PGN Pgnx Capital Corporation

Paragon Pharmacies Limited ("Paragon") (TSX VENTURE:PGN) today announced that it
has entered into a definitive asset purchase agreement (the "Agreement") with
Shoppers Drug Mart Corporation ("Shoppers"). Shoppers has agreed to purchase
substantially all of the assets of Paragon (the "Paragon Assets") for a cash
purchase price of approximately $75 million, subject to certain adjustments and
escrow provisions contained in the Agreement (the "Transaction"). The Paragon
Assets are comprised of those assets currently used in Paragon's pharmacy
business, which consists of 19 retail pharmacies and three central fill
pharmacies located in British Columbia, Alberta and Manitoba. 


The completion of the Transaction is subject to the approval of Paragon's
shareholders, acceptance by the TSX Venture Exchange and certain other customary
closing conditions. The parties anticipate that the Transaction will close in
the third quarter of 2012. 


Highlights of the Transaction 

Paragon's management and board of directors have continuously reviewed options
available to Paragon to ensure that shareholder value is being maximized.
Notwithstanding significant provincial regulatory reform that has impacted the
pharmacy industry over recent years, Paragon has made significant progress in
improving its operations while retaining and continuing to attract new customers
to its community based pharmacies. In the future, Paragon's ability to grow the
business of Paragon will be challenged by the ongoing regulatory reform,
significant competition from larger pharmacy chains and access to capital.  


As negotiations with Shoppers developed, Paragon determined that the disposition
of the Paragon Assets would create an opportunity to maximize shareholder value
with the ability to offer Paragon shareholders potential near-term liquidity. 


Based on these and other factors, the board of directors of Paragon has
unanimously approved the Transaction and recommend that the shareholders of
Paragon vote in favour of the sale of the Paragon Assets on the terms and
conditions set forth in the Agreement. 


Martin Weinberg, Chairman of the Board of Directors of Paragon, said "this
transaction with Shoppers represents a significant premium to the stock's
trading price over recent years and recognizes the underlying strength of
Paragon and its people in these challenging times. The terms of the Transaction
clearly affirm the changes that were initiated by the board of directors and
implemented by management team over the last several years".


Summary of the Transaction 

On May 22, 2012, Shoppers and Paragon entered into the Agreement setting out the
terms and conditions pursuant to which Shoppers has agreed to purchase the
Paragon Assets from Paragon, which are substantially all of the assets of
Paragon currently used in its business, consisting of 19 retail pharmacies and
three central fill pharmacies located in British Columbia, Alberta and Manitoba.
Shoppers has agreed to purchase the Paragon Assets for a purchase price of
approximately $75 million, subject to certain adjustments. Among other things,
Paragon has agreed to provide Shoppers with a period of 20 business days to
allow Shoppers to conduct confirmatory due diligence, which includes a review of
store operating income. The maximum purchase price reduction arising from this
review is $7.0 million. 


In addition, from the date of the Agreement until closing of the Transaction,
Paragon has agreed not to solicit or initiate discussions regarding any other
business combination or sale of material assets and has granted Shoppers the
right to match any superior proposals. The Agreement provides for a $3 million
non-completion fee payable to Shoppers in certain circumstances if the
Transaction is not completed.


Shareholder Approval 

The Paragon Assets comprise substantially all of the property of Paragon and
accordingly the sale of the Paragon Assets requires a special resolution of
shareholders of Paragon in order to give effect to the Transaction. The
Transaction must be approved by at least 66 2/3% of the votes cast by the
shareholders of Paragon in person or by proxy at a special meeting of Paragon
shareholders expected to take place in July, 2012. The Agreement has been
unanimously approved by both companies' boards of directors and the Transaction
is expected to be completed in the third quarter of 2012.


Expected Use of Proceeds 

The cash proceeds from the Transaction are expected to be used to repay
Paragon's liabilities and obligations as they exist at closing. The remaining
proceeds are expected to be distributed to Paragon shareholders at a future
date. The exact amount of the cash distribution and the date for determining the
Paragon shareholders of record will be confirmed at a later date. 


Shareholder Support 

Concurrent with entering into the Agreement, Shoppers entered into a voting
support agreement with Canterbury Park Capital L.P. and Canterbury Park Capital
(U.S.) L.P. (together, "Canterbury"), pursuant to which Canterbury has
irrevocably agreed to support the Transaction and vote all of the common shares
of Paragon that it owns in favour of the Transaction. Canterbury beneficially
owns and controls 68,271,783 common shares of Paragon representing approximately
77% of the issued and outstanding common shares of Paragon.


Fairness Opinion 

Altacorp Capital Inc. has provided an opinion to the Paragon board of directors
to the effect that the consideration to be paid by Shoppers under the
Transaction is fair, from a financial point of view, to Paragon. Paragon
obtained legal advice from Burnet, Duckworth & Palmer LLP in connection with the
Transaction.


Transaction Services 

Pavilion Financial Corporation, the manager for Canterbury, has agreed to terms
with Paragon to provide consulting services related to the transactions
contemplated by the Agreement and consulting services to be performed for the
benefit of Paragon during a four month period following the closing of the
transaction. The fees for these services for the ten and a half months of the
engagement are as approved by the independent directors of Paragon and are
expected to be approximately $637,500.


Further Information 

Further information regarding the Transaction will be contained in an
information circular that Paragon will prepare, file and mail in due course to
its shareholders in connection with the special meeting of Paragon shareholders.
The asset purchase agreement entered into between Shoppers and Paragon is
available on SEDAR at www.sedar.com. 


Paragon Pharmacies Limited built a pharmacy with our customers in mind.
Headquartered in Kelowna, BC and employing over 400 staff, Paragon currently
owns and operates 19 retail pharmacies and three central fill pharmacies
throughout British Columbia, Alberta and Manitoba. Paragon is a leading
mid-market pharmacy, providing premier pharmacy services in a friendly,
community-focused environment. 


For more information, visit www.helloparagon.com. 

Cautionary Statement on Forward-Looking Information 

This news release contains forward-looking information and statements which
constitute "forward-looking information" under Canadian securities law and which
may be material regarding, among other things, Paragon's beliefs, plans,
objectives, strategies, estimates, intentions and expectations. These include,
but are not limited to, statements with respect to the completion of the
Transaction, the timing of holding a special meeting of Paragon shareholders to
consider the Transaction, to and the expected use of the cash proceeds from the
Transaction by Paragon of distribution cash to shareholders of Paragon and the
amount, mechanism and timing of such cash distribution. Forward-looking
information and statements are typically identified by words such as
"anticipate", "believe", "expect", "estimate", "forecast", "goal", "intend",
"plan", "will", "may", "should", "could" and similar expressions. 


The forward-looking information and statements contained herein are based on
certain factors and assumptions, certain of which appear proximate to the
applicable forward-looking information and statements contained herein,
including assumptions as to the time required to prepare meeting materials for
the Paragon shareholder meeting, the timing of receipt of the necessary
regulatory approvals and the satisfaction of and time necessary to satisfy the
conditions to the closing of the Transaction. Such timing may change for a
number of reasons, including unforeseen delays in preparing meeting materials,
inability to secure necessary regulatory approvals in the time assumed or the
need for additional time to satisfy the conditions to the completion of the
Transaction. In addition, there are no assurances the Transaction will be
completed. In the event the Transaction is not completed, there will be no cash
distribution to Paragon shareholders. Accordingly, readers should not place
undue reliance on the forward-looking statements and information contained in
this news release. Readers are cautioned that the foregoing list is not
exhaustive. 


Inherent in the forward-looking information and statements are known and unknown
risks, uncertainties and other factors beyond Paragon's ability to control or
predict, which give rise to the possibility that Paragon's predictions,
forecasts, expectations or conclusions will not prove to be accurate, that its
assumptions may not be correct and that its plans, objectives and statements
will not be achieved. Actual results or developments may differ materially from
those contemplated by the forward-looking information and statements. 


Certain of these risks, factors, estimates and assumptions are described in more
detail in the "Risks and Risk Management" section of Paragon's most recently
filed annual and interim Management's Discussion and Analysis for the year-ended
August 31, 2011 and the six month period ended February 29, 2012 to which
readers are referred and which are incorporated by reference in this news
release. In addition, all forward-looking statements made in this news release
are qualified by the full caution regarding Forward-Looking Information and
Statements in such Management's Discussion and Analysis. These risks, factors,
estimates and assumptions are not exhaustive. Paragon disclaims any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise, or to explain any
material difference between subsequent actual events and such forward-looking
statements, except to the extent required by applicable law.

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