TORONTO, ON, July 29, 2022 – Pathway Health Corp. (TSXV: PHC) (Frankfurt: KL1) (“Pathway” or the “Company“) announces that it has entered into an agreement (the “Credit Agreement”) with the Company’s largest indirect beneficial shareholder Avonlea-Drewry Holdings Inc. (the “Lender“) to establish a $3.5 million credit facility (the “Facility”) (inclusive of all amounts advanced under the Company’s bridge loan announced on May 27, 2022). The Facility has a term of two years (the “Term”), is secured against all of the assets of the Company, pledges of the shares of the Company’s subsidiaries, and is supported by guarantees from the Company’s subsidiaries Pathway Health Services Corp., 2563367 Ontario Limited, Pathway Healthcare Technologies Corp. and Slawner Ortho Ltee. Principal amounts outstanding under the Facility from time to time will bear interest at the greater of: (i) 12% per annum; or (ii) a variable rate per annum benchmarked to the Bank of Canada prime rate as at May 1, 2022 (which, for certainty, was 3.20% (the “Prime Rate”) plus 8.8%. An amount equal to 2% of the aggregate principal amount outstanding as at the day immediately preceding the first and second anniversaries of the date of the Credit Agreement will be added to the principal amount outstanding under the Credit Facility. Additionally, an annual work fee equal to 1% of the aggregate principal amount outstanding as at the day immediately preceding the first and second anniversaries of the date of the Credit Agreement will be added to the principal amount outstanding under the Credit Facility.
The Company may draw on the available proceeds of the Facility and repay without penalty from time to time during the Term, and intends to use available proceeds for general working capital and potential future acquisition purposes. The Credit Agreement contains certain other customary financial and other covenants, and will be made available on the Company’s SEDAR profile at www.sedar.com.
The Facility is not subject to any bonuses, including cash bonuses, future bonuses, or bonus of common shares in the capital of the Company. The Lender is a company of which Mr. Michael Steele, Chairman of Pathway, and Ms. Alison Wright, a director of the Company, are directors, officers and shareholders (the “Insider Position“). Entering into of the Facility between the Corporation and the Lender is considered to be a “related party transaction” as defined under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“). The Company has relied on exemptions from the formal valuation and minority shareholder approval requirements contained in sections 5.5(b) and 5.7(1)(f) of MI 61-101 in respect of the Facility as the Company is not listed on certain specified markets and the Credit Facility is a loan from a related party that is on reasonable commercial terms and is not convertible into or repayable in equity of the Company. The Company did not file a material change report more than 21 days before issuing the Credit Facility as the details of the above mentioned Insider Position were included in the Company’s management information circular dated June 10, 2022.
The Credit Facility was approved by the members of the board of directors of the Company who are independent for the purposes of the Credit Facility, being all directors other than Mr. Steele and Ms. Wright, and by the Company’s disinterested shareholders at its annual and special meeting held on July 15, 2022. No special committee was established in connection with the Credit Facility, and no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto.
None of the securities sold in connection with the private placement will be registered under the United States Securities Act of 1933, as amended, and no such securities may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
For further information, please contact:
Pathway Health Corp.
Robin Cook, Corporate Development
Email: [email protected]