Nordex Explosives Ltd.
TSX VENTURE : NXX

Nordex Explosives Ltd.

June 15, 2016 08:20 ET

Nordex Explosives Ltd. Announces Change of Control Transaction and Going Private Transaction

KIRKLAND LAKE, ONTARIO--(Marketwired - June 15, 2016) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

NORDEX EXPLOSIVES LTD. ("Nordex" or the "Corporation")(TSX VENTURE:NXX) is pleased to announce that it has entered into a binding letter of intent (the "Binding Letter") with Société Anonyme d'Explosifs et de Produits Chimiques ("EPC"), a French public company listed on NYSE Euronext Paris (ISIN FR0000039026), with its head office in Paris, France. Pursuant to the Binding Letter, the Board of Directors has agreed to support a change of control transaction and a going private transaction with EPC (the "Transactions").

Change of Control Transaction

In connection with the first Transaction (the "Change of Control Transaction"), Nordex has agreed to enter into a subscription agreement (the "Subscription Agreement") with EPC pursuant to which Nordex will issue a total of 41,445,459 common shares of the Corporation (the "Common Shares") at price of $0.12 per share for gross proceeds of $4,973,455.08. The Subscription Agreement will contain additional terms that are customary for transactions of this nature. Nordex shares closed at $0.09 per share at the close of trading on June 14, 2016.

On the basis that EPC does not currently hold any shares of Nordex and that Nordex will not issue any Common Shares other than in connection with the Change of Control Transaction, upon completion of the Change of Control Transaction EPC will, directly or indirectly, hold 67% of the outstanding Common Shares. Under applicable policies of the TSX Venture Exchange (the "TSXVE"), a listed company must obtain shareholder approval to issue listed shares to any person if the holder thereof would become a new "control person" (as that term is defined under applicable TSXVE policies) of the listed company. A person who holds more than 20% of the issued and outstanding voting securities of the listed company is deemed to be a control person, in the absence of evidence to the contrary. The Company expects to seek shareholder approval for the Change of Control Transaction at the annual and special meeting (the "Meeting") of shareholders which has been postponed from its originally scheduled date of June 30, 2016 and will be rescheduled in due course. The Change of Control Transaction must be approved by a majority of shareholders voting in person or by proxy at the Meeting that are eligible to vote on the Change of Control Transaction. The Change of Control Transaction is also subject to the receipt of the requisite regulatory, TSXVE and corporate approvals.

Use of Proceeds

The proceeds of the Change of Control Transaction will be used for debt repayment and for working capital. In connection with the Binding Offer, EPC and Nordex have entered into debt repayment agreements with NIL Funding Corporation ("NIL") and Jograh Investments Limited ("Jograh") (the "Debt Repayment Agreements") and propose to enter into a debt repayment agreement with the Royal Bank of Canada ("RBC"). Please see the press releases of the Corporation dated August 27, 2015 and January 15, 2016 (the "Press Releases") for further information relating to the NIL debt and Jograh debt. Pursuant to the Debt Repayment Agreements, all outstanding indebtedness of the Corporation to NIL and Jograh, currently totaling approximately $2,552,595.05, plus all accrued and outstanding interest to the date of repayment, will be repaid on closing of the Change of Control Transaction. It is also contemplated that the outstanding non-revolving term facility advanced by RBC to Nordex, currently in the principal amount of $773,000 plus all accrued and outstanding interest as well as a break fee will be repaid on closing of the Change of Control Transaction. The Corporation will continue to hold a leasing facility and a revolving credit facility advanced by RBC. Pursuant to the Debt Repayment Agreements, NIL and Jograh have each agreed to surrender the warrants (the "Warrants") received in connection with their loans to Nordex; please see the Press Releases for further information regarding the terms of the Warrants.

Election of Directors

Pursuant to the Binding Letter, in the event the Change of Control Transaction is approved, management of the Corporation will propose that five (5) directors are to be elected at the Meeting, of which three (3) shall be EPC nominees. In the event the Change of Control Transaction is not approved by the shareholders at the Meeting, EPC will not have the right to nominate any of management's nominees for election as directors, and management will put forward an alternate slate consisting of six (6) nominees.

Going Private Transaction

The second transaction that is the subject of the Binding Letter is a going private transaction (the "Going Private Transaction"). EPC and Nordex propose to enter into a definitive agreement (the "Going Private Agreement") pursuant to which the parties would complete a transaction as a result of which all of the current holders of Common Shares (other than EPC) would receive $0.15 per share and EPC would become the sole shareholder of Nordex. In the event that the Going Private Agreement is completed, it is anticipated that Nordex would seek to delist the Common Shares from the TSXVE and relinquish reporting issuer status. The Going Private Transaction is subject to receipt of requisite shareholder, TSXVE, regulatory and corporate approvals. The Corporation intends to seek shareholder approvals for the Going Private Transaction at the Meeting. The Going Private Transaction must be approved by not less than 66 2/3% of the shareholders voting in person or by proxy at the Meeting eligible to vote on the Going Private Transaction.

The Binding Letter provides that the Going Private Transaction is not subject to the approval of the Change of Control Transaction. Consequently, in the event the Change of Control is approved and the Going Private Transaction is not approved, the Change of Control Transaction will proceed assuming it receives all other necessary approvals.

Pursuant to the Binding Letter, EPC is obligated to fund the entity (which may be an existing entity or one which EPC will create) which will engage in the Going Private Transaction with sufficient capital to meet its obligations with respect to the Going Private Transaction.

Closing Conditions for Change of Control Transaction, Going Private Transaction

Completion of the Transactions is subject to a number of conditions, including but not limited to the entering into of the Subscription Agreement and Going Private Transaction Agreement, as applicable (such agreements to include customary terms, conditions, representations, warranties and covenants for transactions of this nature), the execution by RBC of a Debt Repayment Agreement, the determination of a new board of directors of Nordex (to consist of five (5) directors, of which three (3) directors will be nominated by EPC and two will be nominated by the current Board), the receipt of the approval of the shareholders of Nordex at the Meeting in the required percentages, the beneficiaries of all outstanding stock options surrendering such options for no consideration, and the receipt of all necessary approvals of all regulatory bodies having jurisdiction in connection with the Transactions, including the TSXVE. Neither the Change of Control Transaction or the Going Private Transaction can close until the required conditions are satisfied or waived, and there can be no assurance that either the Change of Control Transaction or the Going Private Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular of Nordex to be prepared in connection with the Transactions, any information released or received with respect to the Transactions and/or other associated transactions may not be accurate or complete and should not be relied upon. Trading in the securities of the Corporation should be considered highly speculative.

If and when definitive agreements regarding the Change of Control Agreement and the Going Private Transaction Agreement between Nordex and EPC are executed, Nordex will issue a subsequent press release in accordance with the policies of the TSXVE containing the details of such definitive agreements.

Termination Fees

In the event that (i) the Nordex Board fails to recommend the approval of the Transactions to the shareholders of the Corporation, or changes, withdraws or modifies its recommendation; (ii) there is a misrepresentation, breach or non-performance by the Corporation of any of its obligations or covenants under the Binding Letter; or (iii) the Corporation enters into a "Acquisition Proposal" (as defined in the Binding Letter) with a third party, Nordex shall pay a termination fee to EPC in the amount of $500,000. In the event there is a misrepresentation, breach or non-performance of any obligations or covenants by EPC under the Binding Letter which would be reasonably likely to result in the failure of either the Change of Control Transaction or the Going Private Transaction, EPC shall pay a termination fee to Nordex in the amount of $200,000.

Support Agreements

The Binding Letter provides that each of the officers and directors of Nordex will enter into customary support agreements in connection with the approval of the Transactions at the Meeting. In addition, EPC has entered into a support agreement with NIL whereby NIL has agreed to vote the shares owned or controlled by it or its affiliates to support the Transactions. As of the date hereof, The Article 6 Marital Trust created under the First Amended and Restated Jerry Zucker Revocable Trust dated 4-2-07, an affiliate of NIL, owns and controls 2,930,000 Common Shares.

Other Provisions

The Binding Letter provides that Nordex shall not undertake any transactions out of the ordinary course of business without the consent of EPC, other than the Change of Control Transaction or the Going Private Transactions. Nordex has agreed to grant exclusivity to EPC until August 25, 2016. Further, EPC has agreed to make an additional $780,000 available to Nordex no later than December 31, 2016 by way of a shareholder loan. The Binding Letter shall terminate upon the occurrence of certain events, including if the shareholders do not approve the Change of Control Transaction or the nominees of EPC are not elected to the Board by August 25, 2016.

About EPC

EPC Groupe (epc-groupe.com), a pioneer in France in manufacturing and distributing industrial explosives, is one of the leading independent players in the core business of explosives and drilling and blasting in Europe, the Middle East and Africa. With total annual revenues of approximately Cdn$480,000,000 and over 1,800 employees, the EPC Groupe is currently active in more than 20 countries around the world. For over 120 years, the EPC Groupe has been committed to providing solutions for its customers: geographically, technically and commercially. This commitment is demonstrated both by its global and expanding presence as well as by its development of innovative technologies. For Olivier Obst, Chairman and CEO of EPC, "the integration of Nordex within the EPC Groupe is a synergy driven operation. It is a unique opportunity as it will both allow EPC to develop its presence in North America and will provide Nordex with a wider range of technologies, products and services in order to consolidate its existing activity and access new market segments".

About Nordex Explosives

Nordex Explosives Ltd. is a Canadian based manufacturer and distributor of explosives for the mining, quarry and construction industries since 1970. Its manufacturing operations and distribution centre is strategically located in one of the world's largest mining regions near Kirkland Lake, Ontario. Nordex is the exclusive supplier of the "Buttbuster" perimeter control explosive products in Canada. Additional information can be found at: www.nordexexplosives.com.

Disclosure Regarding Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of applicable securities legislation relating to the proposal to complete the Change of Control Transaction and the Going Private Transaction and associated transactions, including statements regarding the terms and conditions of the Transactions and the use of proceeds of the Change of Control Financing. The information about EPC contained in this press release has not been independently verified by Nordex. We use words such as "might", "will", "should", "anticipate", "plan", "expect", "believe", "estimate", "forecast" and similar terminology to identify forward looking statements and forward-looking information. Such statements and information are based on assumptions, estimates, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments as well as other factors which it believes to be reasonable and relevant. Forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied in the forward-looking statements and information and accordingly, readers should not place undue reliance on such statements and information. Although the Corporation believes, in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate, that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Corporation can give no assurance that they will prove to be correct. In evaluating forward-looking statements and information, readers should carefully consider the various factors which could cause actual results or events to differ materially from those expressed or implied in the forward looking statements and forward-looking information depending on, among other things, the risks that the parties will not proceed with the Change of Control Transaction or the Going Private Transaction and/or other associated transactions, that the ultimate terms of the Transactions, will differ from those currently contemplated, and that the Change of Control Transaction or the Going Private Transaction and/or other associated transactions will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this press release are made as of the date of this release. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Corporation, EPC, or their respective financial or operating results (as applicable).

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

Neither the TSXVE nor its Regulation Services Provider (as that term is defined in the policies of the TSXVE) accepts responsibility for the adequacy or accuracy of this release.

This press release is intended for distribution in Canada only and is not intended for distribution to United States newswire services or dissemination in the United States. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from the U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.

All information contained in this press release relating to EPC was provided by EPC to Nordex for inclusion herein. Nordex has not independently verified such information and shall bear no liability for any misrepresentation contained therein.

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