ENTG Entourage Health Corp

Entourage Health Corp. (TSX-V: ENTG) (OTCQX: ETRGF) (FSE: 4WE) (the “Company” or “Entourage”) is pleased to announce that it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) with 1001007762 Ontario Inc. (the “Purchaser”) and 2437653 Ontario Inc. (the “Guarantor”) pursuant to which the Purchaser will acquire all of the issued and outstanding common shares of the Company (the “Common Shares”) pursuant to a statutory plan of arrangement under the Business Corporations Act (Ontario) (the “Transaction”). Certain obligations of the Purchaser under the Arrangement Agreement have been guaranteed by the Guarantor. Each of the Purchaser and the Guarantor are related parties of LiUNA Pension Fund of Central and Eastern Canada (“LPFCEC”).

Under the terms of the Arrangement Agreement, the Purchaser has agreed to acquire all of the Common Shares for cash consideration equal to C$0.005 per Common Share (the “Consideration”). The Arrangement Agreement also provides for the same Consideration to be paid to holders of certain vested convertible securities of the Company. In connection with the Transaction, the Company has also entered into debt settlement agreements (the “Debt Settlement Agreements”) with holders of C$1,013,050 in aggregate principal amount of unsecured debentures issued by a subsidiary of the Company (the “Unsecured Debentures”). The Debt Settlement Agreements provide for the full and final settlement of the Unsecured Debentures in exchange for an aggregate cash payment of C$250,000 to the holders of the Unsecured Debentures, conditional upon closing of the Transaction.

Jason Alexander, director and Chair of the special committee of independent directors of the Company (the "Special Committee"), stated, “After thorough evaluation, the Special Committee is confident that the proposed Transaction offers the most favourable outcome for the Company and its shareholders in light of the current challenges and the upcoming expiration of the current forbearance agreement. The Transaction ensures shareholders receive immediate, tangible value while positioning the Company for future growth and flexibility.”

Special Committee and Board Approval

The Special Committee, comprised of independent directors of the Company, was established to consider strategic alternatives for the Company, including the Transaction. Evans & Evans, Inc. (“Evans & Evans”), the financial advisor to the Special Committee, has provided an oral opinion to the Special Committee to the effect that, as of the date thereof and subject to the various assumptions, limitations and qualifications set out therein, the Consideration to be received by the shareholders of the Company pursuant to the Transaction is fair, from a financial point of view, to the shareholders (other than any shareholders that are an affiliate of the Purchaser (“Purchaser Affiliated Shareholders”)).

Following receipt of the unanimous recommendation of the Special Committee, the board of directors of the Company (the “Board”) unanimously approved the Arrangement Agreement and the proposed Transaction. Both the Special Committee and the Board determined that the Transaction is in the best interests of the Company and fair to the shareholders of the Company (other than Purchaser Affiliated Shareholders). Furthermore, the Board unanimously recommends that shareholders of Entourage vote in favour of the Transaction at the special meeting of shareholders to be held to approve the Transaction (the “Shareholder Meeting”).

The Arrangement Agreement resulted from a comprehensive negotiation process undertaken at arm’s length with the oversight and participation of the Special Committee advised by qualified legal and financial advisors.

In reaching its unanimous decision to recommend the Transaction to the Board, and in the Board's subsequent decision to unanimously approve it, several key factors were considered, including the following:

• Value and Liquidity. The all-cash Consideration delivers immediate value and liquidity to shareholders, offering benefits given the limited trading volume, financial constraints and reduced liquidity in the Company’s Common Shares.
• Debt Obligations. The Company has indebtedness of approximately C$167.6 million under its Senior Credit Agreement and Subordinated Credit agreements (collectively, the “Credit Agreements”) with the Guarantor. While the Company is currently in breach of certain financial covenants and other obligations under the Credit Agreements, such breaches are currently waived until January 15, 2025 pursuant to the terms of a forbearance letter dated November 28, 2024. In addition, the Company has additional secured debt that is subordinated to the Credit Agreements. Without amended debt terms in relation to all of the Company’s indebtedness, the Company does not foresee being able to meet its obligations in respect of its currently outstanding indebtedness. The all-cash Consideration provides value to shareholders that may not otherwise be available as a result of the Company’s current indebtedness and financial outlook.
• Fairness Opinion. The Special Committee received an oral fairness opinion from Evans & Evans which concluded that, based upon and subject to the assumptions made, procedures followed, matters considered, limitations and qualifications set out therein, the Consideration to be received by the shareholders of the Company pursuant to the Transaction is fair, from a financial point of view, to the shareholders of the Company (other than Purchaser Affiliated Shareholders). A written copy of the fairness opinion will be included in the materials to be sent to shareholders of the Company in connection with the Shareholder Meeting.
• Arrangement Agreement Terms. The Arrangement Agreement was the result of a comprehensive negotiation process that was undertaken at arm’s length with the oversight and participation of the Special Committee advised by qualified legal and financial advisors and resulted in terms and conditions that are reasonable in the judgment of the Special Committee and the Board, including a customary "fiduciary out" allowing the Company to enter into a superior proposal in certain circumstances.
• Break Fee and Expense Reimbursement. The Special Committee negotiated a break fee payable by the Company which is reasonable in the circumstances and only payable in customary and limited circumstances. The Arrangement Agreement also includes expense reimbursement equal to C$500,000 for both parties in certain circumstances.
• Support for the Transaction. All of the directors and executive officers of Entourage as well as certain other shareholders have entered into voting and support agreements representing, in the aggregate, 27% of the issued and outstanding Common Shares (on a non-diluted basis), pursuant to which they have agreed to, among other things, vote in favour of the Transaction at the Shareholder Meeting.

Transaction Details and Timing

The Transaction is not subject to a financing condition. The Transaction is to be effected by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario). The consummation of the Transaction is subject to the approval of the Transaction at the Shareholder Meeting by (i) at least two-thirds of the votes cast by the Company's shareholders at the Shareholder Meeting; and (ii) a simple majority of the votes cast by non-Purchaser Affiliated Shareholders of the Company and any other Company shareholder required to be excluded for the purpose of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Completion of the Transaction is also subject to other customary conditions, including receipt of court approval.

The Arrangement Agreement includes customary deal-protection provisions. The Company is subject to non-solicitation provisions, which are subject to customary “fiduciary out” provisions that entitle the Board to terminate the Arrangement Agreement in favour of an unsolicited superior proposal, subject to the payment of the break fee described above and subject to a right of the Purchaser to match such superior proposal.

The Company currently anticipates holding the Shareholder Meeting to consider and vote on the Transaction in and around February 2025. If approved at the Shareholder Meeting, the Transaction is expected to close shortly thereafter, subject to court approval and the satisfaction of other customary closing conditions. Immediately following completion of the Transaction, the Common Shares are expected to be delisted from the TSX Venture Exchange and the Company is expected to submit an application to the Ontario Securities Commission to cease being a reporting issuer under applicable Canadian securities laws.

In connection with the entering into of the Arrangement Agreement, the Guarantor has also agreed to extend the terms of the forbearance agreement until the earlier of (i) the termination of the Arrangement Agreement; (ii) the completion of the Transaction; and (iii) the Transaction outside date specified within the Arrangement Agreement.

Voting and Support Agreements

In connection with the Transaction, each director and executive officer of Entourage and certain other shareholders have entered into voting and support agreements pursuant to which they have agreed to vote their Common Shares in favour of the Transaction at the Shareholder Meeting, subject to certain customary exceptions.

The Common Shares subject to voting and support agreements represent approximately 27% of outstanding Common Shares (on a non-diluted basis).

Advisors

Mintz LLP is acting as legal advisor to the Company and the Special Committee.

Evans & Evans is acting as the financial advisor to the Special Committee in connection with the Transaction.

Goodmans LLP is acting as legal counsel to the Purchaser and Koskie Minsky LLP is acting as legal counsel to LPFCEC.

Additional Information about the Transaction

Further details regarding the terms and conditions of the Transaction are outlined in the Arrangement Agreement, which the Company will file publicly on its profile at www.sedarplus.ca. Additional information regarding the Transaction will be provided in the information circular to be sent to shareholders in advance of the Shareholder Meeting, and also be made available on www.sedarplus.ca. The Company encourages shareholders to review these documents for a detailed understanding of the Transaction.

About Entourage Health Corp.

Entourage Health Corp. is the publicly traded parent company of Entourage Brands Corp., a licence holder producing and distributing cannabis products for the medical and adult-use markets. The Company owns and operates a fully licensed 26,000F sq. ft. Aylmer, ON processing facility. With its Starseed Medicinal medical-centric brand, Entourage has expanded its multi-channelled distribution strategy. Starseed's industry-first, exclusive partnership with LPFCEC, the largest construction union in Canada, along with employers and union groups, complements Entourage's direct sales to medical patients. Entourage's elite adult-use product portfolio includes Color Cannabis, Saturday Cannabis – and now Dime Bag and Syndicate – sold across eight provincial distribution agencies. Exclusive Canadian producer and distributor of award-winning U.S.-based wellness brand Mary's Medicinals, sold in both medical and adult-use channels. For more information, contact Entourage:

For additional information or investor or media inquiries:1-888-385-5003Investor@entouragecorp.com

About LiUNA Pension Fund of Central and Eastern Canada

Established in 1972, LPFCEC is one of the fastest growing multi-employer pension funds across Canada, voted top 10 pension funds by Benefits Canada. With a diverse investment portfolio and over $12 billion in assets, LPFCEC has yielded positive returns for the plan, great work opportunities for LPFCEC members, and has created many needed institutions across North America through a broad range of investments. Learn more at lpfcec.org.

Forward-looking statements and forward-looking information

Certain statements made herein, including statements relating to matters that are not historical facts and statements of the Company's beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information relates to future events or future performance, reflect current expectations or beliefs regarding future events and is typically identified by words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "likely", "may", "plan", "seek", "should", "will" and similar expressions suggesting future outcomes or statements regarding an outlook. Forward-looking information includes, but is not limited to, statements with respect to the Transaction, including the expected timing of the Shareholder Meeting, the expected benefits of the Transaction, the ability of the Company to enter into a superior proposal, closing and various other steps to be completed in connection with the Transaction, the expected de-listing of the Common Shares and the Company ceasing to be a reporting issuer following closing of the Transaction and other statements that are not historical facts.

Forward-looking information is based upon certain assumptions and other important factors that, if untrue, could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such information. There can be no assurance that such information will prove to be accurate. Such information is based on numerous assumptions, including assumptions regarding the ability to complete the Transaction on the contemplated terms or at all, that the conditions precedent to closing of the Transaction can be satisfied, and assumptions regarding present and future business strategies, local and global economic conditions, and the environment in which the Company operates.

Although the Company believes that the forward-looking information in this news release is based on information and assumptions that are current, reasonable and complete, this information is by its nature subject to a number of factors, many of which are beyond the Company's control, that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information, including, without limitation, the following factors, many of which are beyond the Company's control and the effects of which can be difficult to predict: (a) the possibility that the Transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all due to a failure to obtain or satisfy, in a timely manner or otherwise, required shareholder and court approvals or satisfy other conditions of closing necessary to complete the Transaction or for other reasons; (b) the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Transaction; (c) risks relating to the retention of key personnel during the interim period; (d) the possibility of litigation relating to the Transaction; (e) risks related to the diversion of management's attention from the Company's ongoing business operations; (f) risks relating to the ability of the Purchaser to complete the Transaction; and (g) other risks inherent to the Company's business and/or factors beyond its control which could have a material adverse effect on the Company or the ability to consummate the Transaction. The Company cautions that the foregoing list is not exhaustive of all possible factors that could impact the Company's results.

Readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes will not occur. Events or circumstances could cause the Company's actual results to differ materially from those estimated or projected and expressed in, or implied by, this forward-looking information.

Investors and others should carefully consider the foregoing factors, other uncertainties and potential events and the risk factors and other cautionary statements in Entourage's disclosure documents filed with the applicable Canadian securities' regulatory authorities on SEDAR+ at www.sedarplus.ca and should not rely on the Company's forward-looking information to make decisions with respect to the Company. Furthermore, the forward-looking information contained herein are made as of the date of this document and the Company does not undertake any obligation to update or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. All forward-looking information contained herein is expressly qualified by this cautionary statement.

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this news release.