present.
3.
Tilray Advisory Compensation Proposal
Approval requires the affirmative vote of the holders of a majority of the outstanding Tilray Shares, present or represented by proxy at the Tilray Meeting, and entitled to vote on the Tilray Advisory Compensation Proposal.

A failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST the Tilray Advisory Compensation Proposal.
4.
Tilray Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the voting power of the shares of Tilray Shares present or represented by proxy at the Tilray Meeting and entitled to vote on such proposal.

An abstention will have the same effect as a vote AGAINST the Tilray Adjournment Proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the Tilray Adjournment Proposal.
Aphria Shareholder Dissent Rights
Section 185 of the OBCA provides registered shareholders of a corporation with the right to dissent from certain resolutions that effect extraordinary corporate transactions or fundamental corporate changes. The Interim Order
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expressly provides registered Aphria Shareholders with the right to dissent from the Aphria Resolution pursuant to Section 185 of the OBCA in the manner set forth in Sections 185 of the OBCA, with modifications or supplements to the provisions of Sections 185 as provided in the Plan of Arrangement and the Interim Order. Any registered Aphria Shareholder who dissents from the Aphria Resolution in compliance with Section 185 of the OBCA, as modified or supplemented by the Plan of Arrangement and the Interim Order, will be entitled, if ultimately successful and in the event the Arrangement becomes effective, to be paid the fair value of the Aphria Shares held by such Aphria Dissenting Shareholder determined as of the close of business on the last Business Day before the day on which the Arrangement is approved by Aphria Shareholders at the Aphria Meeting.
Failure to strictly comply with the requirements with respect to the Dissent Rights set forth in the OBCA, the Plan of Arrangement and the Interim Order will result in the loss of any right to dissent. Anyone who is a beneficial owner of Aphria Shares registered in the name of an Intermediary and who wishes to dissent should be aware that only registered Aphria Shareholders are entitled to exercise Dissent Rights.
If you wish to exercise Dissent Rights, you should review the requirements summarized in this Circular carefully and consult with your legal advisor. See “Aphria Dissenting Shareholders’ Rights”, “General Information about the Aphria Meeting and Voting – Aphria Dissenting Shareholders’ Rights”, and “Appendix “K” of this Circular.
Accounting Treatment
The Combined Company will account for the acquisition pursuant to the Arrangement Agreement as a reverse acquisition using the acquisition method of accounting in accordance with generally accepted accounting principles in U.S. GAAP requires that either Tilray or Aphria be designated as the acquirer for accounting purposes based on the evidence available. Aphria will be treated as the acquiring entity for accounting purposes.
In identifying Aphria as the acquiring entity, Tilray and Aphria reviewed the accounting guidance as provided in Accounting Standards Codification 805, Business Combinations, which takes into account the type of consideration, the structure of the Arrangement and the other transactions contemplated by the Arrangement Agreement, relative outstanding share ownership, the composition of the Combined Company board of directors, designation of senior management positions of the Combined Company, particularly the chief executive officer, relative voting rights, and the relative size as measured by assets, revenue or earnings as well as other metrics an investor would use for evaluating the respective company’s current and future financial performance.
Certain Canadian Federal Income Tax Considerations
Pursuant to the Arrangement, a Resident Holder, other than a Resident Dissenter, will exchange their Aphria Shares for Tilray Shares. Generally, such Resident Holder will be considered to have disposed of such Aphria Shares for proceeds of disposition equal to the aggregate fair market value at the Effective Time of the Tilray Shares received by such Resident Holder under the Arrangement, and will realize a capital gain (or a capital loss) to the extent that such proceeds of disposition exceed (or are less than) the aggregate of the Resident Holder’s adjusted cost base of the Aphria Shares immediately before the time of disposition and any reasonable costs of disposition.
Aphria Shares held by a Non-Resident Holder, other than a Non-Resident Dissenter, will be exchanged for Tilray Shares as part of the Arrangement. Generally, such Non-Resident Holder will not be subject to tax under the Tax Act on any capital gain realized on the disposition of Aphria Shares under the Arrangement unless the Aphria Shares are “taxable Canadian property” and are not “treaty-protected property” to the Non-Resident Holder.
The foregoing summary is qualified in its entirety by the summary set forth in this Circular under the heading “Certain Canadian Federal Income Tax Considerations”. Aphria Shareholders should consult their own tax advisors regarding the Canadian federal income tax consequences of the Arrangement.
Certain U.S. Federal Income Tax Considerations
Aphria Shareholders should carefully read the information in this Circular under “Certain U.S. Federal Income Tax Considerations” which qualifies the information set out below and should consult their own tax advisors.
Aphria Shareholders should not recognize gain or loss as a result of the Arrangement for U.S. tax purposes. Each holder’s aggregate tax basis in Tilray Shares received in the Arrangement, should equal the aggregate tax basis of the holder’s Aphria Shares surrendered in the Arrangement. Each holder’s holding period for Tilray Shares received in the Arrangement should include such holder’s holding period for the Aphria Shares surrendered in the Arrangement.
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Holders who acquired different blocks of Aphria Shares with different holding periods and tax bases must generally apply the foregoing rules separately to each identifiable block of Aphria Shares. Any such holder should consult its tax advisor with regard to identifying the bases or holding periods of the particular shares of Tilray Shares received in the Arrangement.
Support Agreements
Aphria Support Agreements
Simultaneously with the execution of the Arrangement Agreement, management and the Tilray Board and certain holders of Aphria Shares (the “Aphria Supporting Shareholders”) have entered into a voting and support agreements (the “Aphria Support Agreements”), pursuant to which the Aphria Supporting Shareholders agreed, among other things, to vote their Aphria Shares in favour of the Aphria Resolution. The Aphria Support Agreements terminate upon the occurrence of certain events, including the termination of the Arrangement Agreement in accordance with its terms. See “General Information about the Aphria Meeting and Voting – Aphria Agreement”.
Tilray Support Agreements
Simultaneously with the execution of the Arrangement Agreement, management and the Aphria Board and certain holders of Tilray Shares (the “Tilray Supporting Stockholders”) have entered into a voting and support agreements (the “Tilray Support Agreements”), pursuant to which the Tilray Supporting Stockholders agreed, among other things, to vote their Tilray Shares in favour of the Tilray Resolutions. Pursuant to the Tilray Support Agreement entered into between Aphria and Brendan Kennedy, Mr. Kennedy provided additional covenants to, among other things, vote his Tilray Subject Shares in favor of certain governance measures and in support of any other measures put forward by management of the Combined Company for a period from and after the Effective Time until the Business Day immediately following the second annual general meeting of Tilray Stockholders to occur after the Effective Time. The Tilray Support Agreements terminate upon the occurrence of certain events, including the termination of the Arrangement Agreement in accordance with its terms. See “General Information about the Tilray Meeting and Voting – Tilray Support Agreement”.
No Fractional Shares
In no event shall any Aphria Shareholder be entitled to a fractional Tilray Share. Where the aggregate number of Tilray Shares to be issued to an Aphria Shareholder as Consideration under the Arrangement would result in a fraction of a Tilray Share being issuable, the number of Tilray Shares to be received by such Aphria Shareholder shall be rounded down to the nearest whole Tilray Share.
See “Description of the Arrangement – No Fractional Shares”.
Risk Factors
There are a number of risk factors relating to the Arrangement, the business of Aphria, the business of Tilray and the business of the Combined Company, all of which should be carefully considered by Aphria Shareholders and Tilray Stockholders.
See “Risk Factors – Risks Related to the Arrangement”, “The Arrangement Agreement and Related Agreements – Risks”, “Information Concerning Tilray – Risks and Uncertainties” and “Risk Factors – Risks Related to the Combined Company”.
Aphria Selected Historical Financial Information
The following tables present selected consolidated summary financial data for Aphria as of and for the six months ended November 30, 2020 and as of and for each of the fiscal years ended May 31, 2020, May 31, 2019 and May 31, 2018. This data has been derived from the unaudited condensed interim consolidated financial statements for the three and six months ended November 30, 2020 and from the audited consolidated financial statements for the years ended May 31, 2020 and May 31, 2019, which are incorporated by reference into this Circular, and have been prepared in accordance with International Financing Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and Interpretations of the IFRS Interpretations Committee.
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The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Aphria’s unaudited condensed interim consolidated financial statements for the three and six months ended November 30, 2020 and Aphria’s audited consolidated financial statements for the years ended May 31, 2020 and May 31, 2019, together with the other information contained therein.
 
Six Months
Ended
November 30
Years ended May 31
(CAD$ in thousands, except per share amounts)
2020
2020
2019
2018
Consolidated Results of Operations Data:
 
 
 
 
Net Revenue
$306,221
$543,339
$237,110
$36,917
Gross profit before fair value adjustments
$87,085
$133,759
$62,538
$27,912
Gross profit
$114,771
$191,975
$75,421
$40,887
Operating Loss
$(22,468)
$(66,057)
$(145,155)
$(12,428)
Net income / (loss)
$(125,693)
$(84,634)
$(16,499)
$29,448
Net loss per share - basic and diluted
$(0.43)
$(0.33)
$(0.07)
$0.18
 
Six Months
Ended
November 30
May 31
(CAD$ in thousands)
2020
2020
2019
2018
Consolidated Balance Sheet Data:
 
 
 
 
Cash and cash equivalents
$187,997
$497,222
$550,797
$59,737
Total assets
$2,810,801
$2,498,439
$2,441,592
$1,314,092
Total liabilities
$863,810
$660,097
$708,439
$140,499
Total shareholders’ equity
$1,946,991
$1,838,342
$1,733,153
$1,173,593
Financial information with respect to Aphria has been incorporated by reference into this Circular. See “Additional Information Concerning Aphria and Documents Incorporated by Reference by Aphria”.
Tilray Selected Historical Financial Information
The following tables present selected consolidated summary financial data for Tilray, as of and for each of the fiscal years ended December 31, 2020, December 31, 2019 and December 31, 2018. This data has been derived from the audited financial statements included in Tilray’s Annual Report on Form 10-K for the year ended December 31, 2020 and “Item 8 (Financial Statements and Supplementary Data)” of Tilray’s Definitive Proxy Statement on Schedule 14A filed on April 15, 2019, which are incorporated by reference into this Circular, and have been prepared in accordance with generally accepted accounting principles as applied in the United States, which are referred to as GAAP.
The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Item 6, “Selected Financial Data,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Tilray’s Annual Report on Form 10-K for the year ended December 31, 2020 and Item 8, “Financial Statements and Supplementary Data” of Tilray’s Definitive Proxy Statement on Schedule 14A filed on April 15, 2019.
 
Years ended December 31
(USD$ in thousands, except per share amounts)
2020
2019
2018
Consolidated Results of Operations Data:
 
 
 
Revenue
$210,482
$166,979
$43,130
Gross profit (loss)
$24,655
$(23,496)
$14,275
Operating Loss
$(201,124)
$(304,138)
$(57,840)
Net loss
$(271,073)
$(321,169)
$(67,723)
Net loss per share - basic and diluted
$(2.15)
$(3.20)
$(0.82)
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Years ended December 31
(USD$ in thousands)
2020
2019
2018
Consolidated Balance Sheet Data:
 
 
 
Cash and cash equivalents
$189,702
$96,791
$487,255
Working capital
$165,738
$166,600
$528,365
Total assets
$945,949
$896,330
$656,667
Total liabilities
$572,050
$611,059
$459,014
Accumulated deficit
$(730,103)
$(430,130)
$(108,177)
Total stockholders’ equity
$373,899
$285,271
$197,653
Financial information with respect to Tilray has been incorporated by reference into this Circular. See “Additional Information Concerning Tilray and Documents Incorporated by Reference by Tilray”.
Summary Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of Tilray and Aphria, as adjusted to give effect to the Arrangement. The unaudited pro forma condensed combined balance sheet information as at December 31, 2020 (the “summary pro forma balance sheet”) gives effect to the Arrangement as if it had occurred on December 31, 2020. The unaudited pro forma statement of net loss information for the year ended December 31, 2020 (the “summary pro forma statement of net loss”) gives effect to the Arrangement as if it had occurred on January 1, 2020. See the unaudited pro forma condensed combined financial statements of Tilray that give effect to the Arrangement, which are set forth in Appendix “L” to this Circular.
The transaction accounting adjustments consist of those necessary to account for the Arrangement as a reverse acquisition in accordance with U.S. GAAP.
Pro Forma Financial Information
 
(USD$ in thousands, except per share amounts)
Pro forma combined
December 31, 2020
Summary Pro Forma Statement of Net Loss
 
Revenue
$682,445
Gross Profit
$116,604
Net loss
$(524,584)
Net loss per share - basic and diluted
$(1.32)
 
 
Summary Pro Forma Balance Sheet
 
Cash and cash equivalents
$371,841
Total assets
$6,391,900
Convertible notes, net of issuance costs
$510,370
Long-term debt
$144,819
Total stockholders’ equity
$4,722,201
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RISK FACTORS
The following risk factors should be considered by Aphria Shareholders and Tilray Stockholders in evaluating whether to approve the Aphria Resolution and the Tilray Proposals, respectively. These risk factors should be considered in conjunction with the other information contained in or incorporated by reference into this Circular. These risk factors relate to the Arrangement. For information on risks and uncertainties relating to the business of Aphria, see “Additional Information Concerning Aphria and Documents Incorporated by Reference by Aphria” and for information on risks and uncertainties relating to the business of Tilray, see “Additional Information Concerning Tilray and Documents Incorporated by Reference by Tilray”.
Risks Related to the Arrangement
Conditions precedent to closing of the Arrangement
The completion of the Arrangement is subject to a number of conditions precedent, some of which are outside Aphria’s and Tilray’s control, including receipt of the Final Order, receipt of Aphria Shareholder Approval, receipt of Tilray Stockholder Approval and receipt of Required Regulatory Approvals.
In addition, the completion of the Arrangement by Aphria and Tilray is conditional on, among other things, no Material Adverse Effect having occurred, or having been disclosed to the public (if previously undisclosed to the public) in respect of the other Party.
There can be no certainty, nor can Aphria or Tilray provide any assurance, that all conditions precedent to the Arrangement will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Arrangement may not be completed. If the Arrangement is not completed, the market price of Aphria Shares and/or Tilray Shares may be adversely affected.
The Regulatory Approvals may not be obtained or, if obtained, may not be obtained on a favourable basis
To complete the Arrangement, each of Aphria and Tilray must make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities. The Required Regulatory Approvals have not been obtained yet. The regulatory approval processes may take a lengthy period of time to complete, which could delay completion of the Arrangement. If obtained, the Required Regulatory Approvals may be conditioned, with the conditions imposed by the applicable Governmental Entity not being acceptable to either Aphria or Tilray, or, if acceptable, not being on terms that are favourable to the Combined Company. There can be no assurance as to the outcome of the regulatory approval processes, including the undertakings and conditions that may be required for approval or whether the Regulatory Approvals will be obtained. If not obtained, or if obtained on terms that are not satisfactory to either Aphria or Tilray, the Arrangement may not be completed.
Market price of the Aphria Shares and Tilray Shares
If, for any reason, the Arrangement is not completed or its completion is materially delayed and/or the Arrangement Agreement is terminated, the market price of Aphria Shares and Tilray Shares may be materially adversely affected. Depending on the reasons for terminating the Arrangement Agreement, Aphria’s or Tilray’s business, financial condition or results of operations could also be subject to various material adverse consequences, including as a result of paying the Aphria Termination Amount or Tilray Termination Amount, as applicable, or the Transaction Expenses.
Additionally, the market price for Tilray Shares, the market price for the Aphria Shares, and the market price of stock of other companies operating in the cannabis industry, has been extremely volatile. The volatility of the market price for Aphria Shares and Tilray Shares may be based on speculative trading of each of Aphria Shares and Tilray Shares and merger arbitrage.
During the year ended December 31, 2020, the trading price of Tilray Shares ranged between a low sales price of US$2.43 and a high sales price of US$22.95 and included single day fluctuations as high as 64.13%. Additionally, during 2019, the trading price of Tilray Shares fluctuated between a low sales price of US$15.57 and a high sales price of US$106.00 per share. The market price of Tilray Shares may continue to be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond Tilray’s control, including the following: (i) actual or anticipated fluctuations in Tilray’s quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of other issuers that investors deem comparable to Tilray; (iv) the addition or departure of Tilray’s executive officers or other key personnel; (v) the
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release or expiration of lock-up or other transfer restrictions on Tilray Shares, such as the release of 11.0 million Tilray Shares on April 3, 2020, 19.5 million shares, in aggregate, of Class 1 and Class 2 common stock on June 5, 2020, and 7.0 million Tilray Shares on December 14, 2020, each associated with Tilray’s downstream merger transaction in 2019; (vi) sales or perceived sales, or the expectation of future sales, of Tilray Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving Tilray or Tilray’s competitors; and (viii) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the cannabis industry or Tilray’s target markets.
During the year ended May 31, 2020, the trading price of Aphria Shares ranged between a low sales price of C$2.65 and a high sales price of C$10.08 and included single day fluctuations as high as 23.00%. Additionally, during 2019, the trading price of Aphria Shares fluctuated between a low sales price of C$4.76 and a high sales price of C$22.00 per share. The market price of Aphria Shares may continue to be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond Aphria’s control, including the following: (i) actual or anticipated fluctuations in Aphria’s quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of other issuers that investors deem comparable to Aphria; (iv) the addition or departure of Aphria’s executive officers or other key personnel; (v) the release or expiration of lock-up or other transfer restrictions on Aphria Shares; (vi) sales or perceived sales, or the expectation of future sales, of Aphria Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving Aphria or Aphria’s competitors; and (viii) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the cannabis industry or Aphria’s target markets.
Investors may also purchase Tilray Shares or Aphria Shares to hedge existing exposure in Tilray Shares or Aphria Shares or to speculate on the price of Tilray Shares or Aphria Shares. Speculation on the price of Tilray Shares or Aphria Shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of Tilray Shares or Aphria Shares available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase Tilray Shares or Aphria Shares for delivery to lenders of such common shares. Those repurchases may, in turn, dramatically increase the price of Tilray Shares or Aphria Shares until investors with short exposure are able to purchase additional Tilray Shares or Aphria Shares, as applicable, to cover their short position. This phenomenon is often referred to as a “short squeeze”. A short squeeze could exacerbate volatile price movements in Tilray Shares or Aphria Shares that are not directly correlated to the operating performance or prospects of Tilray or Aphria, respectively. Once investors purchase the shares necessary to cover their short position, Tilray’s or Aphria’s share price will likely decline rapidly and substantially relative to its levels during the short squeeze with such decline being unrelated to operating performance or prospects of the company, and may not return to levels at or above those during the short squeeze for a long time or at all. As a result, if an investor purchases Tilray Shares or Aphria Shares during a short squeeze, the investor will be at an increased risk of failing to sell the shares at a price greater than what the investor paid for them and losing some or all of the investor’s investment.
Termination in certain circumstances
Each of Aphria and Tilray has the right, in certain circumstances, in addition to termination rights relating to the failure to satisfy the conditions of closing, to terminate the Arrangement. Accordingly, there can be no certainty, nor can Aphria or Tilray provide any assurance that the Arrangement will not be terminated by either of Aphria or Tilray prior to the completion of the Arrangement. In addition, if the Arrangement is not completed by [•], 2021 (subject to the right of either Party to extend such Outside Date by up to an additional 60 days if the Required Regulatory Approvals have not been obtained or the Final Order has not been obtained as a result of the COVID-19 pandemic, in each case, by such date as further described in the Arrangement Agreement), either Aphria or Tilray may choose to terminate the Arrangement Agreement. The Arrangement Agreement also includes termination amounts payable if the Arrangement Agreement is terminated in certain circumstances. Additionally, any termination will result in the failure to realize the expected benefits of the Arrangement in respect of the operations and business of Aphria and Tilray.
The Termination Amounts provided under the Arrangement Agreement may discourage other parties from attempting to acquire Aphria or Tilray
Under the Arrangement Agreement, each of Aphria and Tilray is required to pay to the other a termination amount of C$65 million in the event the Arrangement Agreement is terminated in connection with entry into a Superior Proposal. This termination amount may discourage other parties from attempting to acquire Aphria Shares or Tilray
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Shares or otherwise make an Acquisition Proposal to Aphria or Tilray, even if those parties, in the case of Aphria, would otherwise be willing to offer greater value to Aphria Shareholders than that offered by Tilray under the Arrangement, or in the case of Tilray, would be willing to offer Tilray Stockholders a benefit greater than what the Transaction offers.
Uncertainty surrounding the Arrangement
As the Arrangement is dependent upon receipt, among other things, of the Required Regulatory Approvals and satisfaction of certain other conditions, its completion is uncertain. If the Arrangement is not completed for any reason, there are risks that the announcement of the Arrangement and the dedication of Aphria’s and Tilray’s resources to the completion thereof could have a negative impact on their respective relationships with their stakeholders and could have a material adverse effect on the current and future operations, financial condition and prospects of each of Aphria and Tilray.
In addition, each of Aphria and Tilray will incur significant transaction expenses in connection with the Arrangement, regardless of whether the Arrangement is completed.
Restrictions from pursuing business opportunities
Each of Aphria and Tilray is subject to customary non-solicitation provisions under the Arrangement Agreement, pursuant to which, the Parties are restricted from soliciting, initiating or knowingly encouraging any Acquisition Proposal, among other things. The Arrangement Agreement also restricts them from taking specified actions until the Arrangement is completed without the consent of the other Party. These restrictions may prevent each Party from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement.
Risks associated with a fixed exchange ratio
The Exchange Ratio is fixed and will not increase or decrease due to fluctuations in the market price of Aphria Shares or Tilray Shares. The market price of Aphria Shares or Tilray Shares could each fluctuate significantly prior to the Effective Date in response to various factors and events, including, without limitation, as a result of the differences between Aphria’s and Tilray’s actual financial or operating results and those expected by investors and analysts, changes in analysts’ projections or recommendations, changes in general economic or market conditions, and broad market fluctuations. As a result of such fluctuations, historical market prices are not indicative of future market prices or the market value of the Tilray Shares that holders of Aphria Shares will receive on the Effective Date. There can be no assurance that the market value of the Tilray Shares that the holders of Aphria Shares will receive on the Effective Date will equal or exceed the market value of the Aphria Shares held by such Aphria Shareholders prior to the Effective Date. Similarly, there can be no assurance that the trading price of Tilray Shares will not decline following the completion of the Arrangement.
The foregoing risks or other risks arising in connection with the failure of the Arrangement, including the diversion of management attention from conducting the business of Aphria and Tilray, may have a material adverse effect on Aphria’s and Tilray’s business operations, financial results and share price.
Risks Related to the Combined Company
The business and operations of the Combined Company will be subject to the risks described in the documents of Aphria and Tilray incorporated by reference in this Circular, including, without limitation, the risks described in Aphria’s annual information form for the year ended May 31, 2020 and in Aphria’s management’s discussion and analysis of financial condition and results of operations for the six months ended November 30, 2020 and Tilray’s Annual Report filed on Form 10-K for the year ended December 31, 2020, and certain unexpected, unforeseen or unknown risks. The Combined Company’s business, financial condition, results of operations and cash flows could be materially adversely affected by any of these risks. The market or trading price of Aphria’s and Tilray’s securities could decline due to any of these risks. Additional risks not presently known to Aphria and Tilray or that Aphria and Tilray currently considers immaterial may also prove to be material and may impair the Combined Company’s business and operations. In addition to risks associated with Aphria’s and Tilray’s business and operations, the following additional risks are associated with the Combined Company.
Aphria and Tilray may not integrate successfully
Aphria and Tilray intend to integrate their operations together. However, operational and strategic decisions and staffing decisions have not yet been made. As a result, the Arrangement will present challenges to management, including the integration of management structures, operations, information technology and accounting systems and
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personnel of the two companies, and special risks, including possible unanticipated liabilities, unanticipated costs, diversion of management’s attention and the loss of key employees or customers. These decisions and the ‎integration of Aphria’s and Tilray’s global operations may present ‎challenges to management, ‎including the integration of systems and personnel, ‎and special risks, including possible unanticipated ‎liabilities, unanticipated costs, and the loss of key ‎employees.
The ability to realize the benefits of the Arrangement may depend in part on successfully consolidating ‎‎functions and integrating operations, procedures and personnel in a timely and efficient manner, as well ‎as on ‎the Combined Company’s ability to realize the anticipated growth opportunities and synergies, ‎efficiencies and cost ‎savings from integrating Aphria’s and Tilray’s businesses following ‎completion of the Arrangement. ‎‎The performance of the Combined Company after ‎completion of the ‎Transaction could be adversely affected if the Combined Company cannot retain key employees to ‎‎assist in the ongoing operations. As a result of these factors, it is ‎possible that the cost reductions and ‎synergies expected will not be realized.‎
The difficulties that management of the Combined Company encounters in the transition and integration processes could have an adverse effect on the revenues, level of expenses and operating results of the Combined Company. The amount and timing of the ‎synergies the Parties hope to realize may not occur as planned. ‎As a result of these factors, it is possible that any anticipated benefits from the Arrangement will not be realized.
The pro forma financial statements are presented for illustrative purposes only and may not be an indication of the Combined Company’s financial condition or results of operations following the Arrangement
The pro forma financial statements contained in this Circular are presented for illustrative purposes only and may not be an indication of the Combined Company’s financial condition or results of operations following the Arrangement for a number of reasons (including challenges related to the COVID-19 pandemic). For example, the pro forma financial statements have been derived from the historical financial statements of Aphria and Tilray and certain adjustments and assumptions have been made regarding the Combined Company after giving effect to the Arrangement. The information upon which these adjustments and assumptions have been made is preliminary, and these types of adjustments and assumptions are difficult to make with complete accuracy. Moreover, the pro forma financial statements do not reflect all costs that are expected to be incurred by the Combined Company in connection with the Arrangement. For example, the impact of any incremental costs incurred in integrating Aphria and Tilray is not reflected in the pro forma financial statements. As a result, the actual financial condition and results of operations of the Combined Company following the Arrangement may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the Combined Company's financial condition or results of operations following the Arrangement (including challenges related to the COVID-19 pandemic). Any potential decline in the Combined Company’s financial condition or results of operations may cause a significant decrease in the stock price of Tilray.
The issuance and future sale of Tilray Shares could affect the market price
Based on number of outstanding Aphria Shares as of [•], Tilray currently expects to issue at the Effective Time an aggregate of [•] Tilray Shares. The issuance of these shares, and the sale of Tilray Shares in the public market from time to time, could depress the market price for Tilray Shares.
Additional Indebtedness
The Combined Company may be required to draw down or incur additional Indebtedness under its credit facilities or other sources of debt financing. The additional Indebtedness will increase the interest payable by the Combined Company from time to time until such amounts are repaid, which will represent an increase in the Combined Company’s cost and a potential reduction in its income. In addition, the Combined Company may need to find additional sources of financing to repay this amount when it becomes due.
The Tilray Shares to be received by Aphria Shareholders as a result of the Arrangement will have different rights from the Aphria Shares
Tilray is a Delaware corporation. Aphria is a company continued under the OBCA. Upon completion of the Arrangement, Aphria Shareholders will become Tilray Stockholders and their rights as stockholders will be governed by the Current Tilray Organizational Documents and Delaware Law. Certain of the rights associated with Tilray Shares under Delaware Law are different from the rights associated with Aphria Shares under the OBCA. For a discussion of the different rights associated with Tilray Shares, see Appendix “J” to this Circular.
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Enforcement of rights against the Combined Company in Canada
Tilray is located outside Canada and, following the Effective Time, certain of its directors, officers and experts are expected to reside outside of Canada. Accordingly, it may not be possible for Tilray Stockholders to effect service of process within Canada upon the Combined Company or the majority of its directors, officers or experts, or to enforce judgments obtained in Canadian courts against the Combined Company or the majority of its directors, officers or experts.
Competition
The Combined Company expects significant competition from other companies. Some of these companies may have significantly greater financial, technical, marketing and other resources than the Combined Company, may be able to devote greater resources to the development, promotion, sale and support of their products and services, and may have more extensive customer bases and broader customer relationships. The Combined Company’s future success depends upon its ability to achieve competitive per unit costs through increased production and on its ability to produce and sell higher margin products. To the extent that the Combined Company is not able to produce its products at competitive prices or consumers prioritize established low margin products over innovative, higher margin products, the Combined Company’s business, financial condition and results of operations could be materially and adversely affected.
Should the size of the cannabis market increase as projected, the overall demand for products and number of competitors will increase as well, and in order for the Combined Company to be competitive it will need to invest significantly in research and development, market development, marketing, production expansion, new client identification, distribution channels and client support. If the Combined Company is not successful in obtaining sufficient resources to invest in these areas, the Combined Company’s ability to compete in the market may be adversely affected, which could materially and adversely affect the Combined Company’s business, financial condition, results of operations and prospects.
For a detailed discussion of the competition risks applicable to the Combined Company, see the “Competition” risk factor in Aphria’s annual information form for the year ended May 31, 2020 and Aphria’s management’s discussion & analysis for the three and six months ended November 30, 2020, and “Risks related to the Arrangement” and “Risks related to Adult-Use Cannabis” risk factors in Tilray’s Annual Report on Form 10-K for its fiscal year ended December 31, 2020.
Reliance on third-party suppliers, manufacturers and contractors
The Combined Company intends to maintain a full supply chain for the provision of products and services to the regulated cannabis industry. Due to the novel regulatory landscape for regulating cannabis in Canada, the European Union, and other international markets in which the Company will do business, and the variability surrounding the regulation of cannabis in the U.S., the Combined Company’s third-party suppliers, manufacturers and contractors may elect, at any time, to decline or withdraw services necessary for the Combined Company’s operations. Loss of these suppliers, manufacturers and contractors, including for non-cannabis based products coming from the U.S., may have a material adverse effect on the Combined Company’s business, financial condition, results of operations and prospects.
In addition, any significant interruption, negative change in the availability or economics of the supply chain or increase in the prices for the products or services provided by any such third party suppliers, manufacturers and contractors could materially impact the Combined Company’s business, financial condition, results of operations and prospects. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on the Combined Company’s business, financial condition, results of operations and prospects.
For a detailed discussion of the competition risks applicable to the Combined Company, see the “Reliance on Third Party Suppliers, Manufacturers and Contractors” risk factor in Aphria’s annual information form for the year ended May 31, 2020 and Aphria’s management’s discussion & analysis for the three and six months ended November 30, 2020, and “General Business Risks and Risk Related to Our Financial Conditions and Operations,” “Risks Related to the Medical Cannabis Business” and “Risks Related to COVID-19” risk factors in Tilray’s Annual Report on Form 10-K for its fiscal year ended December 31, 2020.
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Highly Regulated Industry and Evolving Regulatory Landscape
The Combined Company operates in a highly regulated and rapidly evolving market. The laws, regulations and guidelines generally applicable to the cannabis industry domestically and internationally may change in ways currently unforeseen. The Combined Company’s operations are subject to a variety of laws, regulations, guidelines and policies, whether in Canada, the European Union, the United States or elsewhere, relating to the cultivation, manufacture, import, export, management, transportation, storage, packaging/labelling, advertising and promotion, sale, health and safety and disposal of cannabis, including, but not limited to, the Cannabis Act, any regulations thereunder, and laws, regulations, guidelines and policies relating to drugs, controlled substances, health and safety, the conduct of operations and the protection of the environment, and applicable stock exchange rules and regulations. Any amendment to or replacement of existing laws, regulations, guidelines or policies may cause adverse effects to the Combined Company’s operations. The risks to the Combined Company’s business represented by subsequent regulatory changes could reduce the addressable market for the Combined Company’s products and could materially and adversely affect the Combined Company’s business, financial condition, results of operations and prospects.
For a detailed discussion of the competition risks applicable to the Combined Company, see the “Highly Regulated Industry” risk factor in Aphria’s annual information form for the year ended May 31, 2020 and Aphria’s management’s discussion & analysis for the three and six months ended November 30, 2020, and “Risks Related to Adult-Use Cannabis” and “Risks Related to the Medical Cannabis Business” risk factors in Tilray’s Annual Report on Form 10-K for its fiscal year ended December 31, 2020.
Risks Related to Taxes
The Arrangement may give rise to taxable income in the United States for Aphria Shareholders who are U.S. citizens or residents and there can be no assurances that material adverse tax consequences will not result from the Arrangement
The Arrangement is expected to qualify as a “reorganization” under section 368(a) of the Internal Revenue Code. However, there can be no assurance that the Internal Revenue Service (“IRS”) will agree with or not otherwise challenge this position on the tax treatment of the Arrangement, which could result in the Arrangement being treated as a taxable exchange. Neither Aphria nor Tilray has applied for a ruling or received a tax opinion of counsel related to the Arrangement and neither intends to do so.
The effective income tax rate of income of Aphria and its Subsidiaries could increase after completion of the Arrangement
Since Aphria and its non-U.S. Subsidiaries will become wholly owned Subsidiaries of Tilray after completion of the Arrangement, the profits of Aphria and its Subsidiaries may be subject to U.S. taxation prior to distribution to shareholders, which could increase the effective tax rate on such income. For example, Aphria and its non-U.S. Subsidiaries will become “controlled foreign corporations” under U.S. federal income tax law, which will subject certain types of income to anti-deferral rules. In addition, distributions from Aphria to Tilray may be subject to U.S. federal income tax or withholding prior to or at the time of distribution to shareholders. This could have the effect of increasing the effective income tax rate applicable to such income in comparison to the current effective income tax rate on Aphria’s income. Post-Arrangement restructuring may help to mitigate this risk, but there can be no guarantee that any such restructuring transactions will not themselves be taxable.
Changes in tax law could have a material impact on the Combined Company
Changes to the U.S. federal income tax laws are proposed regularly and there can be no assurance that, if enacted, any such changes would not have an adverse impact on the Combined Company. For example, President Biden has suggested the reversal or modification of some portions of the 2017 U.S. tax legislation and certain of these proposals, if enacted, could result in a higher U.S. corporate income tax rate than is currently in effect and thereby increase the effective tax rate of the Combined Company following the Arrangement compared to current expectations. There can be no assurance that any such proposed changes will be introduced as legislation, or if they are introduced that they would be enacted, or if enacted what form they would take.
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GENERAL INFORMATION ABOUT THE APHRIA MEETING AND VOTING
Date, Time and Place
The Aphria Meeting will be held online on [•], 2021 at [•] (Eastern time) via live audio webcast at www.virtualshareholdermeeting.com/APHA2021. Online check-in will begin at [•] a.m. (Eastern time), and we encourage you to allow ample time for the online check-in procedures. To participate in the Aphria Meeting, Aphria Shareholders will need their unique 16-digit control number included on their Aphria form of proxy or voting instruction form, as applicable.
Purpose of the Aphria Meeting
At the Aphria Meeting, Aphria Shareholders will be asked:
1.
to consider and, if thought advisable, to pass the Aphria Resolution, the full text of which is set forth in Appendix “C” to this Circular, approving the Arrangement pursuant to Section 182 of the OBCA involving, among other things, the acquisition by Tilray of all of the outstanding Aphria Shares, all as more particularly described in this Circular, which resolution, to be effective, must be passed by an affirmative vote of at least two-thirds of the votes cast at the Aphria Meeting by Aphria Shareholders either online, by proxy or by voting instruction form, as applicable; and
2.
to transact such further and other business as may properly be brought before the Aphria Meeting or any postponement or adjournment thereof.
Recommendation of the Aphria Board
The Aphria Board unanimously recommends that Aphria Shareholders vote FOR the Aphria Resolution. To be effective, the Aphria Resolution must be approved, with or without variation, by the affirmative vote of at least two-thirds of the votes cast on the Aphria Resolution by Aphria Shareholders virtually present or represented by proxy at the Aphria Meeting.
Record Date and Entitlement to Vote
The record date for determining the Aphria Shareholders entitled to receive notice of and to vote at the Aphria Meeting is [•], 2021. Only Aphria Shareholders of record as of the close of business (Eastern time) on the Aphria Record Date are entitled to receive notice of and to vote at the Aphria Meeting.
Solicitation of Proxies
This Circular is furnished by management of Aphria in connection with the solicitation of proxies for use at the Aphria Meeting to be held online on [], 2021 at [] (Eastern time) via live audio webcast at www.virtualshareholdermeeting.com/APHA2021, and at any postponements or adjournments of the Aphria Meeting. To participate in the Aphria Meeting, Aphria Shareholders will need their unique 16-digit control number included on their Aphria form of proxy or voting instruction form, as applicable.
The solicitation of proxies by this Circular is being made by or on behalf of management of Aphria. It is expected that the solicitation will be made primarily by mail, but proxies may also be solicited by telephone, over the internet or in writing. In addition, Aphria has retained the services of Laurel Hill to solicit proxies for a fee of approximately C$150,000, and Aphria has also agreed to reimburse out-of-pocket expenses of Laurel Hill and to indemnify it against certain liabilities arising out of or in connection with such engagement. The cost of the solicitation will be borne by Aphria.
Quorum
The quorum for the Aphria Meeting is two or more shareholders or proxyholders holding or representing not less than 10% of the Aphria Shares entitled to be voted at the Aphria Meeting.
Persons Entitled to Vote
Only registered Aphria Shareholders and duly appointed proxyholders are entitled to vote at the Aphria Meeting. Each registered Aphria Shareholder has one vote for each Aphria Share held at the close of business on the Aphria Record Date. As of the Aphria Record Date, there were [•] Aphria Shares outstanding. Non-registered Aphria Shareholders who have not made arrangements for the due appointment of themselves as proxyholder will not be able to vote at the Aphria Meeting but may attend the Aphria Meeting and ask questions.
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Voting Instructions
Registered Aphria Shareholders
Registered Aphria Shareholders may wish to vote by proxy whether or not they are able to attend the Aphria Meeting. Registered Aphria Shareholders may choose one of the following options to submit their vote:
Internet:
Go to www.proxyvote.com and enter the 16-digit control number printed on the form of proxy or scan the QR Code on the Aphria form of proxy to access and follow the instructions on the screen. Internet voting facilities for Aphria Shareholders of record are available 24 hours a day.
Phone:
Call the toll-free telephone number provided on the form of proxy and follow the promoted instructions. You will need to enter the 16-digit control number. Telephone voting facilities for Aphria Shareholders of record are available 24 hours a day.
Mail:
Enter your voting instructions, sign and date the form of proxy and return your completed form of proxy or voting instruction form in the enclosed postage paid envelope provided to Data Processing Centre, P.O. Box 3700 STN Industrial Park, Markham, ON L3R 9Z9.
Virtually at the Meeting:
Registered Aphria Shareholders and duly appointed proxyholders can vote at the appropriate times by completing a ballot online during the Aphria Meeting. It is anticipated that once voting has opened during the Aphria Meeting, the resolutions and voting choices will be displayed and you will be able to vote by selecting your voting choices from the options shown on the screen. You must click submit for your vote to be counted.
In all cases, registered Aphria Shareholders must ensure the form of proxy is received at least 48 hours (excluding non-Business Days) before the Aphria Meeting, or the adjournment thereof, at which the form of proxy is to be used.
Beneficial Aphria Shareholders
These meeting materials are being sent to both registered and non-registered Aphria Shareholders. If you are a non-registered Aphria Shareholder and Aphria or its agent has sent these materials directly to you, your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the Intermediary holding on your behalf.
Aphria Shareholders whose Aphria Shares are not registered in their own name are referred to in this Circular as “beneficial Aphria Shareholders”. There are two kinds of beneficial Aphria Shareholders: those who have objected to their name being made known to Aphria (called “OBOs” for Objecting Beneficial Owners) and those who have not objected (called “NOBOs” for Non-Objecting Beneficial Owners).
Aphria can request and obtain a list of their NOBOs from Intermediaries via its transfer agent and can use this NOBO list for distribution of proxy-related materials directly to NOBOs. Aphria has decided not to directly send proxy-related materials to its NOBOs. If you are a NOBO, your Intermediary will have provided to you a voting instruction form. Please return your instructions as specified in the voting instruction form. NOBOs that wish to attend the Aphria Meeting and vote in person (or appoint someone else to attend the Aphria Meeting and vote on such NOBOs’ behalf) can appoint themselves (or someone else) as a proxyholder by following the applicable instructions on the voting instruction form.
Applicable regulatory policy requires intermediaries to seek voting instructions from beneficial Aphria Shareholders. Every Intermediary has its own mailing procedures and provides its own return instructions to clients. However, the majority of Intermediaries now delegate responsibility for obtaining instructions from clients to Broadridge. Broadridge typically mails its voting instruction form, which may be scanned, in lieu of the form of proxy. Beneficial Aphria Shareholders will be requested to complete and return the voting instruction form to Broadridge by mail. Alternatively, beneficial Aphria Shareholders can call a toll-free telephone number or access the internet to vote. The toll-free number and website will be provided by Broadridge on its voting instruction form. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Aphria Shares
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to be represented at the Aphria Meeting. A beneficial Aphria Shareholder cannot use a voting instruction form to vote Aphria Shares directly at the Aphria Meeting, as the voting instruction form must be returned as directed by Broadridge in advance of the Aphria Meeting in order to have the Aphria Shares voted.
Aphria will arrange for copies of its meeting materials for the Aphria Meeting to be delivered to OBOs and is responsible for paying the fees and costs of Intermediaries for their services in delivering proxy-related materials to OBOs in accordance with National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer. Applicable regulatory policy requires Intermediaries to whom meeting materials have been sent to seek voting instructions from OBOs in advance of the Aphria Meeting. Every Intermediary has its own mailing procedures and provides its own return instructions, which should be carefully followed by OBOs in order to ensure that their Aphria Shares are voted at the Aphria Meeting. Often, the form of proxy supplied to an OBO by its Intermediary is identical to that provided to registered Aphria Shareholders. However, its purpose is limited to instructing the registered Aphria Shareholder how to vote on behalf of the OBO. OBOs are requested to complete and return the voting instruction form in accordance with the instructions set out on that form. The voting instruction form must be returned as directed well in advance of the Aphria Meeting in order to have the Aphria Shares voted. OBOs that wish to attend the Aphria Meeting and vote in person (or appoint someone else to attend the Aphria Meeting and vote on such OBOs’ behalf) can appoint themselves (or someone else) as proxyholder by following the applicable instructions.
Beneficial Aphria Shareholders are not entitled, as such, to vote online at the Aphria Meeting or to deliver a form of proxy. Beneficial Aphria Shareholders should carefully follow the voting instructions they receive, including those on how and when voting instructions are to be provided, in order to have their Aphria Shares voted at the Aphria Meeting.
Beneficial Aphria Shareholders located in the United States who wish to attend, submit questions or vote at the Aphria Meeting or, if permitted, appoint a third party as their proxyholder, must obtain a valid legal proxy from their intermediary. Beneficial Aphria Shareholders located in the United States must follow the instructions from their intermediary included with the legal proxy form and the voting instruction form sent to them, or contact their intermediary to request a legal proxy form if they have not received one. The legal proxy form will be mailed to the person and address written on the voting instruction form. After obtaining a valid legal proxy from their intermediary, the beneficial Aphria Shareholders located in the United States must then submit such legal proxy to Broadridge. Requests for registration from beneficial Aphria Shareholders located in the United States that wish to attend, submit questions or vote at the Aphria Meeting or, if permitted, appoint a third party as their proxyholder must be sent by fax to +1-905-507-7793 or +1-514-281-8911, or, by courier to Broadridge at 2601 14th Avenue, Markham, Ontario, Canada, L3R 0H9, and in both cases, must be labeled as “legal proxy” and received by no later than [•] (Eastern time) on [•], 2021. Sufficient time must be given to Broadridge for the mailing and return of the legal proxy by this deadline.
Participation at the Aphria Meeting
Aphria is holding the Aphria Meeting in a virtual-only format, which will be conducted via live audio webcast online at www.virtualshareholdermeeting.com/APHA2021. Aphria Shareholders will not be able to attend the Aphria Meeting in person. Participating at the Aphria Meeting online enables registered Aphria Shareholders and duly appointed proxyholders (including those acting in accordance with the voting instructions received from beneficial Aphria Shareholders) to vote at the appropriate times during the Aphria Meeting. Guests are able to listen to the Aphria Meeting but are not able to ask questions or vote at the Aphria Meeting.
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To log in to the Aphria Meeting online visit www.virtualshareholdermeeting.com/APHA2021 on your smart phone, tablet or computers and check-in using the 16-digit control number included on your form of proxy or voting instruction form, as applicable. You should ensure you have a strong preferably high-speed, internet connection wherever you intend to participate in the Aphria Meeting. The Aphria Meeting will begin promptly at [•] (Eastern time) on [•], 2021; however, it is recommended that you access the Aphria Meeting link online at least 30 minutes prior to the commencement of the Aphria Meeting and test your compatibility using the “Click Here” prompt and if necessary upgrade the media player on your device. You will be able to log in 15 minutes before the Aphria Meeting starts. To log in, click on one of the following choices:
Shareholders:
enter the 16-digit control number located on your form of proxy or voting instruction form. Registered Aphria Shareholders and beneficial Aphria Shareholders will be entitled to attend the Aphria Meeting and ask questions, however, only Registered Aphria Shareholders and duly appointed proxyholders will be able to vote at the Aphria Meeting; or
Proxyholders / Appointees:
follow the instructions including entering the “Appointee Name” and “Appointee Identification Number” as it was provided by the Aphria Shareholder and click submit; or
Guests:
complete the online form. Guests may attend the Aphria meeting but will not be able to ask questions.
When successfully authenticated, the information screen will be displayed. You can view information about Aphria, ask questions, vote (where applicable) and listen to the live audio webcast.
Even if you plan to attend the Aphria Meeting, we recommend that you vote in advance, so that your vote will be counted if you later decide not to attend the Aphria Meeting.
Submitting Questions during the Aphria Meeting
Aphria expects to hold, to the extent feasible and practical, a live question and answer session in connection with the Aphria Meeting. Questions will be sent to be moderated before being sent to the Chair of the Aphria Meeting. Aphria reserves the right to edit profanity or other inappropriate language, or to exclude questions that are not pertinent to the Aphria Meeting matters or are otherwise inappropriate.
Appointment of Proxyholders
A proxy is a document that authorizes someone else to attend the Aphria Meeting and cast the votes for a registered Aphria Shareholder. Aphria Shareholders who are unable to attend the virtual Aphria Meeting and vote may still vote by appointing a proxyholder.
An Aphria Shareholder has the right to appoint a person (who need not be an Aphria Shareholder) to represent the Aphria Shareholder at the Aphria Meeting other than the persons designated in the form of proxy. To do so, you can appoint either yourself or such other person (other than the named proxyholders) online at www.proxyvote.com using the 16-digit control number provided on the form of proxy or voting instruction form, as this will reduce the risk of any mail disruptions in the current environment and will allow you to share the unique “Appointee Information” you have created with the person you have appointed to represent you at the Aphria Meeting more easily. If you do not designate a proxyholder or appointee when completing your form of proxy, or if you do not provide the exact “Appointee Identification Number” and “Appointee Name” to any other person (other than the named proxyholders) who has been appointed to access and vote at the Aphria Meeting on your behalf, that other person will not be able to access the meeting and vote on your behalf.
If you are a non-registered Aphria Shareholder and wish to virtually attend the Aphria Meeting, participate or vote at the Aphria Meeting, you have to insert your own name in the space provided on the voting instruction form sent to you by your Intermediary AND appoint yourself as your proxyholder, as described above. By doing so, you are instructing your Intermediary to appoint you as proxyholder.
Voting of Proxies
If you have properly filled out, signed and delivered your proxy, then your proxyholder can vote your Aphria Shares for you at the Aphria Meeting. The Aphria Shares represented by the proxy will be voted or withheld from voting in accordance with the instructions of the Aphria Shareholder on any ballot that may be called for and, if the Aphria
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Shareholder specifies a choice with respect to any matter to be acted upon, the Aphria Shares will be voted accordingly. If you sign and return your form of proxy without designating a proxyholder and do not give voting instructions, the Aphria Shares represented by such proxy will be voted FOR the approval of the Aphria Resolution.
The enclosed form of proxy confers discretionary authority upon the proxy nominee with respect to any amendments or variations to the matters identified in the Notice of Aphria Meeting and any other matters which may properly come before the Aphria Meeting. If any such amendments or variations are proposed to the matters described in the Notice of Aphria Meeting or if any other matters properly come before the Aphria Meeting, the proxyholder may vote your Aphria Shares as he or she considers best. The Aphria Board is not currently aware of any amendments to the matters to be presented for action at the Aphria Meeting or of any other matters to be presented for action at the Aphria Meeting.
Revocation of Proxies
A registered Aphria Shareholder who has submitted a proxy may revoke it at any time prior to it being exercised by: (a) voting again on the internet or by telephone or by any other means permitted by law; or (b) delivering a signed written notice changing their instructions to Chief Legal Officer of Aphria no later than [•], 2021 at [•] (or any adjournment, if the Aphria Meeting is adjourned) at 1 Adelaide Street East, Suite 2310, Toronto, ON, M5C 2V9, Attention: Christelle Gedeon, Chief Legal Officer (email: info@aphria.com).
Aphria Support Agreement
On December 15, 2020, concurrently with the execution of the Arrangement Agreement, Tilray entered into the Aphria Support Agreements with the Aphria Supporting Shareholders.
The Aphria Supporting Shareholders beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, Aphria Shares representing less than 1% of the outstanding Aphria Shares as of the date of this Circular and have agreed, subject to the terms of the Aphria Support Agreements, to, inter alia, vote their Aphria Shares in favour of the Aphria Resolution and any other matters necessary for the consummation of the Arrangement.
The following is a summary of the principal terms of the Aphria Support Agreements. This summary does not purport to be complete and is qualified in its entirety by the complete text of the Aphria Support Agreements, copies of each which are available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Aphria Shareholders
Under the Aphria Support Agreement entered into between Tilray and the Aphria Supporting Shareholders, the Aphria Supporting Shareholders have agreed, inter alia:
(a)
to vote their Aphria Subject Shares, and, in the case of Aphria Subject Shares held by an affiliate or associate (as defined in the Aphria Support Agreement) of the Aphria Supporting Shareholder, to cause any holder of record of Aphria Subject Shares to vote or to execute a written consent or consents with respect to the Aphria Subject Shares at the Aphria Meeting (or any adjournment or postponement thereof or at every other meeting of the shareholders of Aphria with respect to the Aphria Resolution) (i) in favour of the Aphria Resolution and any other matter necessary for the consummation of the Arrangement and the other transactions contemplated by the Arrangement Agreement; (ii) against any adverse proposal and (iii) against any action, proposal, transaction, agreement, or other matter that would reasonably be expected to impede, interfere with, delay, discourage, postpone or adversely affect the Plan of Arrangement or any of the transactions contemplated by the Plan of Arrangement;
(b)
if the Aphria Supporting Shareholder is the holder of record of any of the Aphria Subject Shares, no later than five Business Days prior to the date of the Aphria Meeting, the Aphria Supporting Shareholder shall deliver or cause to be delivered to Tilray, a copy of the duly executed proxy or proxies in respect of the Aphria Subject Shares directing the holder of such proxy or proxies to vote in favour of the Aphria Resolution and/or any matter that could be expected to facilitate the Arrangement;
(c)
if the Aphria Supporting Shareholder is the beneficial owner of any of the Aphria Subject Shares, no later than five Business Days prior to the date of the Aphria Meeting, the Aphria Supporting Shareholder shall deliver or cause to be delivered to Tilray a copy of the duly executed voting instruction form(s) to the Intermediary through which the Aphria Supporting Shareholder holds its beneficial interest in the Aphria
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Subject Shares instructing that the Aphria Subject Shares be voted at the Aphria Meeting in favour of the Aphria Resolution and/or any matter that could be expected to facilitate the Arrangement;
(d)
to appoint Tilray and any designee of Tilray, and each of them individually, as its proxies and attorneys-in-fact, with full power of substitution and re-substitution, to vote or act by written consent during the term of the Aphria Support Agreement with respect to the Aphria Subject Shares in accordance with the Aphria Support Agreement in the event that either (i) the Aphria Supporting Shareholder breaches any of its obligations under the Aphria Support Agreement, or (ii) the Aphria Supporting Shareholder fails to vote or act by written consent with respect to the Aphria Subject Shares in accordance with the foregoing section prior to or at the Aphria Meeting at which the matters described in the foregoing section are considered or the last date by which written consents with respect to such matters are required to be delivered in order to be effective; and
(e)
not to tender for any bid or tender offer for Aphria Shares or take any action (including the voting (or granting of a proxy to vote) of the Aphria Subject Shares) that may lead to or otherwise result in an adverse proposal.
Voting Securities and Principal Holder of Securities
On the Aphria Record Date, there were [•] outstanding Aphria Shares. Each Aphria Share carries the right to vote.
There are no Aphria Shareholders, that to the knowledge of Aphria management owned beneficially, or exercised control or direction over more than 10% of the total outstanding Aphria Shares.
On the Aphria Record Date, directors and executive officers of Aphria and their affiliates beneficially owned and had the right to vote [•] Aphria Shares, representing less than 1% of the total outstanding Aphria Shares.
Independent Auditors
Representatives of PricewaterhouseCoopers LLP, Aphria’s independent auditors, plan to attend the Aphria Meeting and will be available to answer questions. Representatives of PricewaterhouseCoopers LLP will also have an opportunity to make a statement at the Aphria Meeting if they so desire.
Aphria Dissenting Shareholders’ Rights
Under the provisions of the Interim Order, registered Aphria Shareholders will have the right to dissent with respect to the Aphria Resolution. If the Arrangement becomes effective, any registered Aphria Shareholder that dissents and complies with the applicable provisions of the OBCA as amended or supplemented by the Plan of Arrangement and the Interim Order will be entitled to be paid the fair value of its Aphria Shares by Aphria. This right to dissent is described in this Circular and in the Plan of Arrangement which is attached to this Circular as Appendix “B”. If you want to dissent in respect of the Aphria Resolution, you must provide a written dissent notice to the attention of the Chief Legal Officer of Aphria, 1 Adelaide Street East, Suite 2310, Toronto, ON, M5C 2V9, Attention: Christelle Gedeon, Chief Legal Officer (email: info@aphria.com), not later than [•] (Eastern time) on the date that is two Business Days immediately prior to the Aphria Meeting or any date to which the Aphria Meeting may be postponed or adjourned. If you do not strictly comply with this requirement, you could lose your right to dissent.
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GENERAL INFORMATION ABOUT THE TILRAY MEETING AND VOTING
This Circular is being provided to Tilray Stockholders as part of a solicitation of proxies by the Tilray Board for use at the Tilray Meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This Circular provides Tilray Stockholders with information they need to know to be able to vote or instruct their vote to be cast at the Tilray Meeting.
Date, Time and Place
The Tilray Meeting will be held online via live audio webcast on [•], 2021 at [•] a.m. (Eastern time). There will be no physical location for Tilray Stockholders to attend. Tilray Stockholders may only participate by logging in at www.virtualshareholdermeeting.com/TLRY2021SM, where you will be able to attend the Tilray Meeting via live audio webcast. Online check-in will begin at [•] a.m. (Eastern time), and you are encouraged to allow ample time for the online check-in procedures. To participate in the Tilray Meeting, Tilray Stockholders will need their unique 16-digit control number included on their Tilray proxy card (printed in the box and marked by the arrow) or the instructions that accompanied the proxy materials. Tilray intends to mail this Circular and the enclosed form of proxy to the Tilray Stockholders entitled to vote at the Tilray Meeting on or about [•], 2021.
Purpose of the Tilray Meeting
The Tilray Meeting is being called for the following purposes:
1.
To consider and vote on a proposal to increase the authorized capital stock of Tilray from 743,333,333 shares to 900,000,000 shares of capital stock, consisting of 890,000,000 shares of Class 2 common stock and 10,000,000 shares of preferred stock, as reflected in the Tilray Charter Amendment attached as Appendix “F”, which is further described in this Circular, including in the section entitled “Amendment to Tilray’s Organizational Documents” beginning on page [•] of this Circular, and a copy of the Tilray Charter Amendment is attached as Appendix “F” (the “Tilray Charter Amendment Proposal”);
2.
To consider and vote on a proposal to issue Tilray Class 2 common stock (the “Tilray Shares”) to Aphria Shareholders pursuant to the Arrangement Agreement, as amended on February 19, 2021, which is further described in this Circular, including in the section entitled “The Arrangement Agreement and Related Agreements” beginning on page [•] of this Circular, and a copy of the Arrangement Agreement is attached as Appendix “A” (the “Tilray Share Issuance Proposal”);
3.
To consider and approve, on an advisory (non-binding) basis, the compensation that may be paid to Tilray’s named executive officers that is based on or otherwise relates to the transactions contemplated by the Arrangement Agreement, which is further described in this Circular, including in the section entitled “Interests of Tilray’s Directors and Management in the Arrangement” beginning on page [•] of this Circular (the “Tilray Advisory Compensation Proposal”);
4.
To approve the adjournment of the Tilray Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Tilray Meeting to approve the Tilray Charter Amendment Proposal or the Tilray Share Issuance Proposal (the “Tilray Adjournment Proposal”).
The Tilray Charter Amendment Proposal, the Tilray Share Issuance Proposal, the Tilray Advisory Compensation Proposal and the Tilray Adjournment Proposals are together referred to as the “Tilray Proposals”.
Recommendation of the Tilray Board
On December 15, 2020, the Tilray Board unanimously approved and declared advisable the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement, including the Arrangement, and determined that the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement, including the Arrangement, are advisable, fair to and in the best interests of Tilray and its stockholders.
On February 19, 2021, the Tilray Board unanimously approved and declared advisable the Tilray Charter Amendment Proposals.
Accordingly, the Tilray Board unanimously recommends that Tilray Stockholders vote FOR the Tilray Proposals.
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The approval of Tilray Stockholders to each of the Tilray Charter Amendment Proposal and the Tilray Share Issuance Proposal is required in order to complete the Arrangement.
Tilray Stockholders should carefully read this Circular, including any documents incorporated by reference, and the appendices in their entirety for more detailed information concerning the Arrangement and the other transactions contemplated by the Arrangement Agreement.
Tilray Record Date and Entitlement to Vote
Only holders of record of Tilray Class 2 Common Stock at the close of business on [•], 2021 will be entitled to notice of, and to vote at, the Tilray Meeting or any adjournments or postponements thereof.
As of the close of business on the Tilray Record Date, there were [•] shares of Tilray Class 2 Common Stock outstanding and entitled to vote at the Tilray Meeting. Each share of Tilray Class 2 Common Stock outstanding on the Tilray Record Date entitles the holder thereof to one vote on each proposal to be considered at the Tilray Meeting.
Solicitation of Proxies
This Circular is furnished by management of Tilray in connection with the solicitation of proxies for use at the Tilray Meeting to be held virtually at www.virtualshareholdermeeting.com/TLRY2021SM on [], 2021 at [] (Eastern time), and at any postponements or adjournments of the Tilray Meeting.
The solicitation of proxies by this Circular is being made by or on behalf of management of Tilray. It is expected that the solicitation will be made primarily by mail, but proxies may also be solicited by telephone, over the internet or in writing. In addition, Tilray has retained the services of MacKenzie Partners to solicit proxies for a fee of approximately $[•], and Tilray has also agreed to reimburse out-of-pocket expenses of MacKenzie Partners and to indemnify it against certain liabilities arising out of or in connection with such engagement. The cost of the solicitation will be borne by Tilray.
Quorum
The presence at the Tilray Meeting, by remote participation or represented by proxy, of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereat as of the Tilray Record Date, will constitute a quorum for the transaction of business at the Tilray Meeting.
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Required Vote
Except for the Tilray Adjournment Proposal, the vote required to approve all of the proposals listed herein assumes the presence of a quorum.
No.
Proposal
Votes Necessary
1.
Tilray Charter Amendment Proposal
Approval requires the affirmative vote of the holders of a majority of the Tilray Shares outstanding and entitled to vote on the Tilray Charter Amendment Proposal.
A failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST the Tilray Charter Amendment Proposal.
2.
Tilray Share Issuance Proposal
Approval requires the affirmative vote of a majority of votes cast at the Tilray Meeting on the Tilray Share Issuance Proposal.
An abstention will have the same effect as a vote AGAINST the Tilray Share Issuance Proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the Tilray Share Issuance Proposal, so long as a quorum is present.
3.
Tilray Advisory Compensation Proposal
Approval requires the affirmative vote of the holders of a majority of the outstanding Tilray Shares, present or represented by proxy at the Tilray Meeting, and entitled to vote on the Tilray Advisory Compensation Proposal.
A failure to vote, a broker non-vote or an abstention will have the same effect as a vote AGAINST the Tilray Advisory Compensation Proposal.
4.
Tilray Adjournment Proposal
Approval requires the affirmative vote of the holders of a majority of the voting power of the shares of Tilray Shares present or represented by proxy at the Tilray Meeting and entitled to vote on such proposal.
An abstention will have the same effect as a vote AGAINST the Tilray Adjournment Proposal, while a broker non-vote or other failure to vote will have no effect on the outcome of the Tilray Adjournment Proposal.
Persons Entitled to Vote
Only registered Tilray Stockholders are entitled to vote at the Tilray Meeting. Each registered Tilray Stockholder has one vote for each Tilray Share held at the close of business on the Tilray Record Date. As of the Tilray Record Date, there were [•] Tilray Shares outstanding. To the knowledge of the directors and executive officers of Tilray, no person or corporation beneficially owns, or controls or directs, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to any class of voting securities of Tilray.
Abstentions
Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the Tilray Meeting.
Registered Tilray Stockholders
If you are a registered Tilray Stockholder, there are two ways in which you can vote your Tilray Shares. You can either vote online at the Tilray Meeting or you can vote by proxy. As indicated on the form of proxy, you may vote your Tilray Shares by mail, phone or Internet following the instructions provided.
Internet:
Go to www.proxyvote.com and enter the 16-digit control number printed on the enclosed Tilray proxy card to access and follow the instructions on the screen. Internet voting facilities for Tilray stockholders of record are available 24 hours a day.
Phone:
Call the toll-free telephone number provided on the enclosed Tilray proxy card and following the prompted instructions. You will need to enter the 16-digit control number. Telephone voting facilities for Tilray stockholders of record are available 24 hours a day.
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Mail:
Complete, sign and date the enclosed Tilray proxy card and return your completed Tilray proxy card in the enclosed postage paid envelope provided to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood NY 11717.
Virtually at the Meeting:
Registered Tilray Stockholders can vote at the appropriate times by completing a ballot online during the Tilray Meeting . It is anticipated that once voting has opened during the Tilray Meeting, the proposals and voting choices will be displayed and you will be able to vote by selecting your voting choices from the options shown on the screen. You must click submit for your vote to be counted.
Whether you vote by Internet, phone, or mail, your Tilray proxy card must be received no later than 11:59 pm on [•] (Eastern Time). We strongly urge you to vote in advance by proxy by signing and dating the enclosed Tilray proxy card and returning it in the postage-paid envelope provided or by voting via the internet or by telephone before the Tilray Meeting by following the instructions provided on the enclosed Tilray proxy card and above.
Subject to health concerns relating to COVID-19 which may require Tilray to implement alternative procedures to protect the health and welfare of Tilray’s employees and stockholders. If you are a Tilray Stockholder and would like to examine the complete list of Tilray Stockholders entitled to vote at the Tilray Meeting, please contact Tilray’s Investor Relations department at (203) 682-8253, by email at Raphael.Gross@icrinc.com, or by going to Tilray’s Investor Relations page on its website at https://ir.tilray.com/investor-relations and clicking on the link titled “Financials” to make alternate arrangements. A complete list of Tilray Stockholders entitled to vote at the Tilray Meeting will also be available for inspection during the Tilray Stockholder through the virtual meeting website.
Beneficial Tilray Stockholders
If your Tilray Shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. Unless your broker has discretionary authority to vote on certain matters, your broker will not be able to vote your Tilray Shares without instructions from you. Brokers are not expected to have discretionary authority to vote for any of the proposals. To make sure that your vote is counted, you should instruct your broker to vote your shares, following the procedures provided by your broker. Many brokers solicit voting instructions over the Internet or by telephone.
As the beneficial owner, you are also invited to attend the Tilray Meeting. However, you may not vote shares held in street name during the meeting unless you obtain a proxy, executed in your favor, from the holder of record (i.e., your broker).
Participation at the Tilray Meeting
Tilray is holding the Tilray Meeting in a virtual-only format, which will be conducted via live audio webcast online at www.virtualshareholdermeeting.com/TLRY2021SM. Tilray Stockholders will not be able to attend the Tilray Meeting in person. Participating at the Tilray Meeting online enables registered Tilray Stockholders to vote at the appropriate times during the Tilray Meeting.
To log in to the Tilray Meeting online visit www.virtualshareholdermeeting.com/TLRY2021SM on your smart phone, tablet or computers and check-in using the 16-digit control number included on your Tilray proxy. You should ensure you have a strong preferably high-speed, internet connection wherever you intend to participate in the Tilray Meeting. The Tilray Meeting will begin promptly at [•] (Eastern time) on [•], 2021; however, it is recommended that you access the Aphria Meeting link online at least 30 minutes prior to the commencement of the Tilray Meeting and test your compatibility using the “Click Here” prompt and if necessary upgrade the media player on your device. You will be able to log in 15 minutes before the Tilray Meeting starts.
When successfully authenticated, the information screen will be displayed. You can view information about Tilray, ask questions, vote (where applicable) and listen to the live audio webcast.
Even if you plan to attend the Tilray Meeting, we recommend that you vote in advance, so that your vote will be counted if you later decide not to attend the Tilray Meeting.
Voting of Proxies
If you have properly filled out, signed and delivered your proxy, then your proxyholder can vote your Tilray Shares for you at the Tilray Meeting. The Tilray Shares represented by the proxy will be voted or withheld from voting in accordance with the instructions of the Tilray Stockholder on any ballot that may be called for and, if the Tilray
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Stockholder specifies a choice with respect to any matter to be acted upon, the Tilray Shares will be voted accordingly. If a choice is not so specified with respect to any such matter, and the persons named in the enclosed form of proxy have been appointed as proxyholder, the Tilray Shares represented by such proxy will be voted FOR the Tilray Proposals.
The enclosed form of proxy confers discretionary authority upon the proxy nominee with respect to any amendments or variations to the matters identified in the Notice of Tilray Meeting and any other matters which may properly come before the Tilray Meeting. If any such amendments or variations are proposed to the matters described in the Notice of Tilray Meeting or if any other matters properly come before the Tilray Meeting, the proxyholder may vote your Tilray Shares as he or she considers best. The Tilray Board is not currently aware of any amendments to the matters to be presented for action at the Tilray Meeting or of any other matters to be presented for action at the Tilray Meeting.
Revocation of Proxies
A registered Tilray Stockholder who has submitted a proxy may revoke it at any time prior to it being exercised. If the Tilray Stockholder is a registered holder, the Tilray Stockholder can do this in one of three ways: First, before the Tilray Meeting, deliver a signed notice of revocation of proxy to the Secretary of Tilray at the address specified below. Second, complete and submit a later-dated Tilray proxy card. Third, attend the Tilray Meeting and vote at the meeting. Attendance at the Tilray Meeting alone will not revoke a previous proxy; rather, the registered Tilray Stockholder must also vote at the Tilray Meeting in order to revoke the previously submitted proxy.
To change proxy directions by mail, Tilray Stockholders should send any notice of revocation or a completed new Tilray proxy card, as the case may be, to Tilray at the following address: Tilray, Inc., c/o Corporate Secretary, 1100 Maughan Road, Nanaimo, BC, Canada, V9X IJ2.
If you have instructed a broker to vote your shares and wish to change your vote, you must follow directions received from your broker to change those instructions.
Tilray Support Agreements
On December 15, 2020, concurrently with the execution of the Arrangement Agreement, Aphria entered into the Tilray Support Agreements with the Tilray Supporting Stockholders.
The Tilray Supporting Stockholders beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, Tilray Shares representing approximately [•]% of the outstanding Tilray Shares as of the date of this Circular and have agreed, subject to the terms of the Tilray Support Agreements, to, inter alia, vote their Tilray Shares in favour of the Arrangement and any other matters necessary for the consummation of the Arrangement.
Pursuant to the Tilray Support Agreement entered into between Aphria and Brendan Kennedy, Mr. Kennedy provided additional covenants to, among other things, (i) vote his Tilray Subject Shares in favor of certain governance measures and in support of any other measures put forward by management of the Combined Company, and (ii) refrain from certain actions, directly and indirectly, including nominating, encouraging or recommending any person for election or submitting any proposals for consideration at any meeting of Tilray’s stockholders, for a period from and after the Effective Time until the Business Day immediately following the second annual general meeting of Tilray Stockholders to occur after the Effective Time.
The foregoing is a summary of the principal terms of the Tilray Support Agreements. This summary does not purport to be complete and is qualified in its entirety by the complete text of the Tilray Support Agreements, copies of each which are available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
On December 15, 2020, Brendan Kennedy, Tilray’s Chief Executive Officer, submitted an irrevocable letter of resignation and release (the “Letter of Resignation”) whereby Mr. Kennedy resigned from all positions held at Tilray (other than as a member of the Tilray Board), with such resignations to be effective upon the Effective Time. The Letter of Resignation also includes a form of release agreement to be entered into between Mr. Kennedy and Tilray as of the Effective Time, whereby, in consideration for the benefits that Mr. Kennedy may receive as a result of the completion of the Arrangement, including a severance payment and full accelerated vesting of all equity awards, Mr. Kennedy agreed to release Tilray from certain claims Mr. Kennedy and his related parties may have against Tilray arising prior to the Effective Time. The Letter of Resignation will become null and void if the Arrangement Agreement terminates without the closing of the Arrangement having occurred.
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The foregoing is a summary of the principal terms of the Letter of Resignation. This summary does not purport to be complete and is qualified in its entirety by the complete text of the Letter of Resignation, copies of which is available on EDGAR at www.sec.gov.
Shares Beneficially Held by Principal Holders of Securities and Directors and Executive Officers
On the Tilray Record Date, there were [•] outstanding Tilray Shares. Each Tilray Share carries the right to vote.
To the knowledge of the directors and executive officers of Tilray, no person or corporation beneficially owns, or controls or directs, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to any class of voting securities of Tilray.
On the Tilray Record Date, directors and executive officers of Tilray and their affiliates beneficially owned and had the right to vote [•] Tilray Shares, representing approximately [•]% of the total outstanding Tilray Shares.
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DESCRIPTION OF THE ARRANGEMENT
Background to the Arrangement
On December 15, 2020, Aphria and Tilray entered into the Arrangement Agreement, which sets out the terms and conditions for implementing the Arrangement. The Arrangement Agreement is the result of extensive arm’s length negotiations among Representatives of Aphria and Tilray and their respective legal and financial advisors. The following is a summary of the principal events leading up to the execution and public announcement of the Arrangement Agreement.
The Tilray Board and Tilray senior management team regularly reviews and considers Tilray’s long-term strategic plans and objectives, including business combinations, acquisitions, and other strategic opportunities. As part of this ongoing evaluation, the Tilray Board, together with Tilray’s senior management team, has from time to time considered various opportunities to enhance stockholder value, including the possibility of a strategic combination with other companies in the cannabis industry in order to strengthen its market position and drive cost efficiencies.
Aphria’s overall strategy has been to leverage its scale, expertise and capabilities to drive market share in Canada and internationally in order to achieve industry-leading, profitable growth and build sustainable, long-term shareholder value. In order to ensure long-term sustainable growth, Aphria continues to focus on developing strong capabilities in consumer insights, driving category management leadership and assessing growth opportunities through the introduction of innovative new products, increasing market share, maintaining a strong financial position and managing cost of goods and expenses. In order to be well-positioned to capitalize on the U.S. market should cannabis become federally legal, Aphria is focused on participating in federally permissible activities in the U.S., and is reviewing the landscape and looking to prepare for legalization of cannabis through the purchase of profit generating companies in other industries and converting their existing operations to include cannabis when it is federally legal to do so. In that regard, the key strategic pillars considered by the Aphria Board in respect of any potential acquisition or business combination included: (i) seeking synergies arising from leveraging the Aphria’s low-cost cultivation leadership and economies of scale opportunities in Canada; (ii) improving Aphria’s strategic position in the U.S.; (iii) maximizing Aphria’s opportunities in the rapidly emerging international legal cannabis market; and (iv) positioning the company in the capital markets as a leading global cannabis company, with the scale to attract institutional investors and strategic partners.
Tilray’s senior management team and the Tilray Board were generally familiar with Aphria, its business and its management team, and believed that a potential combination of the two companies at the right time and on appropriate terms could provide an opportunity to enhance stockholder value.
Irwin D. Simon, Aphria’s Chairman and CEO, had become acquainted with Brendan Kennedy, Tilray’s CEO, having met at prior industry conferences. Mr. Simon was also familiar with Andrew Pucher, Tilray’s Chief Corporate Development Officer, from prior discussions regarding the purchase and sale of cannabis between the two companies in early 2019.
In October 2019, a representative from an investment bank active in the cannabis industry and familiar with Aphria’s business and management team, contacted Messrs. Kennedy and Pucher by e-mail, to inquire if they would be interested in taking a meeting with Mr. Simon in New York to discuss the state of the industry and each other’s businesses. Representatives from this investment bank attended certain meetings between Tilray and Aphria between December 2019 and May 2020 but neither Tilray nor Aphria engaged this investment bank in connection with the Arrangement. Messrs. Kennedy and Pucher responded that they were willing to meet with Mr. Simon. As the date of the meeting approached, Mr. Kennedy informed Mr. Simon that he could no longer attend, but Michael Auerbach, a member of the Tilray Board who resides in New York, was able to attend along with Mr. Pucher. The meeting took place on November 22, 2019. Messrs. Simon, Auerbach and Pucher each acknowledged that Tilray’s and Aphria’s Canadian and international operations appeared to be highly complementary and that a combination of the businesses could result in significant new business opportunities and cost and revenue synergies. As a follow up to the meeting, Mr. Simon invited Messrs. Kennedy and Pucher to visit Aphria’s primary cannabis production facilities in Leamington, Ontario, to continue the dialogue.
On November 28, 2019, to facilitate future discussions, a mutual non-disclosure agreement was executed between Aphria and Tilray.
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On December 18, 2019, representatives from Aphria and Tilray, including Messrs. Simon, Pucher, Carl Merton, Aphria’s Chief Financial Officer, and Denise Faltischek, Aphria’s Chief Strategy Officer, met in Toronto, Ontario, to discuss the merits of a potential strategic combination.
On January 14, 2020, Mr. Simon and Mr. Kennedy had a conversation in Orlando, Florida to discuss the strategic merits of potentially combining Aphria and Tilray.
On January 21, 2020, representatives of Tilray participated in a tour of the Aphria One and Aphria Diamond facilities in Leamington, Ontario. Representatives from Tilray included Messrs. Kennedy, Pucher, Greg Christopher, Tilray’s Executive Vice President of Operations (former), and Francoise Levesque, Tilray’s Master Horticulturist (former). Representatives from Aphria included Messrs. Simon and Merton, Jim Meiers, Aphria’s Chief Operating Officer and Ms. Faltischek.
Around the same time, Aphria informally engaged Jefferies to evaluate a potential combination with Tilray. Over the years, Jefferies had been both formally and informally engaged by Aphria on various financing and M&A assignments, and Aphria had also periodically consulted with Jefferies on a wide range of strategic and financial topics. Aphria selected Jefferies as financial advisor based on, among other things, Jefferies’ experience and expertise as a financial advisor in a wide variety of transactions, including in the cannabis, food & beverage and consumer products sectors, and Jefferies’ familiarity with Aphria’s business.
Later in January 2020, Tilray informally engaged Cowen to evaluate a potential combination of Tilray and Aphria. Over the years, Cowen had been formally engaged by Tilray on various financing and M&A assignments, and Tilray had also periodically consulted with Cowen on other strategic and financial topics. Tilray selected Cowen as financial advisor based on, among other things, Cowen’s experience and expertise as a financial advisor in a wide variety of transactions, including in the cannabis industry, and Cowen’s familiarity with Tilray’s business.
On February 5, 2020, representatives from Aphria and Tilray management met in Toronto to discuss the strategic rationale underlying a potential combination of the two companies. In attendance from Aphria and Tilray were Messrs. Kennedy, Simon, Merton, Pucher, Mark Castaneda, Tilray’s Chief Financial Officer (former), and Ms. Faltischek. Representatives from Cowen, on behalf of Tilray, and Jefferies, on behalf of Aphria, were also in attendance. During the meeting, Aphria and Tilray senior management teams discussed their standalone businesses in greater detail and outlined key areas where value could be created by combining the businesses. It was agreed that Tilray would draft a non-binding term sheet to further advance the discussions.
On February 10, 2020, representatives of Tilray conducted another tour of the Aphria One and Aphria Diamond facilities in Leamington, Ontario. Representatives from Tilray included Messrs. Kennedy, Jon Levin, Chief Operating Officer, Drew Reynolds, V.P. Operations Canada, and Nick Curton, V.P. Strategic Initiatives. Representatives from Aphria included Messrs. Simon, Merton and Meiers,
On February 12, 2020, Mr. Simon and Mr. Kennedy met in New York to discuss strategy, the culture of the two organizations and potential areas where value could be created by combining the two businesses.
On February 14, 2020, Tilray provided Aphria with an initial draft of a non-binding term sheet regarding a potential combination of the two businesses. Mr. Kennedy and Mr. Simon had a discussion regarding the key components of the draft term sheet and potential next steps. The draft term sheet contemplated, among other things: (i) that the transaction would be structured as an all-stock merger, with shareholders of Tilray and Aphria owning 56% and 44% of the Combined Company, respectively; (ii) a governance structure that would include (A) Mr. Kennedy as CEO and Mr. Simon as Executive Chairman, and (B) a board of directors comprised of 8 members total, 4 directors designated by Tilray and 4 designated by Aphria; (iii) that the Combined Company would be called “Tilray”; and (iv) an exclusivity period through March 2, 2020, which was expected to coincide with the announcement of Tilray’s Q4 2019 earnings. At this point, Tilray’s stock was trading at a higher level than Aphria’s stock.
On February 16, 2020, at a meeting of the Aphria Board, Mr. Simon described the discussions to date with Tilray. The Aphria Board discussed the possible transaction and advised Aphria management to continue to explore a strategic combination between the two companies. On February 17, 2020, Aphria and Tilray entered into an updated mutual non-disclosure agreement. The purpose of the updated mutual non-disclosure document was to include a standstill provision that did not exist in the initial mutual non-disclosure agreement. The standstill provision did not include don’t ask don’t waive provisions.
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On February 17, 2020, representatives of Aphria shared feedback on the draft term sheet provided by Tilray. Among other comments, a revised equity ownership split of 55% and 45% for Tilray and Aphria, respectively, was proposed.
On February 21, 2020, the Tilray Board held a meeting to discuss the potential transaction with Aphria. Members of Tilray management and Tilray’s advisors provided the Tilray Board with an update on recent discussions with Aphria, as well as potential combinations with other potential merger partners or acquisition targets. Tilray management and Tilray’s advisors reviewed the benefits and risks of pursuing a strategic transaction and the risks and merits of continuing as a standalone company. The Tilray Board also discussed key terms of the draft term sheet. The Tilray Board instructed Tilray management to continue to engage with Aphria regarding a potential transaction.
On February 23, 2020, ahead of Tilray’s Q4 2019 earnings, which were to be announced on March 2, 2020, Messrs. Kennedy and Simon had a discussion regarding the potential transaction. During this conversation, Messrs. Kennedy and Simon agreed that following Mr. Simon’s attendance at the next Tilray Board meeting as a previously planned, the parties should put discussions on hold and to re-evaluate as appropriate.
On February 27, 2020, the Tilray Board held a regularly scheduled meeting. During this meeting, a number of quarterly business issues were discussed. Mr. Kennedy invited Mr. Simon to join the meeting and introduce himself and Aphria. Mr. Simon spoke about his background, his perspective on the cannabis industry, and his vision for the two companies should they combine.
On March 18, 2020, at an Aphria Board meeting, Mr. Simon noted that the possible transaction with Tilray would be placed on hold in light of the rapidly changing events related to the COVID-19 global pandemic. However, during the month of March, Messrs. Kennedy and Simon remained in periodic contact via telephone and e-mail. On or about March 25, 2020, as the stock prices of Tilray and Aphria started to converge, Mr. Kennedy suggested to Mr. Simon that an equity ownership split of 50% for Tilray and 50% for Aphria be considered, as such a split would reflect the current market capitalizations of each of the companies. On March 29, 2020, Messrs. Kennedy and Simon had a conversation to discuss how to re-engage on the potential transaction. Among other things, both Messrs. Kennedy and Simon agreed to have their respective management teams share financial information and make themselves available for preliminary due diligence questions to better understand the potential value creation opportunity in combining the two businesses.
On April 3, 2020, the Tilray Board held a meeting to discuss the status of the potential transaction with Aphria. The Tilray Board discussed the change in the market environment and relative performance of the two companies and agreed to continue discussions on the basis of a 50% / 50% equity ownership split.
On April 7, 2020, the Tilray Board held a meeting. During this meeting, Cowen presented a financial analysis of a potential transaction, reflecting a 50% / 50% equity ownership split. The Tilray Board also discussed the merits of establishing a transaction committee of the Tilray Board (the “Tilray Transaction Committee”) to review strategic alternatives and address any potential conflicts of interest which may arise in connection with an Aphria transaction or any potential strategic alternatives.
On April 10, 2020, the Tilray Board held a meeting. Mr. Pucher presented an update on the M&A market and potential acquisition or merger partners with which Tilray had recently had conversations, beyond Aphria. Mr. Pucher had periodically presented to the Tilray Board during 2019 and 2020 on the M&A market and strategic combinations for the company. During this meeting, Mr. Pucher discussed the potential benefits and drawbacks of various combinations and their potential impact on shareholder value for Tilray Stockholders. Additionally, at this meeting, the formation and membership of the Tilray Transaction Committee was further discussed, and the formation of the Tilray Transaction Committee, consisting of each of the independent directors of Tilray, Rebekah Dopp, Christine St.Clare and Maryscott Greenwood, with Ms. Dopp serving as Chairperson, was approved. Soren Schroder subsequently joined the Tilray Transaction Committee in August 2020 and Ms. Greenwood stepped down from the Committee in September 2020.
During the week of April 13, 2020, Tilray and Aphria exchanged further financial information of Tilray and Aphria, respectively.
On April 24, 2020, the Tilray Board held a meeting. During this meeting, the financial information provided by Aphria was discussed, as well as the impact on such information on valuation in the context of the transaction. An initial review of the potential synergies and cost savings that could be realized from the transaction was also presented by Tilray Management and discussed with the Tilray Board.
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On April 27, 2020, the Tilray and Aphria management teams had a meeting to discuss each other’s business and future prospects. In attendance were Michael Kruteck, Tilray’s Chief Financial Officer, and Mr. Pucher from Tilray and Mr. Merton and Ms. Faltischek from Aphria. Representatives from Jefferies and Cowen also attended the meeting.
On April 29, 2020, the Tilray Transaction Committee held a meeting to discuss a potential transaction between Tilray and Aphria and the current draft of the term sheet. At such meeting, the Tilray Transaction Committee approved the retention of Lowenstein Sandler LLP (“Lowenstein”), as independent legal counsel to the Tilray Transaction Committee.
On May 1, 2020, the Tilray Transaction Committee held a meeting to further discuss the current draft term sheet and to identify and address the qualifications of potential independent financial advisors to the Tilray Transaction Committee.
On May 9, 2020, following a review of proposals from potential independent financial advisors, the Tilray Transaction Committee held a meeting where it selected Imperial to serve as an independent financial advisor to conduct a strategic alternatives analysis review and/or issue a fairness opinion for a future strategic alternatives transaction. Imperial had previously served as financial advisor to Tilray’s special committee in connection with Tilray’s downstream merger transaction in 2019 whereby Privateer Holdings, Inc. (“Privateer”) merged with and into a wholly owned subsidiary of Tilray to effect an orderly release of 75 million shares of Tilray common stock held by Privateer. The Tilray Transaction Committee selected Imperial from a group of nationally-recognized financial advisors due to Imperial’s knowledge of Tilray’s business, its experience in the Canadian cannabis industry generally and its favorable fee structure compared to other potential advisors, which was not dependent on the outcome of the strategic alternatives review.
On May 13, 2020, representatives from Tilray and Aphria had a meeting to discuss potential next steps. In attendance were Messrs. Kennedy, Kruteck and Pucher from Tilray and Messrs. Simon, Merton and Ms. Faltischek from Aphria. Representatives from Jefferies and Cowen also attended the meeting. The parties discussed how to move the process forward to get to a position where Aphria would be comfortable providing Tilray with an updated draft term sheet for a potential transaction. It was agreed that the teams would reconvene in the coming days to discuss the financial outlook of the parties and potential cost synergies, following which Aphria anticipated that it would be in a position to provide Tilray with an updated draft term sheet.
On May 15, 2020, the Tilray Board held a meeting. A general update was provided by Messrs. Kennedy and Pucher to the Tilray Board on next steps with Aphria.
On May 19, 2020, representatives from Tilray and Aphria had a meeting to discuss questions arising from the ongoing reciprocal financial due diligence. In attendance were Messrs. Kennedy, Kruteck and Pucher from Tilray and Messrs. Simon, Merton and Ms. Faltischek from Aphria. Representatives from Jefferies and Cowen also attended the meeting.
On May 21, 2020, representatives from Tilray and Aphria had a meeting to discuss potential synergies that could be realized by combining the two companies. In attendance were Messrs. Kruteck and Pucher from Tilray and Mr. Merton and Ms. Faltischek from Aphria. Representatives from Jefferies and Cowen also attended the meeting. Conceptual approaches to categories of synergies were identified during the meeting, but the parties did not reach any agreement on the valuation of synergies during the discussion.
On May 22, 2020, the Tilray Board held a meeting. As part of the overall process with Aphria, the Tilray Board wanted to ensure that Tilray was appropriately exploring all potential avenues for value creation. To this end, Cowen presented its perspective as financial advisor to Tilray on a range of strategic alternatives including: (i) acquiring another licensed producer; (ii) merger or selling control of Tilray to another licensed producer (Aphria or others); (iii) US CBD or THC acquisitions; and (iv) attracting an investment from a strategic or financial party from outside the cannabis industry. It was discussed that, among these alternatives, it was unlikely that a strategic or financial investment would be forthcoming given the current pressure that the industry was facing and the fact that Tilray was still not EBITDA or cash flow positive, US CBD or THC acquisition alternatives were not attractive for Tilray at the current time and that, amongst potential acquisition, merger or sale alternatives among Canadian licensed producers, a combination with Aphria was the most attractive from a strategic and financial point of view for Tilray and its stockholders. Following further discussion, the Tilray Board continued to be supportive of dialogue with Aphria to explore a potential transaction.
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During the weekend of May 23/24, 2020, Messrs. Kennedy and Simon had several discussions during which they exchanged views on the financial diligence, potential synergies and cost savings. At this point, as a result of other corporate matters requiring the Aphria management team’s attention, Mr. Simon expressed that his team would have to focus internally. Messrs. Kennedy and Simon agreed to put strategic discussions on hold and to re-evaluate the potential for a transaction in approximately 30 days.
On May 27, 2020, the Tilray Transaction Committee executed an engagement letter to formally retain Imperial as independent financial advisor to conduct a strategic alternatives analysis review of potential transactions and to issue a fairness opinion to the Tilray Board in connection with a future strategic alternatives transaction.
On June 8, 2020, the Aphria Board held a meeting at which Mr. Simon informed the Aphria Board that discussions with Tilray had been put on hold and provided an update on other strategic opportunities available to Aphria.
Over the months of June and July 2020, there were periodic conversations between Messrs. Kennedy and Simon. However, no substantive progress was made on a potential transaction. During this period, the Tilray Transaction Committee continued to meet to discuss the review of strategic alternatives in addition to the potential transaction with Aphria or other industry participants.
On July 13, 2020, the Aphria Board held a meeting at which Mr. Simon re-iterated that discussions with Tilray remained on hold but that Tilray remained interested in re-engaging in discussions. In addition, Mr. Simon informed the Aphria Board that a third party (“Company A”) had contacted Aphria and proposed engaging in exploratory discussions regarding a potential strategic alliance or business combination.
On August 17, 2020, a meeting between Messrs. Kennedy and Simon occurred. During this meeting, it was discussed that Aphria had engaged in conversations with other strategic parties regarding a potential combination but was still interested in engaging in discussions with Tilray regarding a potential transaction. Messrs. Kennedy and Simon then discussed next steps to re-engage, including reciprocal site tours.
Between August 20, 2020, and August 25, 2020, the Tilray Transaction Committee held five meetings to discuss the re-engagement of discussions between Tilray and Aphria and further analyze strategic alternatives. The Tilray Transaction Committee also developed, and reviewed with management and the Tilray Board, strategic transaction policy guidelines to instruct all transaction participants on the avoidance of and disclosure of conflicts of interest in connection with the strategic alternatives review.
On August 25, 2020, representatives of Aphria toured Tilray’s Nanaimo, British Columbia facility, followed by a tour of Aphria’s Broken Coast facility. Representatives from Tilray included Mr. Joshua Eades, Tilray’s Chief Scientific Officer. Representatives from Aphria included Mr. Merton and Mr. Grame Holfeld.
On August 31, 2020, the Tilray Board held a meeting. The agenda included an update from Mr. Pucher on other potential transaction alternatives beyond Aphria. Mr. Pucher reviewed the strategic landscape and summarized Tilray management’s view of other potential transactions given recent dialogue that Tilray management had with selected other large cap and mid cap licensed producers. The Tilray Board was advised that ultimately, in Tilray management’s judgment, the transaction with Aphria still represented the most attractive alternative for long-term value creation for Tilray Stockholders. In addition, at the same meeting, the Tilray Board approved the Tilray Transaction Committee’s proposed strategic transaction policy guidelines to instruct all transaction participants on the avoidance of, and disclosure of, conflicts of interest.
During the first two weeks of September, several meetings took place between Messrs. Kennedy and Simon regarding key aspects of a potential term sheet that Aphria had discussed submitting to Tilray.
On September 9, 2020, the Aphria Board held a meeting at which Mr. Simon provided an update on the strategic opportunities available to Aphria. The Aphria Board was supportive of Aphria management continuing to engage in discussions with respect to these opportunities.
On September 13, 2020, Aphria received a non-binding term sheet from Company A regarding a potential business combination.
On September 14, 2020, the Tilray Transaction Committee and its advisors held a meeting to discuss the status of the potential transaction between Tilray and Aphria.
On September 15, 2020, Mr. Simon shared a revised draft term sheet with Mr. Kennedy. The draft term sheet contemplated, among other things: (i) an equity ownership split of 62.5% for Aphria and 37.5% for Tilray, which
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implied an at-market transaction with no premium for Tilray Stockholders; and (ii) a condition to execution of definitive agreements that Tilray secure commitments from its convertible noteholders to exchange US$200 million of the outstanding Tilray notes into equity. The proposed ownership splits of 62.5% / 37.5% contemplated the dilution from the convertible note exchange.
On September 16, 2020, the Tilray Board held a meeting. A copy of the draft term sheet was shared with the Tilray Board and discussed in detail. Cowen was in attendance and discussed the impact of the revised terms on Tilray Stockholders from a financial point of view and the requirement of a note exchange.
On September 17, 2020, the Tilray Board held a meeting. During this meeting, a counterproposal to the draft of the term sheet provided by Aphria on September 15, 2020 was discussed. The counterproposal included, among other things an equity ownership split of 58% for Aphria and 42% for Tilray and inclusive of an assumed debt-for-equity exchange of US$150 million of Tilray’s convertible notes.
On September 18, 2020, the Aphria Board held a meeting. At this meeting, Fasken Martineau DuMoulin LLP (“Fasken”), legal counsel to Aphria, reviewed Aphria’s conflicts of interest policy, including the conflict of interest questionnaire completed by each office and director to identify any conflict of interest, with the Aphria Board and advised the Aphria Board of its obligations and responsibilities in the context of M&A transactions. Following discussion, the Aphria Board established the Aphria Transaction Advisory Committee, which was comprised of the following independent directors: Mr. Tomas Looney, Ms. Renah Persofsky and Mr. Walter Robb. The mandate of the Aphria Transaction Advisory Committee included: (i) providing guidance and oversight to Aphria management on the terms and conditions, diligence and analysis of any potential transaction and overseeing and supervising management’s negotiation and discussions of such potential transactions; and (ii) providing advice and guidance to the Aphria Board in respect of matters related to such potential transactions. During the same meeting, Jefferies presented the Aphria Board with an analysis of: (a) the non-binding term sheet received from Company A on September 13, 2020; (b) the non-binding term sheet provided to Tilray on September 15, 2020; and (c) the proposed terms of the transaction with SweetWater. At this meeting, the Aphria Board engaged in a discussion with respect to each of the potential transactions. Based on this discussion, the Aphria Board was of the view that the potential transaction with Company A was not as attractive as the potential transaction with Tilray since the proposed Company A transaction undervalued Aphria’s contribution to the combined entity. Accordingly, the Aphria Board instructed Aphria management to inform Company A that it was not interested in pursuing a transaction on the terms presented to Aphria. With respect to the potential of each of the Tilray and SweetWater transactions, the Aphria Board instructed Aphria management to continue its discussions with Tilray and SweetWater, respectively. Between September 23, 2020 and October 23, 2020, Aphria and Company A engaged in discussions regarding the terms of a potential transaction and the Aphria Transaction Advisory Committee and the Aphria Board were kept apprised of the status of those discussions.
On September 18, 2020, Cowen shared Tilray’s counterproposal with Jefferies.
On September 21, 2020, the Aphria Transaction Advisory Committee held a meeting to receive an update from Aphria management and Jefferies on the potential transactions. At this meeting, Aphria management and Jefferies informed the Aphria Transaction Advisory Committee of the counterproposal received from Tilray on September 18, 2020. After discussion, it was determined that Aphria would continue with discussions with Tilray.
On September 23, 2020, Jefferies, after having several discussions with Cowen over the previous few days, shared with Cowen a counterproposal from Aphria on the draft term sheet. The draft term sheet contemplated, among other things an equity ownership split of 61% for Aphria and 39% for Tilray inclusive of an assumed debt-for-equity exchange of US$200 million of Tilray’s convertible notes.
On September 23, 2020, the Aphria Transaction Advisory Committee held a meeting at which Aphria management provided the Aphria Transaction Advisory Committee with an update on discussions with Tilray and noted that Aphria management was preparing an overview of the planned integrations and efficiencies expected with respect to the Combined Company that would be shared with Tilray.
On September 23, 2020, the Tilray Transaction Committee held a meeting where Imperial presented its preliminary strategic alternative analysis to the Tilray Transaction Committee, including its analysis of Tilray remaining as a standalone entity both with and without additional financing; selective acquisitions by Tilray; merging with another
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Canadian operator; merging with or acquiring a U.S. multi-state operator; partnering with a major non-cannabis enterprise; and being acquired by or receiving an investment from a financial sponsor. At the same meeting, Imperial provided the Tilray Transaction Committee with its preliminary analysis of a potential transaction with Aphria.
On September 24, 2020, the Aphria Transaction Advisory Committee held a meeting to receive an update from Aphria management on the work that was being done by Aphria management to validate the potential synergies that could be realized from a potential transaction with Company A. Aphria management also informed the Aphria Transaction Advisory Committee that the overview of the integration plan with Tilray had been shared with Tilray management.
On September 24 and 25, 2020, the Tilray Board held meetings. During these meetings, the Tilray Board asked further questions regarding key components of the draft term sheet and asked Tilray management’s and Cowen’s views of where there was potential to negotiate for Tilray’s benefit. Ultimately no decisions were made to change positions with respect to the draft term sheet during these meetings.
On September 26, 2020, a revised draft term sheet was shared by Cowen with Jefferies. The revised draft term sheet contemplated, among other things an equity ownership split of 60% for Aphria and 40% for Tilray and inclusive of an assumed debt-for-equity exchange of US$200 million of Tilray’s convertible notes.
On September 29, 2020, Aphria entered into a non-binding letter of intent with respect to the acquisition of SweetWater.
On September 30, 2020, the Aphria Board held a meeting to receive an update on each of the potential transactions discussed at the Aphria Board meeting held on September 18, 2020. At this meeting, the terms of the revised proposal regarding a transaction with Company A were discussed and Jefferies presented the Aphria Board with an analysis of the revised terms.
On October 1, 2020, the Tilray Transaction Committee held a meeting at which Imperial presented its updated strategic alternative analysis to the Tilray Transaction Committee, again analyzing the topics reviewed at the September 23, 2020 Tilray Transaction Committee meeting, as well as Imperial’s preliminary analysis of each of Tilray’s and Aphria’s inventory (based upon public information). The Tilray Transaction Committee reviewed the progress of the discussions between the Tilray and Aphria management teams.
On October 2, 2020, the Aphria Board held a meeting to receive an update on the potential transactions that remained under consideration.
On October 9, 2020, the Aphria Transaction Advisory Committee held a meeting to receive an update on the potential transactions that remained under consideration.
Between October 9, 2020, and October 12, 2020, Aphria and Tilray exchanged drafts of the term sheet, and a non-binding term sheet was signed by both parties on October 12, 2020, which contemplated among other things an equity ownership split of 60% for Aphria and 40% for Tilray, and an assumed debt-for-equity exchange of US$200 million of Tilray’s convertible notes.
On October 14, 2020, the Aphria Board held a meeting to receive an update from Aphria management on the status of discussions with Tilray and the status of the potential SweetWater transaction.
On October 16, 2020, the Tilray Board held a meeting. Next steps in the process with Aphria regarding due diligence meetings and retaining Ernst & Young LLP (“EY”) to assist Tilray with financial, accounting and tax diligence were discussed. No key decisions were made.
On October 20, 2020, the Aphria Transaction Advisory Committee held a meeting to receive an update from Aphria management and Jefferies on the status of discussions with Company A and Tilray regarding a potential transaction.
On October 22 and 23, 2020, meetings between Tilray and Aphria management took place in-person in New York. In attendance from Tilray in-person were Messrs. Kennedy, Levin, Kruteck and Pucher. In attendance from Aphria in-person were Mr. Simon and Ms. Faltischek. Attending telephonically were Messrs. Merton and Meiers. Representatives from Cowen and Jefferies were also present in-person. Each management team spent time reviewing its culture, people, strategy, operations, and recent and projected financial performance. The strategic rationale for combining the two companies was discussed, as well as the joint operational strategy should a transaction be consummated.
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On October 23, 2020, the Tilray Board held a meeting at which it was briefed on progress with Aphria and the substance of the discussions at the management meetings in New York. No key decisions were made.
On October 24, 2020, a meeting was held between the Tilray and Aphria management teams to discuss potential synergies that could be realized from the transaction. In attendance from Tilray were Messrs. Levin, Kruteck and Pucher. In attendance from Aphria were Messrs. Merton and Meiers and Ms. Faltischek. Representatives from Cowen and Jefferies were in attendance as well. On this call, the Tilray and Aphria management teams compared areas of potential synergies and cost savings and arrived at a joint estimate of approximately C$100 million of annual run-rate cost synergies.
Later in the day on October 24, 2020, the Aphria Transaction Advisory Committee held a meeting to discuss the most recent proposal received by Aphria from Company A. The Aphria Transaction Advisory Committee expressed concerns with respect to the share consideration contemplated in the proposal in light of the recent increase in the share price of Company A and the multiples at which it was trading. At this meeting, the Aphria Transaction Advisory Committee also discussed the potential transaction with Tilray and considered Aphria management’s view that the acquisition of Tilray would assist Aphria with its U.S. strategy, provide access to European markets through Tilray’s presence in Portugal, allow for Cannabis 2.0 product extensions, and create potential synergies with Aphria’s existing facilities. The Aphria Transaction Advisory Committee expressed the view that the potential acquisition of SweetWater and the business combination with Tilray would create more value for Aphria and its stakeholders than a transaction with Company A.
On October 25, 2020, the Aphria Board held a meeting to receive an update from Aphria management on the status of each of the potential transactions under consideration and a summary of the discussions that had occurred with the Aphria Transaction Advisory Committee. After discussion, the Aphria Board concluded that it was in the best interest of Aphria and its stakeholders to pursue the SweetWater and Tilray transactions and to cease pursuing the third-party transaction. Later that day, the third party was informed that Aphria would not be pursuing a transaction with them.
On October 30, 2020, a representative of Tilray, Mr. Sascha Mielcarek (Managing Director of Europe) conducted a site tour of Aphria’s German cultivation facility in Neumunster . On the same day, the Tilray Board held a meeting and was briefed on the status of discussions with Aphria.
On October 30, 2020, Aphria executed an engagement letter to formally retain Jefferies as its financial advisor.
On October 31, 2020, the Aphria Transaction Advisory Committee held a meeting at which the status of the potential transactions with Tilray and SweetWater were discussed.
On November 2, 2020, Mr. Melcarek, a representative of Tilray conducted a site tour of Aphria’s European distribution business, CC Pharma. CC Pharma is headquartered in Densborn, Germany. On November 2, 2020, a meeting was held between Tilray and Aphria management personnel to discuss overall progress on diligence workstreams. In attendance from Tilray were Messrs. Kennedy, Levin, Kruteck, Pucher, and Ms. Dara Redler, General Counsel. In attendance from Aphria were Messrs. Simon, Merton, Meiers, Ms. Faltischek and Dr. Christelle Gedeon, Chief Legal Officer. Representatives of Cowen and Jefferies were also in attendance. Progress on the diligence timeline was discussed. On this call, Mr. Simon informed Tilray management that Aphria had decided to focus exclusively on the potential acquisition of SweetWater, and that Aphria would be ceasing discussions with Tilray at this time. Mr. Simon informed Tilray management that Aphria remained interested in pursuing a potential transaction with Tilray, and that Aphria was not foreclosing further discussions once the SweetWater transaction was completed.
On November 3, 2020, the Tilray Board held a meeting. During this meeting, Mr. Kennedy explained that Aphria had shared that it was going to proceed with the acquisition of SweetWater and that it would terminate discussions with Tilray until such transaction was closed. Mr. Kennedy and the Tilray Board discussed that this would put at risk the transaction with Aphria but understood that Mr. Simon and the Aphria Board could not be dissuaded from proceeding as planned. The Tilray Board agreed that transaction discussions should be terminated at such time.
On November 4, 2020, the Aphria Board held a meeting at which representatives of Jefferies and Fasken were present. At the meeting, the Aphria Board approved the SweetWater transaction and determined that discussions with Tilray should be terminated until the completion of the SweetWater transaction. Later that day, Aphria announced that it had entered into an agreement to acquire SweetWater for approximately US$300 million.
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On November 6, 2020, a representative of Aphria, Dr. Thomas Weppelmann of CC Pharma, conducted a site tour of Tilray’s cultivation facility in Cantanhede, Portugal as was previously scheduled and planned.
On November 8, 2020, Tilray and Aphria agreed to terminate discussions and revisit at a future time as appropriate.
On November 23 and 24, 2020, Tilray completed an exchange of approximately US$197.2 million in aggregate principal amount of convertible notes into equity. This convertible note exchange was negotiated between Tilray and certain institutional convertible noteholders on a private (i.e., not public tender) basis. The decision to proceed with the convertible note exchange was taken as part of prudent balance sheet management for Tilray and independent of the transaction discussions with Aphria that had previously occurred.
On November 27, 2020, Tilray and Aphria management held a meeting. In attendance from Tilray were Messrs. Kennedy, Levin, Kruteck, Pucher and Ms. Redler. In attendance from Aphria were Messrs. Simon, Merton, Meiers, and Ms. Faltischek and Gedeon. Tilray was informed that Aphria was prepared to re-engage in discussions with Tilray regarding a potential transaction after the completion of the SweetWater transaction, which was scheduled to occur by the end of the month. Tilray management communicated that it was interested in continuing the discussions.
On November 30, 2020, Aphria announced the closing of its acquisition of SweetWater.
On December 1, 2020, the Tilray Board held a meeting. Cowen was in attendance and provided the Tilray Board with an update on the financial analysis of a potential transaction with Aphria with regards to recent developments, including the completion of the SweetWater transaction and the respective stock trading prices of each company. The Tilray Board was supportive of moving forward and re-engaging with Aphria on the terms contained in the executed term sheet dated October 12, 2020.
On December 2, 2020, the Aphria Transaction Advisory Committee held a meeting at which Jefferies was present. Mr. Simon updated the Aphria Transaction Advisory Committee on recent discussions with Tilray and, in particular, noted the reverse acquisition structure that was now being contemplated. Jefferies presented financial metrics with respect to the equity ownership split for the combined entity and discussed the current debt holdings of each of the companies, the potential synergies of the combination, and the effects of Aphria having a U.S. parent. A discussion ensued with respect to the status and results of due diligence, the impact of the U.S. parent structure on the business of Aphria and the tax consequences of the reverse acquisition structure with respect to Aphria shareholders.
On December 4, 2020, the Tilray Board held a meeting. The purpose of this meeting was to provide the Tilray Board with a review of the legal and financial due diligence that had been conducted to date on Aphria. Blakes, legal counsel to Tilray, and Cooley, legal counsel to Tilray, led the conversation regarding legal due diligence. EY then joined the meeting to provide a review of the financial, accounting and tax due diligence that had been conducted to date on Aphria.
On December 5, 2020, DLA Piper and Fasken, Aphria’s legal counsel, sent an initial draft of the Arrangement Agreement (the “Draft Arrangement Agreement”) to Tilray’s legal counsel.
On December 7, 2020, the Aphria Board held a meeting to receive a status update from Aphria management and Jefferies on the potential transaction with Tilray, in particular with respect to deal structure, key terms and diligence that had been completed to date. At this meeting, the Aphria Board considered the proposed equity ownership split for the respective parties in light of recent developments and reviewed the benefits and risks of the transaction and how the transaction could help Aphria achieve its strategic goals.
On December 8, 2020, the Tilray Board held a meeting. During this meeting, the Tilray Board was briefed on the diligence completed to date and the conservative adjustments that Tilray management had made in its best judgment to the Aphria financial projections. Thereafter, a representative from Blakes discussed the key issues in the definitive transaction documents.
On December 8, 2020, Ms. Redler sent a list of Tilray’s issues with the Draft Arrangement Agreement to Ms. Faltischek and Dr. Gedeon, and on December 9, 2020, Tilray’s legal counsel sent a revised version of the Draft Arrangement Agreement to Aphria’s legal counsel. From December 8 through December 11, 2020, various discussions and negotiations took place between members of Tilray’s management and Tilray’s legal counsel and members of Aphria management and Aphria’s legal counsel.
On December 11, 2020, Mr. Simon called Mr. Kennedy to discuss the economics of the transaction in light of the current market capitalizations of each company and reflecting the conclusions of Aphria’s due diligence reviews. As
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a result, Mr. Simon proposed a change to the equity ownership split of 60% for Aphria and 40% for Tilray that was contemplated in the executed term sheet dated October 12, 2020. He communicated that Jefferies would call Cowen to discuss Aphria’s proposal. Later that evening, representatives from Jefferies called representatives from Cowen to discuss the proposal of an equity ownership split of 64% for Aphria and 36% for Tilray. Cowen acknowledged receipt of this proposal and agreed to relay such proposal to the Tilray Board and Tilray’s management.
On December 11, 2020, the Tilray Board held a meeting. An update was provided on due diligence and the drafting of the definitive transaction documents. The Tilray Board also approved the terms of Cowen’s engagement in connection with a strategic alternatives analysis and in particular, the potential transaction with Aphria. On December 12, 2020, Tilray executed an engagement letter dated as of December 10, 2020 with Cowen in respect of the potential transaction with Aphria.
On December 12, 2020, Aphria’s legal counsel sent a revised version of the Draft Arrangement Agreement to Tilray’s legal counsel, which reflected the discussions between the parties and their representatives that had taken place since the issues list was delivered by Tilray on December 8, 2020. From December 12, 2020, through December 15, 2020, negotiations ensued between representatives of Aphria and Tilray and various drafts of the Draft Arrangement Agreement, the Aphria Support Agreements, the Tilray Support Agreements and the other definitive transaction documents were exchanged between the parties.
Over the weekend of December 12 and 13, 2020, Messrs. Simon and Kennedy continued to communicate via text message and telephone. Through these conversations it was agreed that an equity ownership split of 62% for Aphria and 38% for Tilray might be mutually acceptable, subject to further discussions by each of the Aphria Board and the Tilray Board and to mutually satisfactory resolution of certain open items under discussion in the draft Arrangement Agreement.
On December 13, 2020, the Aphria Board held a meeting to receive an update from Aphria management and representatives of Jefferies. At this meeting, DLA Piper and Fasken provided the Aphria Board with a presentation regarding the terms of the Draft Arrangement Agreement and the other definitive transaction documents, discussed board duties with the members of the Aphria Board, and provided an update on the status of legal due diligence.
On December 13, 2020, the Tilray Board held a meeting. The Tilray Board was provided with an update on the latest discussions with Aphria, including with respect to the proposed equity ownership split. Cowen also presented a draft of its financial analysis of the transaction, reflecting the latest terms that had been negotiated. After discussion, the Tilray Board approved moving forward with an equity ownership split of 62% for Aphria and 38% for Tilray.
On December 14, 2020, the Tilray Board held a meeting to discuss the status of the transaction documents and due diligence. The Tilray Board was supportive of continuing to move forward. Imperial then presented a draft of their financial analysis based on the latest terms of the transaction to the Tilray Board.
On December 15, 2020, representatives from Cowen and Jefferies held a meeting to discuss the exchange ratio implied by the equity ownership split of 62% for Aphria and 38% for Tilray. It was agreed that the exchange ratio to effect such an equity ownership split was 0.8381 of a Tilray Share for each Aphria Share.
Also, on December 15, 2020, the Aphria Board held meetings on two separate occasions to discuss the completion of due diligence and the proposed final terms of the definitive transaction documents. During these meetings, following a review of the process and methodologies considered by Jefferies in evaluating the financial terms of the Arrangement, the Aphria Board received an oral opinion from Jefferies that, as of the date of such opinion and subject to the scope of review, assumptions and limitations contained therein, the Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders. After discussion, the Aphria Board determined that the Arrangement is in the best interests of Aphria and is fair to Aphria Shareholders and unanimously passed a resolution approving the Arrangement, authorizing Aphria to enter into the Arrangement Agreement and recommending that Aphria Shareholders vote in favour of the Arrangement.
On December 15, 2020, the Tilray Board held a meeting. Representatives from Cowen, Imperial, Cooley, Blakes, Lowenstein and Potter Anderson were present. Management provided an update on final diligence items and Tilray’s legal advisors provided an update on the transaction documents. Representatives from Cowen and Imperial were present and each rendered its oral opinion to the Tilray Board that, as of the date of such opinion and subject to the
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scope of review, assumptions and limitations contained therein, the Exchange Ratio is fair, from a financial point of view, to Tilray. Following this, the Tilray Board determined that the proposed Arrangement, and the other transactions and matters contemplated in the Arrangement Agreement and other transaction documents were advisable and in the best interests of the Company.
Following the foregoing meetings of the Aphria Board and the Tilray Board, the Arrangement Agreement and certain ancillary agreements were finalized. The Arrangement Agreement, the Aphria Support Agreements and the Tilray Support Agreements and certain other definitive agreements were executed, and the terms of the Arrangement were publicly announced in a joint news release issued by Aphria and Tilray on December 16, 2020, prior to the opening of trading on the TSX and the Nasdaq.
Our Reasons for the Arrangement
The Aphria Board and the Tilray Board each believe that, at this stage of development and expansion of the global cannabis market, companies with financial strength, a strategic footprint and scale, diverse product range, brand expertise and strong leadership are most likely to succeed in the long-term. The key strategic and financial benefits identified by both the Aphria Board and the Tilray Board during their respective evaluations of the Arrangement are summarized below. Since both boards of directors considered and reached the same conclusions on the common benefits of the Transaction described below, this information is being presented in a single section that reflects the views of each of the Aphria Board and the Tilray Board on the common benefits:
World’s Largest Global Cannabis Company. On a pro forma basis for the last twelve months reported by each company prior to the date of the announcement of the Arrangement on December 16, 2020, the Combined Company would have had revenue of approximately US$685 million (C$874 million), which would have been the highest among publicly reporting cannabis companies globally over that period. The Combined Company will be positioned in the capital markets as a leading global cannabis company, with the scale to attract institutional investors and strategic partnerships.
Strategic Footprint and Operational Scale. The Combined Company is expected to have the strategic footprint and operational scale necessary to compete more effectively in today’s consolidating cannabis market with a strong, flexible balance sheet, cash balance and access to capital, which Aphria and Tilray believe will give it the ability to accelerate growth and deliver long-term sustainable value for stockholders.
Low-Cost State-of-the-Art Production & The Leading Canadian Adult-Use Cannabis Producer. The Combined Company is expected to have one of the lowest cost production operations with its state-of-the-art facilities. In addition, the Combined Company will have a portfolio of carefully curated Cannabis 2.0 products brands across all consumer segments, including flower, pre-roll, capsules, vapes, edibles and beverages, that are sold through its distribution partners. On a pro forma basis, for the period of August through October 2020, the Combined Company would have held a 17.3% retail market share, the largest share held by any single licensed producer in Canada and 7% higher than the next closest competitor.1 In the adult-use market in Canada, the Combined Company, on a pro forma basis for the last twelve months reported by each company prior to the date of the announcement of the execution of the Arrangement Agreement, would have had gross revenue of US$232 million (C$296 million) in the adult-use market in Canada, which would have been the most of any Canadian licensed producer.
Positioned to Pursue International Growth. The Combined Company will be well-positioned to pursue growth opportunities with its end-to-end EU-GMP supply chain and distribution, which will include (i) Aphria One’s Part II EU-GMP approved facility; (ii) ARA-Avanti Rx Part I EU-GMP approved facility; (iii) Aphria’s German cultivation facility; and (iv) Aphria’s German medical cannabis distribution footprint and (v) Tilray’s 2.7 million square foot EU-GMP cannabis cultivation and production facility in Portugal. Aphria is one of three companies selected in Germany to receive a licence for the in- country cultivation of medical cannabis and was awarded a total of five lots, which was the most available lots within the tender process, and is the only winner of the German tender with the permission to grow all three strains of medical cannabis approved by the BfArM. Aphria’s wholly-owned subsidiary, CC Pharma GmbH, will provide the Combined Company with distribution capabilities that will support the Aphria and Tilray medical cannabis brands to more than 13,000 pharmacies located throughout Germany. The Combined Company will have the opportunity to reach additional pharmacies and patients via distribution
1
Based on Stifel analyst report by Andrew Carter, dated December 6, 2020, “December 2020 Headset Canada Review”.
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relationships. Tilray’s EU-GMP cultivation and production facility in Portugal will provide the Combined Company with the capacity to cultivate and produce EU-GMP medical cannabis products in order to meet international demand and the Combined Company will be able to export products produced in such facility on a tariff-free basis to EU countries. Importantly, the Tilray EU-GMP cultivation and production facility in Portugal will allow the Combined Company to unlock markets beyond the EU, including supplying countries in Latin America that recognize the EU-GMP standard for the cultivation and production of medical cannabis and that have already federally legalized access to medical cannabis or are in the process of doing so.
Enhanced Consumer Packaged Goods Presence and Infrastructure in the U.S. The Combined Company is expected to have an improved position from a corporate, branding and products perspective if cannabis is legalized under U.S. federal law and allow the Combined Company to leverage several established third-party partnerships. In the United States, the Combined Company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars: SweetWater, a leading cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. The Combined Company is expected to leverage SweetWater’s craft beer manufacturing and distribution network to build brand awareness for the Combined Company’s leading cannabis brands via craft beers, hard seltzers, and other beverages as it seeks to take advantage of opportunities for both health and wellbeing beverage trends. The Combined Company also expects to pursue the opportunity to expand with new or existing CBD or other cannabinoid brands leveraging Manitoba Harvest’s strong hemp and wellness product platform. If cannabis is legalized under U.S. federal law, the Combined Company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong cannabis brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis.
Substantial Synergies. The combination of Aphria and Tilray is expected to deliver meaningful synergies arising from cost leadership and scale opportunities in the Canadian adult-use and medical cannabis sector. Within 24 months of the completion of the Transaction, the Combined Company expects to achieve approximately US$78 million (C$100 million) in annual pre-tax cost synergies. The Combined Company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses. This is expected to include capitalizing on Aphria’s expertise and cost management structure and focusing on the opportunity for Aphria’s Leamington, Ontario operations to fully supply and deliver additional volume for Tilray’s brands and to replace the need for Tilray to purchase wholesale cannabis from other licensed producers. Tilray’s London, Ontario facility is also expected to provide Aphria with excess capacity to increase production of additional product formats, including advancing Aphria’s launch of branded cannabis edibles and cannabis beverages in Canada. The Combined Company is considering utilizing Tilray’s existing Nanaimo, British Columbia facility to enhance the availability of Aphria’s premium Broken Coast brand to meet increasing consumer demand. The Combined Company’s scalable infrastructure, both in Canada and internationally, is expected to deliver cost leadership and scale opportunities in the Canadian adult-use and medical cannabis sector including significant improvements to net profits, net revenues and EBITDA.
Proven Leadership Team. The Combined Company will be led by a best-in-class management team and board of directors, with strong track records in consumer-packaged goods and cannabis experience internationally. Upon completion of the Arrangement, Aphria’s current Chairman and Chief Executive Officer, Irwin D. Simon, will lead the Combined Company as Chairman and Chief Executive Officer. The board of directors of the Combined Company will consist of nine members, seven of which, including Mr. Simon, are current Aphria directors and two of which will be from Tilray, including Brendan Kennedy, and one of which is to be designated. Aphria and Tilray are confident that the leadership team and proposed board of directors of the Combined Company provides a strong foundation for the Combined Company to accelerate growth.
Recommendation of the Aphria Board
The Aphria Board believes that the Arrangement is in the best interest of Aphria and is fair to the Aphria Shareholders. The Aphria Board unanimously recommends that Aphria Shareholders vote FOR the Aphria Resolution.
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Factors Considered by the Aphria Board
In reaching its decision to approve the Arrangement Agreement and the transactions contemplated thereby, the Aphria Board considered the following material factors, all of which they viewed as supporting its decision to approve the Arrangement Agreement and the transactions contemplated thereby:
the strategic reasons for the Arrangement described above under “Description of the Arrangement – Our Reasons for the Arrangement”;
information concerning the respective businesses of Aphria and Tilray, including information regarding financial performance and condition, operations, technology and management, and the results of Aphria’s due diligence review of Tilray’s businesses and operations;
the current and prospective competitive environment in which cannabis companies, including Aphria, operate and the likely effect of that competitive environment on Aphria in light of, and in the absence of, the Arrangement;
the analyses of, and discussions between, the Aphria Board and Aphria’s financial advisor and the financial advisor’s fairness opinion to the effect that, as of the date of the fairness opinion, based upon and subject to the assumptions made, matters considered and limits of the review undertaken, the 0.8381 Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders (for more information see “Description of the Arrangement – Opinion of Aphria’s Financial Advisor”);
the Exchange Ratio of 0.8381 of a Tilray Share for each Aphria Share, and the determination of the Aphria Board that the fixed exchange ratio was appropriate in a strategic transaction of this type;
the structure and terms of the Arrangement, including:
that on completion of the Arrangement, it is expected that the Exchange Ratio will result in Aphria Shareholders owning approximately 62% of the outstanding Tilray Shares on a fully diluted basis providing those Aphria Shareholders with the opportunity to participate in the future growth of the Combined Company;
that the Aphria Supporting Shareholders, who own, directly or indirectly, or exercise control or direction over, in the aggregate, Aphria Shares representing less than 1% of the outstanding Aphria Shares as of the date of this Circular, entered into the Aphria Support Agreements pursuant to which the Aphria Supporting Shareholders agreed, among other things, to vote the subject securities in favour of the Aphria Resolution (for more information see “General Information about the Aphria Meeting and Voting – Aphria Support Agreement);
that the Tilray Supporting Stockholders, who own, directly or indirectly, or exercise control or direction over, in the aggregate, Tilray Shares representing approximately [•] of the outstanding Tilray Shares as of the date of this Circular, entered into the Tilray Support Agreements pursuant to which the Tilray Supporting Stockholders agreed, among other things, to vote the subject securities in favour of the Tilray Resolutions (for more information see “General Information about the Tilray Meeting and Voting – Tilray Support Agreement”);
the reciprocal nature of the terms of the Arrangement Agreement and the other transaction documents, including the parties’ representations, warranties and covenants, and the Aphria Board’s determination that those terms and conditions were appropriate in a strategic transaction of this type;
the conditions to the completion of the Arrangement, and the Aphria Board’s view that while the completion of the Arrangement is subject to various conditions, including certain approvals, such conditions and approvals were likely to be satisfied on a timely basis;
the provisions of the Arrangement Agreement designed to restrict the ability of the Parties to solicit third party Acquisition Proposals but affording both sides the ability to consider and pursue an unsolicited Superior Proposal, the provisions of the Arrangement Agreement providing for the payment of the Aphria Termination Amount or the Tilray Termination Amount, as applicable, under specified circumstances relating to the termination of the Arrangement Agreement following the occurrence of an Acquisition Proposal and the conclusion of the Aphria Board that those provisions were an appropriate and reasonable means to increase the likelihood that the Arrangement will be completed;
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that the Arrangement must be approved by the affirmative vote of at least two-thirds of the votes cast on the Aphria Resolution by Aphria Shareholders who vote virtually or by proxy at the Aphria Meeting;
that the Arrangement must be approved by the Court, which will consider, among other things, the fairness and reasonableness of the Arrangement to the Aphria Shareholders;
the availability of Dissent Rights to registered Aphria Shareholders (for more information see “Description of the Arrangement – Aphria Dissenting Shareholders’ Rights”)
the governance structure for the Combined Company, as reflected in the Arrangement Agreement, including:
the representation of directors from each of the Tilray Board and the Aphria Board on the board of directors of the Combined Company, with the board including two directors from Tilray (including Mr. Brendan Kennedy), and seven directors from Aphria (including Mr. Irwin Simon, the current Aphria CEO, as the chairman of the board of the Combined Company);
that Mr. Kennedy, Tilray’s current CEO and one other director designated by Tilray, would be a member of the board of directors of the Combined Company following the Arrangement, and the Tilray Board’s view of Mr. Kennedy as a leader with a strong reputation in the cannabis industry;
that Mr. Simon, the current Aphria CEO, would be the chief executive officer of the Combined Company following the Arrangement, and the Tilray Board’s view of Mr. Simon as having a strong track record as chief executive officer of Aphria; and
that principal offices will be maintained in Canada (Toronto, Leamington, and Vancouver Island), the United States (New York and Seattle), Portugal and Germany.
The Aphria Board also considered the potential risks of the Arrangement and potential conflicts of interest, including the following:
the possible diversion of management attention for an extended period of time during the pendency of the Arrangement and, following closing, the challenge of combining the businesses of two major international companies;
the risk that the anticipated cost savings will not be achieved;
the costs that may be incurred to combine the operations of Aphria and Tilray;
the potential conflicts of interest of Aphria’s officers and directors in connection with the Arrangement (for more information see “Description of the Arrangement – Interests of Aphria’s Directors and Management in the Arrangement”);
the risk of diverting management’s attention from other strategic priorities to implement integration efforts;
the risk that Aphria Shareholders will exercise Dissent Rights in connection with the Arrangement;
the risk that Tilray’s financial performance may not meet Aphria’s expectations;
the substantial costs to be incurred in connection with the Arrangement, including those that could be incurred regardless of whether the Arrangement is consummated;
the ability of the Tilray Board, in certain circumstances, to terminate the Arrangement Agreement or change its recommendation that Tilray Stockholders approve the Arrangement;
that Aphria would be required to pay to Tilray a termination fee of C$65 million in the event the Aphria Board were to terminate the Arrangement Agreement under certain circumstances; and
the other risks associated with the Arrangement and the business of Aphria, Tilray and the Combined Company, including those described under “Risk Factors – Risks Related to the Arrangement”, “Information Concerning Aphria – Risks and Uncertainties”, “Information Concerning Tilray – Risks and Uncertainties” and “Risk Factors – Risks Related to the Combined Company”.
In addition, the Aphria Board was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of Aphria Shareholders generally described in the section entitled
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“Interests of Aphria’s Directors and Management in the Arrangement” beginning on page 95 of this Circular. The foregoing discussion of the information and factors that the Aphria Board considered is not intended to be exhaustive, but rather is meant to include the material factors that the Aphria Board considered.
The Aphria Board considered all of these factors as a whole and, on balance, concluded that the potential benefits of the Arrangement outweighed the risks and uncertainties of the Arrangement. In addition, the Aphria Board was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of Aphria Shareholders generally described in the section entitled “Interests of Aphria’s Directors and Management in the Arrangement”. In view of the wide variety of factors considered by the Aphria Board in connection with the evaluation of the Arrangement and the complexity of these matters, the Aphria Board did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Aphria Board may have given different weight to different factors. The Aphria Board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Aphria management, and Aphria’s financial and legal advisors, and considered the factors overall to be favorable to, and to support, its determination.
The foregoing description of the Aphria Board’s consideration of the factors supporting the Arrangement is forward-looking in nature. This information should be read in light of the factors discussed in the section entitled “Information Concerning Forward-Looking Statements” beginning on page [•] of this Circular.
Recommendation of the Tilray Board
The Tilray Board believes that the Arrangement Agreement and the transactions contemplated thereby, and the Tilray Charter Amendment Proposals are in the best interests of, and are advisable to, Tilray and the Tilray Stockholders. The Tilray Board unanimously recommends that Tilray Stockholders vote FOR the Tilray Charter Amendment Proposals, FOR the Tilray Share Issuance Proposal, FOR the Tilray Advisory Compensation Proposal and FOR the Tilray Adjournment Proposal.
Factors Considered by the Tilray Board
In reaching its decision to approve the Arrangement Agreement and the transactions contemplated thereby, the Tilray Board considered the following factors, all of which they viewed as supporting their decisions to approve the Arrangement Agreement and the transactions contemplated thereby:
the strategic reasons for the Arrangement described above under “Description of the Arrangement – Our Reasons for the Arrangement”;
information concerning the respective businesses of Aphria and Tilray, including information regarding financial performance and condition, operations, technology and management, and the results of Tilray’s due diligence review of Aphria’s businesses and operations;
the current and prospective competitive environment in which cannabis companies, including Tilray, operate and the likely effect of that competitive environment on Tilray in light of, and in the absence of, the Arrangement;
the analyses of, and discussions between, the Tilray Board and Tilray’s financial advisors and the financial advisors’ fairness opinions to the effect that, as of the date of the fairness opinions, based upon and subject to the assumptions made, matters considered and limits of the review undertaken, the 0.8381 Exchange Ratio is fair, from a financial point of view, to Tilray (for more information see “Description of the Arrangement – Opinion of Tilray’s Financial Advisors”);
the Exchange Ratio of 0.8381 of a Tilray Share for each Aphria Share, and the determination of the Tilray Board that the fixed exchange ratio was appropriate in a strategic transaction of this type, as well as the favorability of the Exchange Ratio implied by the relative trading prices of Tilray Shares and Aphria Shares over various periods and relative to the current assessment of the valuation of each company and of the expected synergies and other benefits of the Arrangement;
the expected treatment of the Arrangement as a tax-free reorganization under Section 368(a) of the Code for U.S. federal income tax purposes, and of the Arrangement Agreement as a “plan of reorganization” under Treasury Regulation Section 1.368-2(g), as more fully described in the section entitled “Certain U.S. Federal Income Tax Considerations” beginning on page [•] of this Circular;
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the structure and terms of the Arrangement, including:
that on completion of the Arrangement, Tilray Stockholders will own approximately 38% of the outstanding Tilray Shares on a fully diluted basis providing those Tilray Stockholders with the opportunity to participate in the future growth of the Combined Company;
that the Tilray Supporting Stockholders, who own, directly or indirectly, or exercise control or direction over, in the aggregate, Tilray Shares representing approximately [•] of the outstanding Tilray Shares as of the date of this Circular, entered into the Tilray Support Agreements pursuant to which the Tilray Supporting Stockholders agreed, among other things, to vote the subject securities in favour of the Tilray Resolutions (for more information see “General Information about the Tilray Meeting and Voting – Tilray Support Agreement”);
that the Aphria Supporting Shareholders, who own, directly or indirectly, or exercise control or direction over, in the aggregate, Aphria Shares representing less than 1% of the outstanding Aphria Shares as of the date of this Circular, entered into the Aphria Support Agreements pursuant to which the Aphria Supporting Shareholders agreed, among other things, to vote the subject securities in favour of the Aphria Resolution (for more information see “General Information about the Aphria Meeting and Voting – Aphria Support Agreement”);
the reciprocal nature of the terms of the Arrangement Agreement and the other transaction documents, including the parties’ representations, warranties and covenants and the Tilray Board’s determination that those terms and conditions were appropriate in a strategic transaction of this type;
the conditions to the completion of the Arrangement, and the Tilray Board’s view that while the completion of the Arrangement is subject to various conditions, including certain approvals, such conditions and approvals were likely to be satisfied on a timely basis;
the provisions of the Arrangement Agreement designed to restrict the ability of the Parties to solicit third party Acquisition Proposals but affording both sides the ability to consider and pursue an unsolicited Superior Proposal, the provisions of the Arrangement Agreement providing for the payment of the Aphria Termination Amount or the Tilray Termination Amount, as applicable, under specified circumstances relating to the termination of the Arrangement Agreement following the occurrence of an Acquisition Proposal and the conclusion of the Tilray Board that those provisions were an appropriate and reasonable means to increase the likelihood that the Arrangement will be completed;
the governance structure for the Combined Company, as reflected in the Arrangement Agreement, including:
the representation of directors from each of the Tilray Board and the Aphria Board on the board of directors of the Combined Company, with the board including two directors from Tilray (including Mr. Brendan Kennedy), and seven directors from Aphria (including Mr. Irwin Simon, the current Aphria CEO, as the chairman of the board of the Combined Company);
that Mr. Kennedy, Tilray’s current CEO and one other director designated by Tilray, would be a member of the board of directors of the Combined Company following the Arrangement, and the Tilray Board’s view of Mr. Kennedy as a leader with a strong reputation in the cannabis industry;
that Mr. Simon, the current Aphria CEO, would be the chief executive officer of the Combined Company following the Arrangement, and the Tilray Board’s view of Mr. Simon as having a strong track record as chief executive officer of Aphria; and
that principal offices will be maintained in Canada (Toronto, Leamington, and Vancouver Island), the United States (New York and Seattle), Portugal and Germany.
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The Tilray Board also considered the potential risks of the Arrangement and potential conflicts of interest, including the following:
the possible diversion of management attention for an extended period of time during the pendency of the Arrangement and, following closing, the challenge of combining the businesses of two major international companies;
the risk that the anticipated cost savings will not be achieved;
the costs that may be incurred to combine the operations of Aphria and Tilray;
the potential conflicts of interest of Tilray’s officers and directors in connection with the Arrangement (for more information see “Description of the Arrangement – Interests of Aphria’s Directors and Management in the Arrangement”);
the risk of diverting management’s attention from other strategic priorities to implement integration efforts;
the risk that, because the Exchange Ratio under the Arrangement Agreement was fixed as of the time of execution of the Arrangement Agreement and would not be adjusted for changes in the market prices of Tilray Shares or Aphria Shares, the trading price of the Tilray Shares to be issued to Aphria Shareholders upon the consummation of the Arrangement could be significantly higher than it was at the time the Arrangement Agreement was entered into, and the fact that the Arrangement Agreement does not provide Tilray with a price-based termination right or other similar protection;
the fact that the Tilray Stockholders will not be permitted to seek appraisal of their shares in connection with the Arrangement;
the risk that Aphria Shareholders will exercise Dissent Rights in connection with the Arrangement;
the risk that Aphria’s financial performance may not meet Tilray’s expectations;
the substantial costs to be incurred in connection with the Arrangement, including those that could be incurred regardless of whether the Arrangement is consummated;
the ability of the Aphria Board, in certain circumstances, to terminate the Arrangement Agreement or change its recommendation that Aphria Shareholders approve the Arrangement;
that Tilray would be required to pay to Aphria a Termination Amount of C$65 million in the event the Tilray Board were to terminate the Arrangement Agreement under certain circumstances; and
the other risks associated with the Arrangement and the business of Aphria, Tilray and the Combined Company, including those described under “Risk Factors – Risks Related to the Arrangement”, “Information Concerning Aphria– Risks and Uncertainties”, “Information Concerning Tilray – Risks and Uncertainties” and “Risk Factors – Risks Related to the Combined Company”.
In addition, the Tilray Board was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of Tilray Stockholders generally described in the section entitled “Interests of Tilray’s Directors and Management in the Arrangement” beginning on page [•] of this Circular. The foregoing discussion of the information and factors that the Tilray Board considered is not intended to be exhaustive, but rather is meant to include the material factors that the Tilray Board considered.
The Tilray Board considered all of these factors as a whole and, on balance, concluded that the potential benefits of the Arrangement outweighed the risks and uncertainties of the Arrangement. In addition, the Tilray Board was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of Tilray Stockholders generally described in the section entitled “Interests of Tilray’s Directors and Management in the Arrangement”. In view of the wide variety of factors considered by the Tilray Board in connection with the evaluation of the Arrangement and the complexity of these matters, the Tilray Board did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Tilray Board may have given different weight to different factors. The Tilray Board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Tilray’s management, and financial and legal advisors, and considered the factors overall to be favorable to, and to support, its determination.
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The foregoing description of the Tilray Board’s consideration of the factors supporting the Arrangement is forward-looking in nature. This information should be read in light of the factors discussed in the section entitled “Information Concerning Forward-Looking Statements” beginning on page [•] of this Circular.
Description of the Plan of Arrangement
The following summary of certain transaction steps of the Plan of Arrangement is qualified in its entirety by reference to the full text of the Plan of Arrangement, a copy of which is attached as Appendix “B” to this Circular.
The Arrangement is being implemented pursuant to a plan of arrangement under the laws of the Province of Ontario. The purpose of the Plan of Arrangement is to facilitate a series of transactions which will occur in a specific sequence and as a consequence of which Tilray, will acquire all of the outstanding Aphria Shares.
Pursuant to the Arrangement, commencing at the Effective Time, each of the following events or transactions shall occur and be deemed to occur in the following sequence, in each case, without any further authorization, act or formality on the part of any person:
1.
at the Effective Time,
(a)
each Dissent Share held by an Aphria Dissenting Shareholder who is ultimately determined to be entitled to be paid the fair value of the Dissent Shares in respect of which such Aphria Dissenting Shareholder has exercised Dissent Rights shall be, and shall be deemed to be transferred by the holder thereof, without any further act or formality on its part, to Aphria (free and clear of all Liens) and such Aphria Dissenting Shareholder will cease to be the holder thereof or to have any rights as a holder in respect of such Dissent Share other than the right to be paid the fair value of such Dissent Share determined and payable in accordance with their Dissent Rights under the laws of Ontario, as modified by the Plan of Arrangement and the Interim Order; and
(b)
at the same time as the preceding step occurs, the name of each Aphria Dissenting Shareholder shall be removed from the register of the Aphria Shares and such Dissent Shares shall be automatically cancelled as of the Effective Date;
2.
concurrently with the preceding steps:
(a)
each Aphria Share outstanding immediately prior to the Effective Time (other than Dissent Shares held by Aphria Dissenting Shareholders who are ultimately determined to be entitled to be paid the fair value of their Dissent Shares as determined in accordance with their Dissent Rights under the laws of Ontario, as modified by the Plan of Arrangement and the Interim Order) shall be and shall be deemed to be transferred by the holder thereof to Tilray (free and clear of all Liens) in exchange for the issuance of the Consideration Shares;
(b)
at the same time as that preceding step occurs, the holder of each Aphria Share transferred to Tilray pursuant to the preceding step shall cease to be the holder thereof, or to have any rights as a holder thereof other than the right to receive the Consideration issuable in respect of each Aphria Share held pursuant to the preceding step and shall be removed from the register of the Aphria Shares and legal and beneficial title to each such Aphria Share shall be transferred to Tilray and Tilray will be and be deemed to be the transferee and legal and beneficial owner of such Aphria Share (free and clear of any Liens) and will be entered in the central securities register of Aphria as the sole holder thereof; and
(c)
Tilray will be the holder of all of the outstanding Aphria Shares;
3.
immediately after the preceding steps occur:
(a)
each Aphria Option, other than any Continuing Aphria Option, to the extent it has not been exercised as of the Effective Date, will be exchanged by the holder thereof, without any further act or formality and free and clear of all Liens, for a Replacement Option to purchase a number of Tilray Shares equal to the product of the Exchange Ratio, rounded down to two decimal places, multiplied by the number of Aphria Shares issuable on exercise of such Aphria Option immediately prior to the Effective Time (rounded down to the next whole number of Tilray Shares) for an exercise price per Tilray Share (rounded up to the nearest whole cent) equal to the exercise price per share of such Aphria Option immediately prior to the Effective Time divided by the Exchange Ratio, rounded down to two decimal
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places, and the Aphria Options shall thereupon be cancelled. The term to expiry, conditions to and manner of exercise and other terms and conditions of each of the Replacement Options shall be the same as the terms and conditions of the Aphria Option for which it is exchanged except that such Replacement Options shall be governed by the terms and conditions of the Tilray Plan and, in the event of any inconsistency or conflict the Tilray Plan shall govern. It is intended that subsection 7(1.4) of the Tax Act apply to the exchange of Aphria Options by Aphria Securityholders resident in Canada who acquired Aphria Options by virtue of their employment. Accordingly, and notwithstanding the foregoing, if required, the exercise price of a Replacement Option held by such an Aphria Securityholders will be increased such that the In-The-Money Amount of the Replacement Option immediately after the exchange does not exceed the In-The-Money Amount of the Aphria Option immediately before the exchange. For any Aphria Option that is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code, it is intended that such exchange will comply with Treasury Regulation Section 1.424(1)(a). For any Aphria Option that is a nonqualified option held by a U.S. taxpayer it is intended that such exchange will be implemented in a manner intended to comply with Section 409A of the Code. Any document previously evidencing the Aphria Option shall thereafter evidence and be deemed to evidence such Replacement Option and no certificates evidencing the Replacement Options shall be issued;
(b)
each Continuing Aphria Option shall, without any further action on the part of ‎any holder of any Continuing Aphria Option, be ‎continued on the same terms and c‎onditions as were applicable immediately prior to t‎he Effective Time, except that, ‎pursuant to the terms of the Aphria Omnibus Incentive Plan, the terms of the Continuing ‎Aphria Options shall be amended so as to substitute for t‎he Aphria Shares subject to such C‎ontinuing Aphria Options such number of Tilray Shares e‎qual to (A) the number of ‎Aphria Shares subject to the Continuing Aphria Options immediately ‎prior to the ‎Effective Time, multiplied by (B) the Exchange Ratio, rounded down to ‎two decimal p‎laces;
(c)
each Aphria RSU other than a Continuing Aphria RSU to the extent it has not been exercised as of the Effective Date, will be exchanged by the holder thereof, without any further act or formality and free and clear of all Liens, for an award of Replacement RSUs in respect of a number of Tilray Shares equal to the product of the Exchange Ratio, rounded down to two decimal places, multiplied by the number of Aphria Shares underlying such Aphria RSUs immediately prior to the Effective Time (rounded down to the next whole number of Tilray Shares), and the Aphria RSUs shall thereupon be cancelled. The term to expiry, conditions to and manner of receipt and other terms and conditions of each of the Replacement RSUs shall be the same as the terms and conditions of the Aphria RSU for which it is exchanged except that such Replacement RSU shall be governed by the terms and conditions of the Tilray Plan and, in the event of any inconsistency or conflict the Tilray Plan shall govern. Any document previously evidencing the Aphria RSUs shall thereafter evidence and be deemed to evidence such Replacement RSUs and no certificates evidencing the Replacement RSUs shall be issued. It is intended that subsection 7(1.4) of the Tax Act apply to the exchange of Aphria RSUs by Aphria Securityholders resident in Canada who acquired Aphria RSUs by virtue of their employment;
(d)<