CRRX CareRX Corporation

CareRx Corporation (“CareRx” or the “Company”) (TSX:CRRX), Canada's leading provider of pharmacy services to seniors communities, announced today that it has entered into a definitive agreement to acquire the Long-Term Care Pharmacy Division (the “LTC Pharmacy Division”) of Medical Pharmacies Group Limited (“MPGL”), which is comprised of 18 fulfillment centres serving approximately 36,000 residents of long-term care, assisted living and other congregate care settings across Ontario, Alberta and British Columbia (the “Acquisition”). Upon closing, CareRx expects to service over 88,000 residents through a significantly strengthened national fulfillment network.

Acquisition Highlights

• Adds approximately $150 million in annual revenue and is expected to be immediately accretive with significant synergies
• Continues CareRx’s development as Canada’s leading seniors pharmacy provider with more than 88,000 beds
• Increased scale will allow CareRx to capitalize on favourable industry dynamics including a rapidly growing seniors population
• $75 million1 acquisition price to be financed through offering of subscription receipts and refinancing of existing credit facilities

“The acquisition of MPGL’s LTC Pharmacy Division is our most transformational acquisition to date and will increase the number of homes and residents we service by approximately 70%,” said David Murphy, President and Chief Executive Officer of CareRx. “MPGL’s LTC Pharmacy Division has a reputation for service and clinical excellence and, as part of CareRx, will provide strategic benefits that we are confident will further strengthen our service offering to our customers, while enhancing our future growth opportunities. With our proven track record of integrating acquisitions, we expect to generate significant operational synergies that will contribute to a meaningful expansion of our EBITDA margin.”

Mr. Murphy added, “The number of Canadians living in seniors housing is expected to more than double over the next 15 years. This Acquisition significantly expands our national platform, which we believe will be increasingly valued by home operators as they look to partner with a pharmacy provider that can support the highest levels of service, quality and care for their residents.”

“We are pleased to announce the signing of the sale of our LTC Pharmacy Division. We believe that this transaction is in the best interest of our stakeholders and that the combined business will be well positioned to provide outstanding service to its customers,” said John Leader, Chief Executive Officer of MPGL.

The Acquisition is expected to be immediately accretive to CareRx’s earnings, contributing run-rate revenue of approximately $150 million to CareRx on an annualized basis, with the integration of the two businesses expected to result in significant synergies, based on CareRx’s history of successful integrations.

The consideration for the Acquisition is comprised of $70 million of cash and the issuance of 1 million common shares of CareRx (“Common Shares”), payable at closing of the Acquisition (the “Acquisition Closing”). The Acquisition is expected to close in late June or early July of 2021, subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals, including the approval of the applicable college of pharmacies and the Competition Bureau.

Acquisition Financing

Bought Deal Private Placement of Subscription Receipts: CareRx has entered into an agreement with Eight Capital and Cormark Securities Inc. (the “Co-Lead Underwriters”), on behalf of a syndicate of underwriters (together with the Co-Lead Underwriters, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase, on a “bought deal” basis, 8,911,000 subscription receipts of the Company (the “Subscription Receipts”) at a price of $5.05 per Subscription Receipt (the “Issue Price”) for aggregate gross proceeds of approximately $45 million (the “Bought Deal Financing”).

Concurrent Private Placement to Yorkville Asset Management: CareRx has also entered into a binding term sheet with Yorkville Asset Management Inc. (for and on behalf of certain managed funds, “Yorkville”) pursuant to which Yorkville will purchase 1,980,200 Subscription Receipts at the Issue Price, on a non-brokered basis, for aggregate gross proceeds of approximately $10 million (the “Non-Brokered Financing” and, together with the Bought Deal Financing, the “Equity Financings”).

Refinancing of Existing Credit Facilities: The Company has entered into binding commitment letters with Crown Capital Partners Inc. (including certain entities and funds controlled by it, “Crown Capital”) and Yorkville, pursuant to which Crown Capital and Yorkville will amend their existing credit facilities with the Company and advance $39 million of total incremental indebtedness to CareRx, to fund a portion of the cash closing price for the Acquisition.

Summary of the Equity Financings

The aggregate gross proceeds from the Equity Financings are expected to be approximately $55 million, which will be used by the Company to fund a portion of the cash purchase price payable in connection with the Acquisition.

In addition, the Company will grant the Underwriters an option (the "Underwriters’ Option") to sell an additional 1,336,650 Subscription Receipts at the Issue Price for additional gross proceeds of up to approximately $6.75 million which is exercisable up to 48 hours prior to the closing date of the Equity Financings. To the extent the Underwriters’ Option is exercised, Yorkville will have an option to purchase up to an additional 297,030 Subscription Receipts at the Issue Price for additional gross proceeds of up to approximately $1.5 million on similar terms as the Underwriters’ Option.

The gross proceeds from the Equity Financings, net of the expenses of the Underwriters and 50% of the commissions payable to the Underwriters, will be placed into escrow and will be released upon the satisfaction of certain conditions, including CareRx shareholder approval of the Equity Financings (as described below) and completion of the Acquisition. Upon satisfaction of such escrow release conditions, each Subscription Receipt will be exchanged for one Common Share, subject to certain adjustments in the event that the Acquisition Closing does not occur by certain prescribed dates, in which case each Subscription Receipt will be exchanged for up to 1.1 Common Shares.

The Equity Financings are expected to close on or about May 19, 2021 and are each subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange (the “TSX”). Under applicable TSX policies, the Company is required to obtain shareholder approval for the Equity Financings, including disinterested shareholder approval, prior to the exercise of the Subscription Receipts into Common Shares. The Company expects to convene an annual and special meeting of shareholders (the “Meeting”) in early June at which it will seek shareholder approval of the Equity Financings. In connection therewith, certain significant shareholders of CareRx representing, in the aggregate, approximately 42% of the Common Shares entitled to vote at the Meeting, have signed voting support agreements under which they have committed to approving the Equity Financings at the Meeting.

The Subscription Receipts to be issued under the Equity Financings and the Common Shares exchanged for the Subscription Receipts upon the Acquisition Closing will be subject to a hold period in Canada expiring four months and one day from the closing date of the Equity Financings.

Summary of the Refinancing of Existing Credit Facilities

The Company has signed a binding commitment letter with Crown Capital, on behalf of a syndicate of lenders, pursuant to which Crown Capital will advance new credit facilities to the Company of $60 million (the “Senior Facility”). $32 million of the Senior Facility will be used to pay a portion of the cash closing price for the Acquisition and related transaction costs, with the remaining $28 million being used to repay the existing term loan with Crown Capital in full. The Senior Facility will be advanced contemporaneously with the Acquisition Closing. Interest on the Senior Facility will accrue at an annual rate of between 7.5% and 9% based on applicable financial covenants, and the Senior Facility will mature on the 5th anniversary of the Acquisition Closing, subject to certain prepayment rights in favour of the Company.

The Company has also signed a binding commitment letter with Yorkville pursuant to which Yorkville will increase the principal amount outstanding under its existing subordinated facility with the Company (the “Subordinated Facility”) by $6 million, which Subordinated Facility will be used to fund working capital needs of the Company. The credit agreement for the Subordinated Facility will also be amended to reduce the interest rate from 12% to 10.5% per annum, and the maturity date of the Subordinated Facility will be extended until the 5th anniversary of the Acquisition Closing, subject to certain prepayment rights in favour of the Company. The amendments to the Subordinated Facility are not conditional on completion of the Acquisition, and are expected to become effective on or about May 1, 2021.

The Subordinated Facility constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 – Protection of Minority Holders in Special Transactions (“MI 61-101”) as Yorkville is a control person of CareRx and is therefore a “related party” of CareRx under MI 61-101. The Company has relied on the exemption from the minority approval requirement contained in section 5.7(1)(f) of MI 61-101 in respect of the Subordinated Facility as the Subordinated Facility has been obtained from Yorkville on reasonable commercial terms that are not less advantageous to the Company than if the Subordinated Facility was obtained from a person dealing at arm’s length with the Company and is not convertible or repayable in Common Shares. A material change report in respect of the Acquisition, the Equity Financings, the Senior Facility and the Subordinated Facility will be filed as required, but is not expected to be filed 21 days in advance of the closing of the Subordinated Facility due to the Company’s immediate need for the proceeds of the Subordinated Facility. The disinterested members of the Company’s Board of Directors have unanimously approved the Subordinated Facility.

Advisors and Counsel

In connection with the Acquisition, Origin Merchant Partners and BDO Canada LLP acted as the financial advisors to CareRx and Stikeman Elliott LLP acted as legal advisor. Richter LLP acted as the financial advisor to MPGL and Torys LLP acted as legal advisor. Bennett Jones LLP is acting as legal counsel to the Underwriters. Eight Capital and Cormark Securities Inc. acted as strategic advisors to CareRx.

The securities described in this press release have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This press 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 State in which such offer, solicitation or sale would be unlawful.

ABOUT CARERX

CareRx is Canada's leading provider of pharmacy services to seniors communities. We serve over 52,000 residents in over 900 seniors and other congregate care communities (long-term care homes, retirement homes, assisted living facilities, and group homes). We are a national organization with a large network of pharmacy fulfillment centres strategically located across the country. This allows us to deliver medications in a timely and cost-effective manner and quickly respond to routine changes in medication management. We use best-in-class technology that automates the preparation and verification of multi-dose compliance packaging of medication, providing the highest levels of safety and adherence for individuals with complex medication regimes. We take an active role in working with our home operator partners to promote resident health, staff education, and medication system quality and efficiency.

ABOUT MEDICAL PHARMACIES

MPGL is one of Canada’s leading continuing care pharmacies, providing services and support to complex continuing care residents and clients across Ontario, Alberta and British Columbia. MPGL also provides specialty pharmacy services and support to physician and specialist clinics, hospitals and other care institutions. Through its subsidiary Ontario Medical Supply (www.oms.ca), MPGL also offers a comprehensive and complementary suite of medical products. For more information on MPGL, please visit www.medicalpharmacies.com.

FORWARD-LOOKING STATEMENTS

This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the Company’s business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events, including in respect of the Acquisition, the Equity Financings, the Senior Facility and the Subordinated Facility. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate” or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include the Company's exposure to and reliance on government regulation and funding, the Company's liquidity and capital requirements, exposure to epidemic or pandemic outbreak, the highly competitive nature of the Company's industry, reliance on contracts with key customers and other risk factors described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change.

For more information, visit www.carerx.ca or contact:

David MurphyPresident & Chief Executive OfficerCareRx Corporation416-927-8400

Lawrence ChamberlainInvestor RelationsLodeRock Advisors416-519-4196lawrence.chamberlain@loderockadvisors.com

_______________________1 Purchase Price consideration comprised of $70 million of cash and the issuance of 1 million common shares of CareRx.