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Aleafia Health, Aphria Settle Cannabis Supply Deal Dispute For C$29.1 Mln

Canadian cannabis company Aleafia Health Inc., its subsidiary Emblem Cannabis, and Aphria Inc. said they have agreed to settle their outstanding dispute regarding the termination of their wholesale cannabis supply agreement.

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.

However, Aleafia said in October 2019 that it terminated the supply agreement as Aphria failed to meet its supply obligations under the deal.

Under the terms of the settlement agreement entered into by the three companies on Thursday, Emblem shall receive a total consideration of C$29.10 million. This includes cash payment of C$15.50 million, the issuance of C$10 million worth of Aphria shares that will be freely tradeable and transferable in Canada, and waiver of claimed receivables.

The companies agreed to a mutual release of all existing and potential claims relating to the supply agreement, and to dismiss all arbitration proceedings that had commenced previously.

"The settlement agreement is fair and satisfactory to both parties, and allows Aleafia Health to move forward with a significantly strengthened balance sheet. With a substantial injection of value into our business, we can focus on our continued growth," said Aleafia Health CEO Geoff Benic.

"Today's settlement announcement allows all of us to avoid unnecessary distraction and the potential expense of prolonged litigation, and importantly, to continue to focus on the future," said Irwin Simon, CEO of Aphria.

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