KELOWNA, BRITISH COLUMBIA--(Marketwire - Nov. 3, 2008) - Paragon Pharmacies Limited ("Paragon" or "the Company") (TSX VENTURE:PGN) today announced that it has reached agreement (the "Amended Transaction") with Canterbury Park Capital LP and Canterbury Park Capital (US) LP (collectively "Canterbury") which replaces the previously announced equity conversion agreement. The Amended Transaction will strengthen Paragon's balance sheet, providing the Company with approximately $13.5 million of cash proceeds and eliminating the Company's $20 million debenture. The Amended Transaction provides for a combined average issuance price of approximately $0.40 per share. Specifically:
1) a conversion of $11,550,000 million principal convertible notes ("the Converted Notes") that Canterbury holds to Paragon common shares at $0.8028 per share for an aggregate of 14,387,145 Paragon common shares;
2) accrued interest and accrued interest adjustment on the Converted Notes in the aggregate of $2,159,055, convertible at $0.35 per share for an aggregate of 6,168,729 Paragon common shares;
3) a conversion inducement fee equal to forgone interest for early conversion at the rate otherwise payable to the scheduled maturity of May 2, 2009 and an agreed interest adjustment amount, in the aggregate of $1,374,170, convertible at $0.35 per share for an aggregate of 3,926,200 Paragon common shares; and
4) a repayment to Canterbury of $8,450,000 million principal convertible notes plus accrued interest with an immediate reinvestment in Paragon common shares of these amounts by way of private placement ("the Private Placement") at $0.26 per common share. Interest of $274,923 is payable at today's date and shall accrue at the rate of $4,617 per day until the date of closing. Paragon estimates it will not exceed approximately $330,000, resulting in issuance of an aggregate of up to approximately 33,770,000 Paragon common shares.
The Amended Transaction is conditional on, among other things, approval of the TSX Venture Exchange and bank consents and waivers.
The Amended Transaction also maintains the requirement that the Paragon board be reduced to a maximum of nine in number from the current ten and that one of the non-Canterbury nominees resign, with Canterbury nominees comprising a majority of the board. It was previously announced on October 29, 2008 that an independent director had resigned in contemplation of completion of the Amended Transaction.
On completion of the Amended Transaction, Canterbury would increase its ownership in Paragon from 25.6% (undiluted) outstanding common shares to approximately 70% (undiluted).
The Amended Transaction was negotiated and unanimously recommended for approval by an independent committee of the board of directors, the members of which are Messrs. Henderson, Hihn and Martin.
