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UrtheCast Announces Commitments for CAD$35 Million Brokered Private Placement of Subscription Receipts to Enable the UrtheDaily™ Financing Package

Press Release From: UrtheCast
Posted: Tuesday, April 10, 2018

UrtheCast Corp. (TSX: UR) ("UrtheCast" or the "Company") is pleased to announce that it has been advised by Clarus Securities Inc. and Canaccord Genuity Corp. (the "Agents") that investors have committed to purchase CAD$35 million (or approximately US$27.3 million) of subscription receipts (the "Subscription Receipts") in connection with its previously announced brokered private placement (the "Subordinated Capital Financing"). The Agents have provided the Company with confirmation of commitments in excess of CAD$35 million, which are intended to satisfy a condition precedent to the closing of the previously announced US$142 million senior secured facility for the UrtheDaily™ Constellation (the "UrtheDaily™ Senior Secured Facility").

As announced on April 3, 2018, the purchase price for each Subscription Receipt is CAD$0.35. Each Subscription Receipt will be convertible into a non-interest bearing, unsecured convertible note in the principal amount of CAD$0.35 (the "Notes"), such Notes convertible at a conversion price of CAD$0.32 (the "Original Conversion Price") for a period of six years following issuance of the Notes 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, such Warrants exercisable at an exercise price equal to CAD$0.48 for a period of five years following issuance of the Warrants.

The Subordinated Capital Financing remains subject to completion and execution of definitive documentation satisfactory to the Agents and the Company, each acting reasonably and in good faith, and receipt of all required consents and approvals. The UrtheDailyTM Senior Secured Facility remains subject to the completion and execution of definitive documentation for the Subordinated Capital Financing satisfactory to the senior lenders and the Company, and finalization of definitive documentation for the UrtheDaily™ Senior Secured Facility, which is ongoing. The Subordinated Capital Financing will enable the Company to meet its immediate financing requirements. The UrtheDaily™ Financing (as defined below) remains subject to TSX approval for reliance by the Company on the financial difficulty exemption set out below.

Details of the UrtheDaily™ Financing

Subordinated Capital Financing

As announced on April 3, 2018, the Company has agreed to use commercially reasonable efforts to file and obtain a receipt for a final prospectus within 45 days of closing to qualify the Notes and Warrants issuable on the conversion of the Subscription Receipts, such that the Common Shares underlying the Notes and Warrants become freely tradeable. 

The proceeds of the Subordinated Capital Financing will be placed into escrow to be released upon the execution of finalized documentation for the UrtheDaily™ Senior Secured Facility and the qualification of the Notes and the Warrants issuable on the conversion of the Subscription Receipts under a prospectus. The Company will use the proceeds of the Subordinated Capital Financing to help finance the UrtheDaily™ Constellation and for general corporate purposes, with at least 50% of the proceeds being used for the UrtheDaily™ Constellation.

From the date of closing of the Subordinated Capital Financing until the later of (i) the eighteen 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 UrtheDaily™ Senior Secured Facility

The UrtheDaily™ Senior Secured Facility will make available to the Company US$142 million in two equal drawdowns subject to such finalized documentation and upon satisfaction of the conditions precedents described below. Details of the arrangement fee and payment terms of the UrtheDaily™ Senior Secured Facility, including a gross revenue royalty and warrants payable to the senior lenders, are set out in our news release of April 3, 2018.

As a condition precedent to the UrtheDaily™ Senior Secured Facility closing, the Company was required to raise subordinated capital of at least US$25 million. The Subordinated Capital Financing is intended to satisfy this condition. In addition, prior to drawdown the Company will be required to refinance an existing credit facility and may be required to raise additional subordinated capital financing to facilitate that refinancing.  We continue to be in discussions regarding a conditional backstop commitment to support any such subordinated financing. There can be no assurance that the conditional backstop commitment will be completed.

The availability of the first and second drawdowns will also be subject to the Company maintaining certain maximum leverage and total contracted value ratios, as ordinarily required of debt financing facilities of this type.

The Company expects to be in line to close the facility over the next two weeks, although there can be no assurance that the transaction will be closed on the terms described in the Company's April 3, 2018 release or on any other terms. On closing of the transaction, a copy of the credit agreement will be filed and will be available for viewing and download on SEDAR (www.sedar.com) and readers are encouraged to review it in its entirety.

The terms of the Subordinated Capital Financing and the UrtheDaily™ Senior Secured Facility (together, the "UrtheDaily™ Financing") were negotiated on an arm's length basis. The Subordinated Capital Financing will not materially affect the control of the Company. No insiders will participate in the Subordinated Capital Financing. Upon closing of the UrtheDaily™ Financing, SMF Investments Limited or its affiliate ("SMF") may become an insider of the Company, as SMF will be issued CAD$10,001,250 principal amount of Notes and 15,626,953 Warrants, which upon the respective conversion and exercise thereof, would result in SMF holding 46,880,859 Common Shares (representing 27.85% of the issued and outstanding Common Shares on a non-diluted basis assuming no participants in the UrtheDaily™ Financing convert or exercise their Notes or Warrants; provided, however, that SMF will be restricted from converting its Notes and exercising its Warrants if such conversion or exercise would result in a new aggregate holding of more than 19.9% of the Common Shares of the Company).

Securities Issuable and Expected Shareholdings after Completion of the UrtheDaily™ Financing

Subordinated Capital Financing

The Notes will not bear any interest and will be convertible into Common Shares at the option of the holder, at any time prior to the six-year anniversary of the issuance of the Notes at the Original Conversion Price of CAD$0.32, which represents 99% of the volume weighted average price of the Common Shares for the five trading days (the "5-day VWAP") ending on April 2, 2018 (the date prior to announcement of the transaction).  The conversion price of the Notes will be adjusted down if the Company issues Common Shares (other than issuances in connection with its stock option plan or in the ordinary course of business) below the then-existing conversion price to such lower issuance price, provided that the conversion price may not be adjusted below CAD$0.24 (which represents 74.26% of the 5-day VWAP ending on April 2, 2018). The Notes will also be subject to other customary anti-dilution protections.

Assuming the completion of the Subordinated Capital Financing for CAD$35 million, the Company will issue CAD$35 million of Notes, convertible into (i) 109,375,000 Common Shares (representing 90.06% of the issued and outstanding Common Shares as of the date hereof), assuming conversion at the Original Conversion Price; and (ii) 145,833,333 Common Shares (representing 120.09% of the issued and outstanding Common Shares as of the date hereof), assuming conversion at CAD$0.24.

Each whole Warrant will be exercisable by the holder to purchase one Common Share at an exercise price equal to CAD$0.48, which represents 148% of the 5-day VWAP as at April 2, 2018 (the "Original Exercise Price") for a period of five years following issuance of the Warrants. The exercise price of the Warrants will be adjusted down in the event that the Company issues Common Shares (other than issuances in connection with its stock option plan or in the ordinary course of business) below the then-existing exercise price to such lower issuance price, provided that the exercise price may not be adjusted below the Original Conversion Price. The Warrants will also be subject to other customary anti-dilution protections. The Warrants will be subject to early exercise, at the election of the Company, if the 5-day VWAP exceeds 250% of the Original Exercise Price for a period of at least 20 consecutive trading days. The Warrants will not be listed on any exchange.

Assuming the completion of the Subordinated Capital Financing for CAD$35 million, the Company will issue Warrants equal to 50% of the number of Common Shares the holder would receive if the Notes were converted at the Original Conversion Price, being 54,687,500 Warrants exercisable into 54,687,500 Common Shares (representing 45.03% of the issued and outstanding Common Shares as of the date hereof).

The UrtheDaily™ Senior Secured Facility

Under the UrtheDaily™ Senior Secured Facility, the Company will issue Senior Lender Warrants to the Senior Lenders, on substantially similar terms and conditions as the Warrants, as is equal to 5% of the issued and outstanding Common Shares immediately after completion of the Subordinated Capital Financing, calculated by assuming that the Notes have been converted at the Original Conversion Price and the Warrants have been exercised.

Assuming the Company enters into the UrtheDaily™ Senior Secured Facility, the Company will issue approximately 14,275,172 Senior Lender Warrants exercisable into 14,275,172 Common Shares (representing approximately 11.75% of the issued and outstanding Common Shares as of the date hereof).

UrtheDaily™ Financing

Assuming completion of the UrtheDail™ Financing, including completion of the Subordinated Capital Financing for CAD$35 million, the Company will issue CAD$35 million of Notes, convertible, in the aggregate,  into (i) 109,375,000 Common Shares (representing 90.06% of the issued and outstanding Common Shares as of the date hereof), assuming conversion at the Original Conversion Price; and (ii) 145,833,333 Common Shares (representing 120.09% of the issued and outstanding Common Shares as of the date hereof), assuming conversion at CAD$0.24.

Assuming completion of the UrtheDaily™ Financing on the terms described above, the Company will also issue approximately 68,962,672 Common Share purchase warrants, consisting of Warrants and Senior Lender Warrants, exercisable into 68,962,672 Common Shares, at each applicable exercise price, (representing approximately 56.79% of the issued and outstanding Common Shares as of the date hereof).

Assuming completion of the UrtheDaily™ Financing, including completion of the Subordinated Capital Financing for CAD$35 million of Notes, convertible, in the aggregate, into 145,833,333 Common Shares, assuming conversion at CAD$0.24, and the issuance of approximately 68,962,672 Common Share purchase warrants, consisting of Warrants and Senior Lender Warrants, exercisable into 68,962,672 Common Shares, the total potential number of Common Shares issuable under the UrtheDaily™ Financing is 214,796,005 (representing 176.87% of the issued and outstanding Common Shares as of the date hereof).

Financial Difficulty Exemption

Under the TSX Company Manual (the "Manual"), shareholder approval would be required for the UrtheDaily™ Financing as a result of (i) the number of Common Shares issuable at a discount being greater than 25% of the currently issued and outstanding Common Shares, and (ii) as a result of that fact that the conversion price of the Notes may be adjusted downward to be equal to CAD$0.24.

The Company has applied to the TSX under section 604(e) of the Manual for an exemption from the requirement to obtain shareholder approval for the UrtheDaily™ Financing. The Company's Board of Directors, who are free from any interest in the UrtheDaily™ Financing and unrelated to the parties involved in the UrtheDaily™ Financing, have authorized such application on recommendation of a special committee of the Board and have concluded that the Company is in serious financial difficulty, the UrtheDaily™ Financing is designed to improve the Company's financial situation, and the terms of the UrtheDaily™ Financing are reasonable for the Company in the circumstances.

As a consequence of relying on the serious financial difficulty exemption, 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.

Each component of the UrtheDaily™ Financing is conditional on the others, and there is no assurance that any of the UrtheDaily™ Senior Secured Facility or the Subordinated Capital Financing will be completed on the terms set out herein, or at all. Further, there is no assurance that the TSX will approve the UrtheDaily™ Financing, 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 UrtheDaily™ Financing.

The disclosure in this news release assumes an exchange rate of US$/CAD$ of 1.282.

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 with 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.

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