Paragon Pharmacies Limited

Paragon Pharmacies Limited

January 11, 2007 14:22 ET

Paragon Pharmacies Limited Announces Amended Financing Terms

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - Jan. 11, 2007) -


This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Paragon Pharmacies Limited ("Paragon" or the "Corporation") (TSX VENTURE:PGN) announced today that it has agreed to amend the terms of its previously announced financing (see media release issued on December 15, 2006) to now raise up to $4,000,000 through a private placement of units of the Corporation ("Units") at a price of $0.80 per Unit, with each Unit now being comprised of one common share and one-half of one common share purchase warrant ("Purchase Warrant"). Each whole Purchase Warrant shall now entitle the holder to acquire one common share of the Corporation for a period of 24 months from the closing date at an exercise price of $1.00 per common share. Closing of the private placement is subject to necessary TSXV approval and is now expected to occur on or about February 16, 2007. Versant Partners Inc. is acting as lead agent in respect of the financing. Closing of the financing is not contingent on completion of the transactions referred to below.

Paragon intends to use the net proceeds from the offering for acquisitions, capital expenditures, and for general corporate purposes.

Paragon has also agreed, subject to receipt of applicable TSXV and shareholder approval, among other things, to complete an additional financing with a private investment fund (the "Lender") for a combination of (i) $3,000,000 of Units at a price of $0.80 per Unit, with each Unit being comprised of one common share ("Common Share") and one-half of one Common Share purchase warrant ("Warrant"). Each whole Warrant shall entitle the holder to acquire one Common Share for a period of 24 months from the closing date at an exercise price of $1.00 per Common Share; and (ii) $20,000,000 of secured convertible debt with a 2 year term (the "Convertible Debt"), the proceeds of which are to be used by Paragon to complete future acquisitions. The Convertible Debt will pay interest at a rate of 15% and will convert into Common Shares under certain circumstances, or at the option of the Lender, at a price of $0.8028 per Common Share. Interest may be paid in additional Common Shares from treasury based on market price at the time, and additional interest, also potentially payable in Common Shares based on market price at the time, may apply if acquisitions do not meet certain financial criteria. The Convertible Debt financing will require shareholder approval, as the Lender, assuming conversion of the Convertible Debt, will acquire a substantial interest in the Corporation. Paragon anticipates that a shareholder meeting will be held on or about March 30, 2007, with closing of the financing expected in April of 2007. This Convertible Debt financing will be subject to terms and conditions customary of transactions of this nature. This financing will result in certain alternative financing fees and commissions being paid to Versant Partners Inc. and Bieber Securities Inc.

Paragon is headquartered in Kelowna, British Columbia and currently employs over 355 full and part time staff in its stores and offices. The Corporation currently owns and operates 17.5 retail pharmacies and 2 home healthcare stores in British Columbia and Alberta. Paragon also holds a minority ownership position in Catalyst Healthcare Ltd.

FORWARD-LOOKING STATEMENTS Certain information set forth in this document, including management's assessment of Paragon's future plans and operations, contain forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond these parties' control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Paragon's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Paragon will derive therefrom. Paragon disclaims any intention or obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

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