PATHWAY HEALTH, THE NEWLY INSTITUTE AND HEAL GLOBAL HOLDINGS ANNOUNCE FURTHER UPDATES IN ANTICIPATION OF COMPLETION OF PROPOSED TRANSACTION

TORONTO, May 16, 2023 /CNW/ - Pathway Health Corp. (TSXV: PHC) (Frankfurt: KL1) ("Pathway" or the "Company"), The Newly Institute Inc. ("Newly") and HEAL Global Holdings Corp. ("HEAL Global"), are pleased to announce further updates to the anticipated business acquisition, recapitalization and debt restructuring transaction pursuant to the previously announced arrangement (see press releases dated December 22, 2022, March 1, 2023, March 31, 2023 and April 27, 2023) (the "Proposed Transaction") by way of plan of arrangement pursuant to the Business Corporations Act (Alberta) (the "ABCA").

Further to its press release dated April 27, 2023, a joint information circular and proxy statement (the "Circular") and related materials have been mailed to the holders (the "Pathway Shareholders") of common shares of the Company (the "Pathway Shares") of record as of April 25, 2023 in connection with the annual and special meeting (the "Meeting") of Pathway Shareholders to be held on May 30, 2023 at 9:30 a.m. (Toronto time) at the offices of Dentons Canada LLP, Four North Boardroom, 77 King St W, Suite 400, Toronto, ON, M5K 0A1.

The Circular, form of proxy and voting instruction form, as applicable, for the Meeting contain information in respect of, among other things, the Proposed Transaction and how Pathway Shareholders may vote on the matters to be considered at the Meeting.

The Meeting is being held, among other things, to consider and if thought advisable, for the Pathway Shareholders to approve a special resolution (the "Pathway Arrangement Resolution") to approve the Proposed Transaction under Section 193 of the ABCA, involving, among other things, the acquisition by Pathway of all of the issued and outstanding common shares of HEAL and Newly (other than shares of Newly held by HEAL), all as more particularly described under the heading "The Arrangement" in the Circular and the full text of which is attached as Appendix "C" thereto.

Approval of the Pathway Arrangement Resolution requires the affirmative vote of (i) at least 66⅔% of the votes cast by Pathway Shareholders, voting together as a single class, present in person or represented by proxy at the Meeting, and (ii) a majority of the votes cast by Pathway Shareholders present in person or represented by proxy at the Meeting, excluding the votes cast in respect of the securities of Pathway held or controlled by certain individuals under the minority approval requirements for a "related party transaction" under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101").

As a reporting issuer, Pathway is subject to MI 61-101 which regulates transactions that raise the potential for conflicts of interest, including transactions involving parties who are "related parties" to the reporting issuer, as that term is used in MI 61-101. Among other things, MI 61-101 requires, in certain instances, that unless an exemption is available or discretionary relief is granted by applicable securities regulatory authorities, a reporting issuer proposing to carry out a related party transaction is required to: (i) engage an independent valuator to prepare a valuation of the affected securities (and any non-cash consideration being offered therefore) and provide to the holders of the affected securities a summary of such valuation (the "Formal Valuation Requirement"); and (ii) obtain the approval of a majority of the "minority" shareholders (as that term is used in MI 61-101) (the "Minority Approval Requirement").

In accordance with MI 61-101, Pathway is entitled to rely on the exemption from the Formal Valuation Requirement of the instrument for any "related party transaction" by virtue of the exemption contained in section 5.5(b) (Issuer Not Listed on Specified Markets), as no securities of Pathway are listed or quoted on the Toronto Stock Exchange, Aequitas NEO Exchange Inc., the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market, or a stock exchange outside of Canada and the United States.

The plan of arrangement, however, includes a number of steps which are considered to be "related party transactions" under MI 61-101 and which are subject to the Minority Approval Requirement, including the issuance of securities of Pathway pursuant to: (i) one or more equity, debt or convertible debt private placement financings (the "Private Placement") to be completed concurrent with completion of the Arrangement for aggregate gross proceeds of not less than $10 million, which will include a non-brokered private placement for a minimum aggregate proceeds of $500,000, to be subscribed for by management of Pathway and other Pathway associates and related parties; (ii) a restructuring advisory fee agreement between Pathway and Avonlea-Drewry Holdings Inc. ("ADH"), a significant shareholder of Pathway (the "Restructuring Advisory Fee Agreement"); (iii) a secured debt conversion agreement (the "Secured Debt Conversion Agreement") between Pathway and ADH which together with the Restructuring Advisory Fee Agreement would result in the maximum issuance of 166,666,667 Pathway shares; (iv) a one-time fee of $1,140,510 (the "Deal Extension Fee") to be paid by Pathway to HEAL pursuant to the letter extension agreement dated February 28, 2023 between Pathway and HEAL ("Deal Extension Agreement"); and (v) the conversion of Pathway's $1.25 million secured, convertible promissory grid note issued to ADH, including all accrued but unpaid interest (the "Grid Note", and collectively, the "Related Party Transactions"). Therefore, by approving the Pathway Arrangement Resolution (and assuming satisfaction of the Minority Approval Requirement), Pathway Shareholders will also be approving the Related Party Transactions. Additional details regarding each of the Related Party Transactions is set forth in the Circular.

In respect of the issuance of the Grid Note, and the related 25 million detachable common share purchase warrants (the "Warrants") (see press releases dated February 3, 2023, February 9, 2023, February 17, 2023 and March 28, 2023) (the "Grid Note Private Placement") Pathway would like to clarify that it relied on the exemption from the Minority Approval Requirement contained in section 5.7(1)(e) (Financial Hardship) (the "Minority Approval Financial Hardship Exemption") of MI 61-101 on the basis that: (i) Pathway was (and continues to be) in serious financial difficulty; (ii) the Grid Note Private Placement was designed to improve the financial position of Pathway; (iii) paragraph 5.5(f) (Bankruptcy, Insolvency, Court Order) of MI 61-101 was not applicable; and (iv) Pathway's board of directors, acting in good faith, and at least two-thirds of Pathway's independent directors, acting in good faith, determined that: (A) Pathway was (and continues to be) in serious financial difficulty and the Grid Note Private Placement was designed to improve the financial position of Pathway, and (B) the terms of the Grid Note Private Placement were reasonable in the circumstances.

The conversion and issuance of Pathway Shares to be issued pursuant to the Related Party Transactions will only occur in connection with closing of the Proposed Transaction. If the Proposed Transaction is not completed, (i) the Private Placement will not proceed, (ii) no fee will be payable pursuant to the Restructuring Advisory Agreement, (iii) the Grid Note and the debt to which the Secured Debt Conversion Agreement relates (the "Debt") will remain due and owing, and (iv) the Deal Extension Fee will be payable in cash. In the event that the Pathway Arrangement Resolution is not approved and the Minority Approval Requirement is not satisfied, in respect of the Deal Extension Fee, the Grid Note and the Debt, Pathway is entitled to rely on the exemption from the Minority Approval Requirement contained in subsection 5.7(1)(f) (Loans to Issuer, No Equity or Voting Component) of MI 61-101 as: (i) these transactions are loans obtained by Pathway from a related party on reasonable commercial terms that are not less advantageous than if the loans were obtained from a person dealing at arm's length with Pathway; and (ii) the loans created by these transactions will not be convertible into equity or voting securities or repayable as to principal or interest in equity or voting securities.

It is Pathway's expectation that if the Proposed Transaction is not completed, ADH will enforce its security to realize upon payment of the Debt as a consequence of Pathway's financial condition, and would include payment of the Grid Note and the Deal Extension Fee as part of those proceedings. In the event this occurs, it is anticipated that Pathway Shareholders would not realize any return on their investment.

About Pathway

Pathway is an integrated healthcare company that provides products and services to patients suffering from chronic pain and related conditions. The Company owns and operates eleven community-based clinics across four provinces where its team of health professionals work together to help patients through a variety of evidence-based approaches and products, including medical cannabis. Pathway's patient care programs utilize an interdisciplinary approach that is guided by trained pain specialists, physical and occupational therapists, psychologists, nurses, and other healthcare providers. Pathway is also the leading provider of medical cannabis services in Canada and has established itself as the leading partner with national and regional pharmacy companies for the delivery of medical cannabis services to their customers. Pathway is working with several pharmacy companies on the development of Cannabis Health Products (CHPs) for OTC product distribution through retail pharmacy locations across the country following anticipated changes to the Cannabis Act (Canada).

For more information, visit Pathway's website: www.pathwayhealth.ca 

About The Newly Institute

The Newly Institute Inc., a Calgary, Alberta based private company, believes mental health treatment is in drastic need of a paradigm shift. Their vision is to provide long-lasting change within the industry, community and patients. They have pioneered an intensive bio-psycho-social-spiritual treatment model that can be supplemented by medically managed psychedelic-assisted therapies when appropriate. Their medical professionals help patients overcome deeply embedded traumas, addiction and pain that are preventing them from living fully in their everyday lives. While their programs are based on evidence and data, the approach remains personal as it is vital that people feel safe as together the patient and The Newly do the difficult work necessary to achieve wellness.

The company strives to become Canada's largest and premier operator of inter-disciplinary mental health clinics. They currently operate clinics in Calgary, Fredericton, and Edmonton with additional locations planned across Canada.

For more information, visit The Newly Institute's website: www.thenewly.ca

About HEAL

HEAL, a privately held company existing under the laws of the Province of Alberta, was established with the goal of becoming a global leader in personalized, curated healthcare.

Cautionary Note Regarding Forward Looking Statements

This news release contains forward–looking statements and forward–looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward–looking statements or information. Forward–looking statements and information are often, but not always, identified by the use of words such as "appear", "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. More particularly and without limitation, this news release contains forward-looking statements and information concerning the Proposed Transaction (and matters relating thereto); the timing of the Meeting (and matters related thereto); the completion of the Proposed Transaction; the terms and completion of the Private Placement and Pathway's outlook in the event the Proposed Transaction is not approved by Pathway Shareholders. The forward-looking statements and information are based on certain key expectations and assumptions made by the Company. Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable in the circumstances, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties, include, but are not limited to receipt of the requisite HEAL, Pathway and Newly shareholder and securityholder approvals and other necessary approvals, and the Proposed Transaction not completing as proposed or at all. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. The Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law or the TSX Venture Exchange.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this Press Release. The TSX Venture Exchange Inc. has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release.

SOURCE Pathway Health Corp.

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