Red White & Bloom Brands Inc. (CNSX:RWB) entered into a binding letter agreement to acquire Aleafia Health Inc. (TSX:AH) from shareholders for CAD 9.4 million on June 6, 2023. The transaction includes the acquisition of Aleafia Health's subsidiaries. Under the terms of the Letter Agreement, each outstanding common share in the capital of Aleafia (each, an ?Aleafia Share?) will be exchanged for 0.35 of a common share in the capital of the Company (each, an ?RWB Share?), subject to customary adjustment (the ?Exchange Ratio?). Upon the completion of the Proposed Transaction, existing RWB shareholders are expected to own approximately 76% of the Combined Company resulting from the Proposed Transaction (the "Combined Company") and Aleafia shareholders are expected to own approximately 24% of the Combined Company. Outstanding restricted and deferred share units of Aleafia will be settled upon closing in RWB Shares on the basis of the Exchange Ratio. Concurrent with entering into the Letter Agreement, the loan agreement made as of December 24, 2021, between Aleafia and certain of its subsidiaries, as borrower, with certain of Aleafia?s other subsidiaries as guarantors, and NE SPC II LP, as lender, as amended on March 28, 2022, June 17, 2022, April 26, 2023, May 15, 2023, and May 31, 2023 (the ?Aleafia Senior Secured Loan Agreement?) was assigned by NE SPC II LP to RWB. In case of termination under certain circumstances, Aleafia will pay CAD 2 million as termination fee to RWB.

Completion of the proposed transaction will be subject to customary closing conditions and receipt of necessary court and regulatory approvals, including stock exchange approval, dissent rights will not have been exercised with respect to more than 5% of the issued and outstanding Aleafia Shares

Subject to receipt of all necessary approvals, the proposed transaction is expected to close by no later than 5:00 p.m. on October 31, 2023. The transaction has been approved by the committee of the Red White & Bloom Brands and Aleafia Health. RWB intends to secure a CAD 30 million credit facility. The proceeds from the New Credit Facility will serve multiple purposes, including the funding of the assignment of the Aleafia Senior Secure Loan Agreement to RWB, full and final settlement of all outstanding principal and accrued interest and any other amounts owing in respect of certain Aleafia convertible debentures issued under the amended and restated debenture indenture providing for the issue of certain convertible debentures dated as of June 27, 2022 between Aleafia and Computershare Trust Company of Canada, as the trustee, as supplemented by: (a) the first supplemental indenture dated as of June 27, 2022 (providing for the issue of the 8.5% Series A Secured Convertible Debentures Due June 30, 2024; (b) the second supplemental indenture dated as of June 27, 2022 (providing for the issue of the 8.5% Series B Secured Convertible Debentures Due June 30, 2026), and (c) the first supplemental indenture dated as of June 27, 2022 (providing for the issue of 8.50% Series C Secured Debentures Due June 30, 2028) (collectively, the ?Aleafia Convertible Debentures?) for an aggregate of CAD 6 million at the Effective Time (subject to receipt of Debenture holder Approval), funding working capital requirements and targeted growth initiatives of the Combined Company, and covering general corporate expenses and transaction costs associated with the Proposed Transaction. Concurrently with the execution of the Letter Agreement, Royal Group Resources Ltd. (?RGR?), an existing creditor of both RWB and Aleafia, provided RWB with CAD 14 million as an advance under the Company?s existing secured note in favour of RGR dated March 27, 2023 (the ?RGR Advance?). The RGR Advance will be retired upon closing of the New Credit Facility. Also concurrent with the execution of the Letter Agreement and upon receipt of the RGR Advance, RWB will enter into an agreement to advance to Aleafia an amount equal to CAD 1.5 million under the Aleafia Senior Secured Loan Agreement. Jason A. Saltzman of Gowling WLG (Canada) LLP acted as legal advisor to Aleafia. Melanie Cole of Aird & Berlis LLP acted as legal advisor to Aleafia.