Aleafia Health Inc. (TSXV:ALEF) (‘Aleafia') executed a letter of intent to acquire Emblem Corp. (TSXV:EMC) for approximately CAD 160 million on November 7, 2018. On December 18, 2018, Aleafia and Emblem signed a definitive agreement under the terms of which, Emblem shareholders will receive 0.8377 of a Aleafia common share in exchange for each Emblem common share. It is expected that holders of Emblem warrants will receive, upon exercise, the same consideration they would have received as if they were Emblem shareholders at the closing of the transaction. Further, Emblem options will be deemed to be exchanged for an option to purchase 0.8377 of an Aleafia share at an exercise price equal to the original exercise price of the Emblem option and each such Emblem option shall be cancelled. Aleafia and Emblem have also entered into an agreement with a holder representing 69.44% of the principal amount of Emblem's convertible debentures pursuant to which such holder has agreed not to accept any change of control offer to the extent one is made, and the parties have agreed to use their commercially reasonable efforts to amend the trust indenture to amend the change of control provisions such that they do not apply to the transaction, and to reduce the conversion price from CAD 2.3 to CAD 2.

Post completion of the transaction, it is expected that, existing Aleafia and Emblem shareholders will own approximately 59% and 41% of Aleafia, respectively, on a fully diluted in-the-money basis. Post completion, Emblem will become a direct wholly-owned subsidiary of Aleafia. Further, upon closing, it is expected that the common shares of Emblem will be de-listed from the TSXV. The agreement also provides for reciprocal termination fees of CAD 10 million if the transaction is terminated in certain circumstances. As part of the transaction, two independent Directors of Emblem will be appointed to serve on the Board of Directors of Aleafia, being Daniel Milliard and Loreto Grimaldi, who will replace two Directors of Aleafia.

The transaction is subject to the approval of at least 66.67% of shareholders of Emblem, receipt of certain regulatory, court and stock exchange approvals, resignation of Emblem directors, listing of shares on the exchange, dissent rights not being exercised and other customary closing conditions. The transaction has been unanimously approved by Emblem's special committee and Board of Directors, and the Emblem Board unanimously recommends that the Emblem shareholders vote in favor of the transaction. In addition to the transaction, Aleafia has entered into support and voting agreements with each of Emblem's Directors, Chief Executive Officer and Chief Financial Officer, along with additional shareholders who have agreed to support and vote for the transaction and who represent in aggregate approximately 11.8% of the outstanding Emblem shares. A special committee was formed of independent members of the Board of Emblem, Daniel Milliard, Terry Johnson and Jeffrey Fineberg to consider the transaction. In conjunction with listing on the TSX, the common shares will be voluntarily delisted from the TSXV prior to the commencement of trading on the TSX. As of March 6, 2019, Emblem Corp. shareholders approved the transaction in its special meeting of shareholders. As of March 6, 2019, Aleafia received conditional approval from the Toronto Stock Exchange to graduate from the Toronto Venture Exchange and list its common shares on the TSX under the symbol “ALEF”. On March 8, 2019, the transaction received a final order from the Ontario Superior Court of Justice approving the transaction. The transaction is expected to complete on or around March 14, 2019.

Jason A Saltzman, Kathleen Ritchie, Marek Lorenc, Joseph McDonald, Stephen Franchetto, Michael Watson, Paul Carenza, Ian Macdonald and Ryan Cohen of Gowling WLG (Canada) LLP acted as legal advisors to Aleafia. Deloitte acted as financial due diligence advisor to Aleafia. Mackie Research Capital Corporation acted as financial advisor to Aleafia. In addition to other fees and expenses payable to Mackie, Aleafia is required to pay a success fee to Mackie upon closing of the transaction equal to 2% of the aggregate fair market value of the share consideration issuable by Aleafia to Emblem's shareholders and the amount of net debt of Emblem which is assumed or acquired by Aleafia, or retired or otherwise extinguished in connection with the transaction, which is expected to be CAD 30.5 million. The success fee is payable in common shares of Aleafia subject to acceptance of the TSX Venture Exchange. Michael Sabusco, Eric Foster, Todd Melchior, Benjamin Iscoe, Mike Malecki, Suraj Rammohan, Matthew Fleming, Mark Jadd, Thomas Wilson and Sandy Walker of Dentons Canada LLP acted as legal advisors to Emblem. Eight Capital acted as financial advisor to Emblem and Echelon Wealth Partners Inc. acted as financial advisor and Michael Hickey, Ryan Morris and Paul Stepak of Blake, Cassels & Graydon LLP acted as the legal advisors to the special committee of Emblem. Eight Capital and Echelon Wealth Partners Inc. have each provided a fairness opinion to the Emblem Board and the special committee, respectively. Computershare Investor Services Inc. acted as Depository to Emblem in the transaction. Kingsdale Advisors acted as information agent to Emblem in the transaction.


Aleafia Health Inc. (TSXV:ALEF) ('Aleafia') completed the acquisition of Emblem Corp. (TSXV:EMC) on March 14, 2019. Following the completion of the transaction, listed Emblem warrants that have not been exercised will remain outstanding as warrants of the surviving company. Emblem Shares will be delisted from the TSX Venture Exchange as of the close of trading on or about March 18, 2019. Concurrent with the completion the transaction, Gary Goodyear and Michael Verbora resigned as directors of Aleafia Health. Michael Verbora will remain in his capacity as Chief Medical Officer of Aleafia Health. Aleafia paid to Mackie Research Capital Corporation a success fee of 2,331,255 common shares.