UrtheCast Corp. (TSX: UR) (“UrtheCast” or the “Company”) is pleased to announce the closing of an approximately $34 million (or approximately US$27 million) private placement of subscription receipts (the “Subscription Receipts”) previously announced on April 3, 2018 and April 10, 2018 (the “Subordinated Capital Financing”). The Subordinated Capital Financing exceeds the requirement to raise a minimum of US$25 million, which is a condition precedent to the proposed US$142 million senior secured facility for the UrtheDailyTM Constellation announced on April 3, 2018 (the “UrtheDailyTM Senior Secured Facility”, together with the Subordinated Capital Financing, the “UrtheDailyTM Financing”).

Subject to meeting the escrow release conditions described below, at least 50% of the proceeds from the Subordinated Capital Financing will be used for the UrtheDailyTM Constellation and the balance will be used for general and corporate purposes. The Company expects that approximately $21.7 million of the approximately $34.4 million in proceeds from the Subordinated Capital Financing will be available during the month of May 2018, although there can be no assurance that all of these conditions will be met during such time or at all.

Details of the Subordinated Capital Financing

The Subordinated Capital Financing includes: (i) Subscription Receipts sold through a brokered private placement co-led by Clarus Securities Inc. and Canaccord Genuity Corp. (the “Agents”) on a “best efforts” agency basis pursuant to an agency agreement dated May 3, 2018 between the Company and the Agents (the “Brokered Private Placement”); (ii) Subscription Receipts sold to certain non-Canadian purchasers directly by the Company (the “Non-Brokered Private Placement”); and (iii) Notes and Warrants   pursuant to a conditional backstop agreement dated May 3, 2018 between 1112099 B.C. Ltd. (the “Backstop Party”) and the Company (the “Backstop Agreement”). The Subscription Receipts issued under the Subordinated Capital Financing will convert into Notes and Warrants (each as defined below) once their distribution is qualified by a short form prospectus (a “Qualifying Prospectus”).

Each Subscription Receipt was issued at a purchase price of $0.35 and is convertible into a non-interest bearing, unsecured convertible note in the principal amount of $0.35 (a “Note”) and a number of Common Share purchase warrants (the “Warrants”) equal to 50% of the number of Common Shares the holder would receive if the Note were converted at the Original Conversion Price. Each Note is convertible at a conversion price of $0.32 (the “Original Conversion Price”) for a period of six years following issuance of the Note. Each Warrant is exercisable at an exercise price equal to $0.48 for a period of five years following the issuance of the Warrant.

The Company has agreed to use commercially reasonable efforts to file and obtain a receipt for a Qualifying Prospectus for each of the Brokered Private Placement and the Non-Brokered Private Placement, in each case within 45 days of closing, to qualify the distribution of the Notes and Warrants issuable under the Subordinated Capital Financing (including under the Backstop Agreement), such that the Common Shares underlying the Notes and Warrants become freely tradeable.

The proceeds from the Subordinated Capital Financing will be deposited in escrow and released to the Company as follows:

(a) approximately $5 million will be released from the investment made by SMF Investments Limited upon the definitive credit agreement (the “Credit Agreement”) for the UrtheDailyTM Senior Secured Facility being signed (the “Credit Agreement Release Condition”) (if such condition is not satisfied by May 11, 2018, this amount (together with interest) will be returned to SMF Investments Limited, unless it agrees to extend the deadline, and the corresponding Notes and Warrants will be cancelled);

(b) approximately $16.7 million will be released from the proceeds of the Brokered Private Placement upon satisfaction of the Credit Agreement Release Condition and the Qualifying Prospectus being receipted (the “Qualifying Prospectus Release Condition”) (if such conditions are not satisfied by June 15, 2018, this amount (together with interest) will be returned to the purchasers and the corresponding Subscription Receipts, or Notes and Warrants, as the case may be, will be cancelled); 

(c) approximately $5 million will be released from the investment made by SMF Investments Limited once the first drawdown conditions under the UrtheDailyTM Senior Secured Facility are satisfied (the “First Drawdown Release Condition”) (if such condition is not satisfied or the Credit Agreement is not entered into by May 11, 2018, this amount (together with interest) will be returned to SMF Investments Limited and the corresponding Subscription Receipts, or Notes and Warrants, as the case may be, will be cancelled); and

(d) approximately $7.7 million is expected to be released from the Initial Backstop Amount (as defined below) upon the First Drawdown Release Condition being satisfied.

If the failure to meet any escrow release condition results in UrtheCast being unable to satisfy the condition precedent under the Credit Agreement that a minimum of US$25 million in subordinated capital financing be raised by UrtheCast, UrtheCast will return all of the proceeds from the Subordinated Capital Financing to the purchasers.

Under the Subordinated Capital Financing, the Company issued (i) an aggregate of 76,217,260 Subscription Receipts, which are convertible into an aggregate principal amount of $26,676,040 of Notes and 41,681,302 Warrants; and (ii) the aggregate principal amount of $7,710,600 of Notes and 12,047,812 Warrants, under the Initial Backstop Amount (as defined below). In total, the Notes are convertible into 107,458,245 Common Shares, assuming conversion thereof at $0.32 per Common Share, and the Warrants are exercisable into 53,739,114 Common Shares, assuming exercise thereof at $0.48 per Common Share.

From the Closing Date until the later of (i) the 18 month anniversary of the Closing Date and (ii) the date on which no Notes remain outstanding, the holders of the Notes will have the right to participate in any offering of equity securities by the Company to permit the holders of the Notes to maintain their percentage ownership interest of equity securities in the Company as at the date immediately prior to such offering.

The subscription price for the Subscription Receipts, the conversion price for the Notes and the exercise price for the Warrants were negotiated by the Company and the Agents on an arm’s length basis. The Company relied on the financial difficulty exemption from shareholder approval for the Subordinated Capital Financing pursuant to section 604(e) of the TSX Company Manual and will apply to the Toronto Stock Exchange to rely on the financial difficulty exemption from shareholder approval for the Additional Backstop Amount (as defined below) and the Backstop Fee Warrants (as defined below) to be issued in connection with the Backstop Agreement.

As previously disclosed on April 3, 2018 and April 10, 2018, the Company has been in discussions regarding a conditional backstop commitment to support the Subordinated Capital Financing. The Company has provided its draw down notice under the Backstop Agreement for an amount of US$6 million (the “Initial Backstop Amount”) for the Subordinated Capital Financing in order to satisfy the condition precedent under the Credit Agreement that a minimum of US$25 million of subordinated capital be raised by the Company. Under the Backstop Agreement, the Backstop Party has also committed to purchase up to an additional US$6 million in Notes and Warrants (the “Additional Backstop Amount”) in two tranches of US$3 million. The Backstop Agreement is conditional on the following: (i) the execution of the Credit Agreement; (ii) the consent of the senior lender to the escrow conditions set out in the
Backstop Agreement; (iii) satisfactory due diligence by the Backstop Party; (iv) no material adverse change of the Company; (v) for the second tranche, the first tranche having been released from escrow; and (vi) for the third tranche, the second tranche having been released from escrow. The Initial Backstop Amount will be deposited and held in escrow for the Backstop Party as the sole property of the Backstop Party. The Initial Backstop Amount will be released to the Backstop Party and the Notes and Warrants will be released to the Company on the earlier of: (i) the date that is 45 days after the date of the Backstop Agreement; and (ii) the date that the first draw-down conditions in the Credit Agreement have been satisfied or waived (the “Backstop Expiry Date”). The Backstop Party may, in its sole discretion, elect to release to the Company 100% of any Backstop Amount in exchange for the release of the applicable Notes and Warrants to the Backstop Party.

As consideration for the Backstop Agreement, the Company has agreed to pay the Backstop Party a fee of US$120,000 and issue to the Backstop Party 23,617,500 Common Share purchase warrants (the “Backstop Fee Warrants”) on terms and conditions substantially similar to the Warrants, except that: (i) the number of Backstop Fee Warrants is subject to upward adjustment to such number, if higher, as is equal to 100% of the number of Common Shares that the Notes in the principal amount of US$6 million would be convertible into; and (ii) the exercise price of the Backstop Fee Warrants is equal to the lesser of $0.48 and the volume weighted price of the Common Shares for the five trading days immediately prior to the Backstop Expiry Date less $0.10, subject to receipt of all necessary approvals from the Toronto Stock Exchange (the “TSX”). The Backstop Party is also entitled to nominate two directors named by the Backstop Party to the board of directors of the Company, subject to receipt of all necessary consents and approvals (including from shareholders of the Company and the TSX).

The Backstop Party will subscribe for approximately $7,710,600 in principal amount of Notes and 35,665,312 Warrants under the Additional Backstop Amount and Backstop Fee Warrants, which upon conversion and exercise, would result in the Backstop Party holding approximately 59,760,937 Common Shares (representing 21.14% of the issued and outstanding Common Shares, assuming all of the Notes or Warrants under the UrtheDailyTM Financing are fully converted or exercised). The Backstop Party, however, has agreed that it will not convert its Notes or exercise its Warrants if such conversion or exercise would result in the Backstop Party holding more than 9.9% of the Common Shares. Accordingly, the Backstop Party will not be an insider. The Additional Backstop Amount and the Backstop Fee Warrants remain subject to TSX approval for reliance by the Company on the financial difficulty exemption described below.

The agreements governing the Subscription Receipts, Notes and Warrants and, upon entering into the Credit Agreement, the Credit Agreement will be available for viewing and download on SEDAR (www.sedar.com) and readers are encouraged to review them in their entirety. 

This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the securities to, or for the account or benefit of, persons in the “United States” or “U.S. persons” (as such terms are defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”)). The securities have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States, and may not be offered or sold to, or for the account or benefit of, persons in the United States or U.S. persons without registration under the U.S. Securities Act and all applicable U.S. state securities laws or in compliance with the requirements of an exemption from such registration requirements.

Financial Difficulty Exemption

The Company has received approval from the TSX for the closing of the Subordinated Capital Financing (including the Initial Backstop Amount) pursuant to the serious financial difficulty exemption from obtaining shareholder approval under section 604(e) of the TSX Company Manual (the “TSX Manual”). However, unless an exemption is available, shareholder approval would also be required under the TSX Manual for the Additional Backstop Amount and the Backstop Fee Warrants because (a) the Additional Backstop Amounts and the Backstop Fee Warrants is related to the Subordinated Capital Financing and 220,948,296 Common Shares will be issued or made issuable, representing 181.94% of the current issued and outstanding Common Shares, which exceeds the 25% limit permitted under Section 607(e) of the TSX Manual without shareholder approval or a obtaining an exemption therefrom, (b) the exercise price of the Backstop Fee Warrants is equal to the lesser of $0.48 and the volume weighted price of the Common Shares for the five trading days immediately prior to the Backstop Expiry Date less $0.10, which may be lower than the maximum discount to market price permitted under Section 608 of the TSX Manual without shareholder approval or obtaining an exemption therefrom, and (c) the conversion price of the Notes (which is identical to the other Notes under the Subordinated Capital Financing), may be adjusted to as low as $0.24, which is lower than the maximum discount to the market price permitted under Section 610 of the TSX Manual without shareholder approval or obtaining an exemption therefrom. Accordingly, the Company is seeking to further rely on the exemption under section 604(e) of the TSX Manual from the requirement to obtain shareholder approval for the Additional Backstop Amount and the Backstop Fee Warrants.

No insider is participating in the Additional Backstop Amount or the Backstop Fee Warrants nor is any of them related to the Backstop Party. The terms of the UrtheDailyTM Financing, including the Additional Backstop Amount and the Backstop Fee Warrants, were negotiated on an arm’s length basis. The Additional Backstop Amount and the Backstop Fee Warrants will not materially affect the control of the Company. No insiders will participate in the Additional Backstop Amount and the Backstop Fee Warrants.

The Company’s Board of Directors has determined that (a) the Company is in serious financial difficulty, (b) the Additional Backstop Amount and the Backstop Fee Warrants, which were required to obtain the Initial Backstop Amount, are designed to improve the Company’s financial situation, and (c) the terms and conditions of the Additional Backstop Amount and the Backstop Fee Warrants are reasonable for the Company in the circumstances.  There is no assurance that the TSX will approve the Additional Backstop Amount or the Backstop Fee Warrants, or any component part or aspect thereof, or the Company’s application to rely on the serious financial difficulty exemption from the requirement to obtain shareholder approval for the Additional Backstop Amount and the Backstop Fee Warrants.

As a consequence of relying on the serious financial difficulty exemption for the Subordinated Capital Financing, the TSX has informed the Company that it will place the Company under review for continued listing, which is standard practice when a listed issuer seeks to rely on this exemption.

About UrtheCast

UrtheCast Corp. is a Vancouver-based technology company that serves the rapidly evolving geospatial and geoanalytics markets with a wide range of information-rich products and services. The Company operates Earth Observation (EO) sensors in space, through its subsidiary Deimos Imaging, including two satellites, Deimos-1 and Deimos-2, to produce imagery data for partners and customers in multiple markets. UrtheCast processes and distributes imagery data and value-added products on behalf of the PanGeo Alliance, a network of seven satellite operators wit
h a combined 13 medium- and high-resolution EO sensors. UrtheCast is developing a satellite constellation designed to capture high-quality, medium- resolution optical imagery of the Earth’s entire landmass (excluding Antarctica) every day, called UrtheDaily™. UrtheCast is also developing the world’s first fully-integrated constellation of sixteen multispectral optical and SAR satellites, called OptiSAR™. Common shares of UrtheCast trade on the Toronto Stock Exchange as ticker “UR”.

For more information, visit UrtheCast’s website at www.urthecast.com.

Forward Looking Information

This release contains certain information which, as presented, constitutes “forward-looking information” or “forward-oriented financial information” within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as “anticipate”, “plan”, “explore” and “expect”, statements that an action or event “may”, “should” or “will” be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to: UrtheCast’s expected completion of the UrtheDailyTM Financing on the terms set out in this press release or at all; UrtheCast’s ability to satisfy the escrow release conditions described in this press release; UrtheCast’s ability to file and obtain a receipt for a Qualifying Prospectus; and UrtheCast’s expectations with respect to its ability to raise proceeds from a subordinated capital or equity offering sufficient to satisfy the effective date conditions or the first drawdown conditions of the UrtheDailyTM Senior Secured Facility in a timely manner. Such statements reflect UrtheCast’s current views with respect to future events. Such statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast as at the date of this press release, are inherently subject to significant uncertainties and contingencies. Many factors could cause UrtheCast’s actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others: UrtheCast’s inability to enter into definitive documentation relating to the  UrtheDailyTM  Financing, including but not limited to the Credit Agreement; UrtheCast’s inability to close the UrtheDailyTM Financing on the terms set out in this press release, the definitive documentation related thereto, or at all; UrtheCast’s ability to satisfy the Credit Agreement Release Condition on or before May 11, 2018; UrtheCast’s ability to obtain an exemption under the TSX Manual for the Additional Backstop Amount or the Backstop Fee Warrants; UrtheCast’s inability to satisfy the escrow release conditions set out in the press release; UrtheCast’s inability to file and obtain a receipt for a Qualifying Prospectus; and UrtheCast’s inability to raise proceeds from a subordinated capital or equity offering sufficient to satisfy the effective date conditions or the first drawdown condition of the UrtheDailyTM Senior Secured Facility in a timely manner or at all; as well as those factors and assumptions discussed in UrtheCast’s annual information form dated April 3, 2018, which is available under UrtheCast’s SEDAR profile at www.sedar.com. UrtheCast cautions readers that such factors and uncertainties are not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual results, performance or achievements may vary significantly from those expected. There can be no assurance that the actual strategies, results, performance, events or activities anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward- looking statements.