/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
TORONTO, March 31,
2023 /CNW/ - Pathway Health Corp. (TSXV: PHC)
(Frankfurt: KL1) ("Pathway" or the "Corporation"), an
integrated healthcare company that provides products and services
to patients suffering from chronic pain and related conditions,
today announced, further to its news releases dated December 22, 2022 and March 1, 2023, that the Corporation has entered
into a definitive arrangement agreement (the "Arrangement
Agreement") dated March 31,
2023 with The Newly Institute Inc. ("The Newly"), a
premier operator of inter-disciplinary mental health clinics in
Canada which has pioneered
intensive bio-psycho-social treatment models, and HEAL Global
Holdings Corp. ("HEAL"), a private Alberta company established with the goal of
becoming a global leader in personalized, curated healthcare. In
accordance with the terms and conditions of the Arrangement
Agreement, Pathway will acquire all of the issued and outstanding
common shares in the capital of HEAL ("HEAL Shares") and The
Newly ("Newly Shares") from their respective shareholders
(other than those Newly Shares held by HEAL) (the
"Transaction") in exchange for common shares in the capital
of Pathway ("Pathway Shares"). The Transaction is intended
to recapitalize Pathway and The Newly through the direct investment
of $7.5 million by HEAL and result in
the formation of a comprehensive health and wellness company
offering interventional pain management and intensive outpatient
mental health treatment programs. These programs will focus on
helping clients address concerns with chronic pain as well as their
mental health to allow them to return to work and their lives with
treatments for addition and chronic pain as well as medically
assisted psychotherapy for treatment resistant conditions.
The Transaction is supported by Avonlea-Drewry Holdings Inc.
("ADH"), Pathway's largest shareholder, which owns or
controls, directly or indirectly, approximately 55% of the issued
and outstanding Pathway Shares and approximately 22% of the issued
and outstanding Newly Shares, and is the majority shareholder in
HEAL.
As part of the Transaction Pathway has entered into a debt
restructuring transaction with ADH whereby approximately
$4 million of debt (including
principal amount and all accrued and unpaid interest and fees)
owing to ADH will be converted into Pathway Shares concurrently
with completion of the Arrangement (as defined below) and pursuant
to a secured debt conversion agreement dated March 31, 2023 and between Pathway and ADH
(the "Debt Restructuring"). In consideration of the Debt
Restructuring, Pathway will issue to ADH: (i) such number of Shares
equal to the debt divided by $0.03
(as established pursuant to the news release dated December 22, 2022 as the then market price),
provided that the maximum number of Pathway Shares shall not exceed
100% of the number of Pathway Shares that are issued and
outstanding immediately prior to completion of the Transaction, on
a non-diluted basis and without giving effect to completion of the
Transaction; and (ii) such remaining number of Pathway Shares equal
to the remaining debt after giving effect to (i) divided by
$0.05; provided, however, that
the total number of Pathway Shares issued to ADH in connection with
the Debt Restructuring and the Restructuring Advisory Fee (as
defined below) shall not exceed an aggregate 166,666,667 Pathway
Shares.
The board of directors of Pathway, The Newly and HEAL,
respectively, have each unanimously approved the Arrangement
Agreement (excluding, in each case, directors who disclosed an
interest in respect thereto) and resolved to recommend that their
securityholders vote in favour of the Arrangement.
TRANSACTION SUMMARY
Pursuant to the Arrangement Agreement Pathway has agreed to
acquire all of the issued and outstanding HEAL Shares and Newly
Shares from their respective shareholders (other than those Newly
Shares held by HEAL) by way of a statutory plan of arrangement (the
"Arrangement") under the Business Corporations Act
(Alberta) (the "ABCA") in
exchange for approximately 2.77 Pathway Shares for every
1 HEAL Share and approximately 4.85 Pathway Shares for every 1
Newly Share, respectively. An aggregate of approximately
279,618,754 Pathway Shares at a deemed price of $0.13 per share for total deemed consideration of
approximately $36,350,000 will be
issued to former holders of HEAL Shares and Newly Shares.
Pathway, Newly and HEAL have entered into voting and support
agreements with directors, officers and certain other shareholders
of the respective parties and pursuant to which such shareholders
have agreed to support and vote in favour of the Transaction. As a
result, shareholders holding approximately 56% of the outstanding
Pathway Shares, 33% of the outstanding Newly Shares and 100% of the
outstanding HEAL Shares have agreed to support the Transaction.
Upon completion of the Arrangement, the Private Placement (as
defined below), the Debt Restructuring, issuance of shares in
relation to the Restructuring Advisory Fee, the conversion of
certain bridge loans advanced by HEAL to both The Newly and Pathway
including related accrued but unpaid interest and fees (see news
release dated February 3, 2023), and
the Deal Extension Fee (as defined in the news release dated
March 1, 2023) it is expected that
the current Pathway shareholders, HEAL shareholders, The Newly
shareholders and the Private Placement investors (assuming the
minimum offering has been raised) will own approximately 56.1%,
5.4%, 13.5% and 25.0%, respectively, of the issued and outstanding
Pathway Shares (post-Transaction) on a non-diluted basis.
Completion of the Arrangement is subject to certain conditions
including the completion of the Private Placement, approval of each
of the Pathway shareholders, The Newly securityholders and HEAL
shareholders (including, as required, approval of a simple majority
of the votes cast by Pathway shareholders, The Newly
securityholders and HEAL shareholders, as applicable, in each case
after excluding votes from certain securityholders, including ADH,
as required under MI 61-101 (as defined below)), in each case,
present in person or by proxy, as applicable, at special meetings
called by Pathway (the "Pathway Meeting") and The Newly (the
"Newly Meeting" and together with the Pathway Meeting, the
"Meetings") for purposes of, among other things, reviewing
and approving the Arrangement and such other closing
conditions customary for transaction of this nature including,
among other things, approval of the Arrangement by the Alberta Court of King's Bench. In connection
with the Meetings, a joint information circular (the "Joint
Circular") will be prepared, filed and sent to all shareholders
of Pathway and securityholders of The Newly.
The Arrangement Agreement provides for customary deal-protection
provisions, including non-solicitation covenants and the right to
match any Pathway Superior Proposal or Newly Superior Proposal (as
such terms are defined in the Arrangement Agreement). The
Arrangement Agreement includes a termination amount of $1 million, payable in certain circumstances,
including if Pathway proceeds with a Pathway Superior Proposal or
The Newly proceeds with a Newly Superior Proposal.
Pursuant to the Arrangement Pathway will change its name to
"Global Healthcare Holdings Corp."
(https://globalhealthcareholdings.com/) or such other name as the
Pathway board may determine and restructure its board of directors
and officers. The board of directors is expected to be comprised of
Michael Steele, Kenneth Howling, Alison
Wright, along with one additional independent director to be
named in due course, and management is expected to include
Michael Steele, Chief Executive
Officer and Mark Kopitar, Corporate
Secretary, with the Chief Financial Officer to be named in the
coming weeks. In addition, The Newly will be afforded board
observation rights at the conclusion of the Transaction. The
following are brief descriptions of the currently proposed incoming
directors and officers:
Michael Steele – Director and
Chief Executive Officer
Mr. Steele is an engineer and financier with over 30 years of
experience in structured investments and new business start-ups.
Mr. Steele has provided consulting services to various industry
sectors including real estate, mining, oil and gas, healthcare and
the Canadian medical sector.
Mr. Steele has consulted to or provided financial restructuring
to various companies and business sectors internationally with an
emphasis within North America,
including but not limited to, oil & gas, mining, real-estate,
food processing, environmental technology and of late medical
health care & clinical operations. Mr. Steele was a previous
director of Barkerville Gold Corp. (later amalgamated with Osisko
Gold Royalties Ltd.) and the former Chairman of Pathway. Mr. Steele
graduated from the University of
Waterloo with a P.Eng (BASc) in civil engineering and
received his MBA in 1981.
Kenneth Howling –
Director
Mr. Howling has over 25 years of healthcare industry experience
in senior financial positions; including 11 years with Bausch
Health (formerly Biovail Corporation), as Chief Financial Officer,
and Senior Vice President, Finance and Corporate Affairs; five
years as Chief Financial Officer of Acerus Pharmaceuticals
Corporation; and five years as Chief Financial Officer with Pharma
Patch PLC. Earlier in his career, Mr. Howling worked in senior
financial management positions at Roberts Company Canada Limited,
including roles of General Manager, Corporate Secretary and
Controller, at GlaxoSmithKline (formerly Beecham Pharmaceuticals
Ltd), and as an auditor with PricewaterhouseCoopers. Mr. Howling is
a graduate of the ICD/Rotman Director Program and formerly a
Certified Public Accountant (inactive license).
During his career, Mr. Howling has contributed to the success of
multiple start-up companies, taken companies through the IPO
process, and has collectively raised over US$2.3 billion in various forms of capital.
Alison Wright –
Director
Ms. Wright has over 20 years of management experience in the
construction and property management industries. Ms. Wright was a
director at Capform Inc., a full service concrete contractor based
in Dallas, Texas, with projects
throughout the southern United
States. Currently, Ms. Wright is the President of Alwright
Investments Inc., a Canadian property Management an investment
company she founded in 2012. Ms. Wright has served as a director on
several boards of private companies in both Canada and the
United States.
Ms. Wright graduated from the University of
Toronto in 1991 and holds a Bachelor of Science.
Mark Kopitar – Corporate
Secretary
Mr. Kopitar is a senior associate at Dentons Canada LLP and
practices in the areas of capital markets, mergers and
acquisitions, corporate governance and securities regulatory
compliance. Mr. Kopitar graduated from University of Alberta (BA Economics) and the
University of Saskatchewan (Juris
Doctor).
THE PRIVATE PLACEMENT
In connection with the Transaction, Pathway has agreed to use
its reasonable commercial efforts to carry out prior to or
concurrent with closing of the Arrangement one or more equity, debt
or convertible debt financings for aggregate gross proceeds of not
less than $10,000,000, including
minimum aggregate proceeds of $500,000 to be subscribed for by management of
Pathway and other Pathway associates and related parties on terms
acceptable to the Parties acting reasonably provided that the terms
of such financing shall be subject to the approval of Pathway,
Newly and HEAL, each acting reasonably (the "Private
Placement"). Further particulars of the Private Placement will
be disseminated in a subsequent news release to be issued upon
finalization of its terms.
It is anticipated that net proceeds of the Private Placement
will be used to fund the business of the resulting issuer upon
completion of the Transaction and for general corporate purposes
and future working capital.
THE RESTRUCTURING ADVISORY FEE
In connection with Pathway's exploration and evaluation of
strategic alternatives for the future of the Corporation, including
to effectuate a significant reduction in the Corporation's debt
position and improve its liquidity, working capital and financial
position and engaging with ADH in respect thereto prior to Pathway
entering into the LOI, Pathway and ADH have entered into a
restructuring advisory fee agreement (the "Restructuring
Advisory Fee Agreement") pursuant to which ADH is to receive a
restructuring advisory fee (the "Restructuring Advisory
Fee") to be satisfied through the issuance by Pathway to ADH of
Pathway Shares at a price of $0.05
per share, which when combined with the Pathway Shares to be issued
pursuant to the Debt Restructuring, will result ADH receiving an
aggregate of approximately 167 million Pathway Shares at the
conclusion of the Transaction.
To the extent that the payment of the Restructuring Advisory
Fee, the completion of the Debt Restructuring and the other
transactions contemplated pursuant to the Arrangement constitute
related party transactions as defined under Multilateral Instrument
61-101 – Protection of Minority Security Holders in Special
Transactions ("MI 61-101"), Pathway intends to comply
with the terms thereof and rely, as the case may be, on available
exemptions from the formal valuation and shareholder approval
requirements, or seek majority of minority approval in accordance
with 61-101 at the Pathway Meeting.
Completion of the Transaction is subject to a number of
conditions, including receipt of all required regulatory, corporate
and third party approvals and fulfilment of all applicable
regulatory requirements and conditions necessary to complete the
Transaction, including approval by the TSX Venture Exchange. As a
result of such conditions, there can be no assurance that the
Transaction will be completed as proposed or at all.
FURTHER INFORMATION
A copy of the Arrangement Agreement is available on SEDAR
at www.sedar.com. Pathway expects to provide
further information in respect of the Private Placement and the
Meetings by way of subsequent news release(s). Additional
information regarding the Arrangement Agreement and the background
to the Transaction will be provided in the Joint Circular, a copy
of which will be made available on SEDAR at
www.sedar.com. Shareholders should read the information
carefully before deciding how to vote. At this time, there is no
need for shareholders to take any voting action.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements.
In certain cases, forward-looking statements can be identified by
the use of words such as "plans", "expects" or "does not
anticipate", or "believes", or variations of such words and phrases
or statements that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be
achieved". In particular, this news release contains
forward-looking information pertaining to the following: statements
regarding the Arrangement, including with respect to the benefits
of the Arrangement and expectations regarding the combined company;
the ability of Pathway, The Newly and HEAL to satisfy the
conditions to and to complete the Arrangement; the terms and
conditions of the proposed Private Placement; use of proceeds from
the Private Placement; and expectations regarding the impact of the
Arrangement on Pathway, The Newly and HEAL, including in respect of
anticipated financial and operating results, strategy and business,
and on stakeholders in general.
Forward-looking information is necessarily based on a number of
opinions, assumptions and estimates that, while considered
reasonable as of the date of this press release, are subject to
known and unknown risks, uncertainties, assumptions and other
factors that may cause the actual results, level of activity,
performance or achievements to be materially different from those
expressed or implied by such forward-looking information, including
but not limited to the factors described in greater detail in the
"Risk Factors" section of Pathway's Annual Information Form dated
April 26, 2022 for the year ended
December 31, 2021 and Pathway's other
periodic filings available at www.sedar.com. These factors are not
intended to represent a complete list of the factors that could
affect Pathway; however, these factors should be considered
carefully. There can be no assurance that such estimates and
assumptions will prove to be correct. The forward-looking
statements contained in this press release are made as of the date
of this press release, and Pathway expressly disclaims any
obligation to update or alter statements containing any
forward-looking information, or the factors or assumptions
underlying them, whether as a result of new information, future
events or otherwise, except as required by law.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Not for distribution to U.S. Newswire Services or for
dissemination in the United
States. Any failure to comply with this restriction may
constitute a violation of U.S. Securities laws.
SOURCE Pathway Health Corp.