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Aleafia Health Terminates Cannabis Supply Deal With Aphria

Canadian cannabis company Aleafia Health Inc. said it has terminated the wholesale cannabis supply agreement that its wholly-owned subsidiary Emblem Corp. had entered into with Aphria Inc.

Aleafia said that Emblem exercised its contractual right to terminate the agreement due to Canada-based Aphria's failure to meet its supply obligations under the deal. The termination of the deal is effective from October 7, 2019.

"The termination of the Supply Agreement by Emblem was made without prejudice to its rights accrued to the date of termination (including its rights to be refunded the unused balance of its deposit) and its rights to seek damages as a result of Aphria's default and termination thereunder," Aleafia said in a statement.

The company added that the termination of the supply agreement will not materially and adversely affect its business, operations or results.

In September 2018, Aphria entered into a wholesale cannabis supply agreement with Emblem. Under the deal, Aphria was required to supply 175,000 kilogram equivalents of cannabis products to Emblem for an initial five-year period from May 1, 2019.

Meanwhile, Aphria expressed disappointment with Aleafia's decision to terminate the cannabis supply agreement, saying that it had "every intention of fulfilling its obligations" under the agreement.

"As a large shareholder of Aleafia, Aphria made good faith efforts to ensure continuation of the Agreement understanding it was in the best interest of all parties involved. However, the termination of this legacy Agreement frees up significant supply allowing the Company to service its brands that are in high-demand across the country," Aphria said.

According to Aphria, the companies are contractually obligated to negotiate for a period of thirty days following the receipt of a formal notice of termination.

However, Aphria intends to vigorously defend itself in the event the companies fail to reach a settlement within the 30-day period and if Aleafia files a formal claim for damages.

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