PATHWAY HEALTH CORP. ENTERS INTO DEFINITIVE AGREEMENT IN CONNECTION WITH RECAPITALIZATION AND DEBT RESTRUCTURING

/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.

Aura Balboa, Chief Financial Officer , [phone] , [email protected] or Robin Cook, Corporate Development, [phone], [email protected]