Itasca Capital Announces Proposed Investment in 1347 Investors LLC

TORONTO, ONTARIO--(Marketwired - Jul 18, 2016) - Itasca Capital Ltd. (TSX VENTURE:ICL) ("Itasca") is pleased to announce that it has entered into a subscription agreement (the "Subscription Agreement") with 1347 Investors LLC ("1347 LLC") to subscribe for up to 10,000,000 Class A Preference Interests of 1347 LLC (the "Class A Interests") for a purchase price of USD$1.00 per Class A Interest, for an aggregate total of up to USD$10,000,000 (the "Investment").

"We believe this is a unique opportunity to invest in Limbach via 1347 LLC," said Kyle Cerminara, Director of Itasca and Chairman & CEO of Ballantyne Strong, Inc., the beneficial owner of approximately 31% of Itasca's shares outstanding. Cerminara added, "We are very supportive of this transaction and we view it to be an excellent risk/reward for Itasca shareholders."

Terms of the Investment

1347 LLC is a privately held limited liability company formed under the laws of Delaware. The stated purpose of 1347 LLC is to invest in and hold securities of 1347 Capital Corp. ("TFSC"). TFSC is a blank check company formed in Delaware on April 15, 2014, for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more target businesses. TFSC has entered into an Agreement and Plan of Merger providing for the merger of a newly formed subsidiary of TFSC with and into Limbach Holdings LLC ("Limbach"), with Limbach surviving the merger as a wholly-owned subsidiary of TFSC (the "Limbach Merger"). 1347 LLC is the sponsor of TFSC.

The Limbach Merger

Limbach is an industry-leading specialty contractor in the areas of heating, ventilation, air-conditioning, plumbing, electrical and building controls through design and construction of new and renovated buildings, maintenance services, energy retrofits and equipment upgrades for private customers and public agencies. Limbach offers building owners this broad range of comprehensive services on new projects and existing facilities and on certain projects, helps customers identify and implement cost and energy saving solutions on new projects and existing facilities. Headquartered in Pittsburgh since 1901, the firm maintains 13 full-service branch operations in 24 major U.S. markets.

Purpose of the Investment and Itasca Investment Policy

The independent directors of Itasca have reviewed the proposed Investment and the related transaction documentation and believe that the Investment is in the best interests of Itasca and represents a timely and attractive opportunity to deploy Itasca's cash assets through an indirect interest in the Limbach Merger. In connection with the Investment, Itasca has revised its investment policy to broaden the nature of possible industries in which investments may be made. The revised investment policy will be posted under Itasca's profile on SEDAR. The board and management of Itasca will continue to look for attractive and creative opportunities for the company.

Description of Related Parties

Mr. Larry G. Swets, Jr., the Chief Executive Officer and Chairman of Itasca, is also (a) the Chief Executive Officer, director and shareholder of Kingsway Financial Services Inc. ("KFSI"), which holds approximately 31% of the issued and outstanding shares of Itasca and which indirectly controls 1347 Capital LLC ("1347 Capital"), which currently controls 1347 LLC; (b) the Chairman and shareholder of TFSC, which is controlled by 1347 LLC; and (c) the manager of 1347 Capital. In addition, Mr. John T. Fitzgerald, a director of Itasca, is also (a) an officer, director and shareholder of KFSI; (b) an investor in 1347 LLC; (c) a director and shareholder of TFSC; and (d) a manager of 1347 Capital. Further, Mr. Mike Powell, a director of Itasca, is managing director of EarlyBirdCapital, Inc., an investment bank acting for TFSC that will receive a fee in connection with the completion of the Limbach Merger. Mr. Hassan Baqar, the Chief Financial Officer and Corporate Secretary of Itasca, is currently (a) a director, Chief Financial Officer, Corporate Secretary and shareholder of TFSC; (b) the President of 1347 LLC; and (c) the manager of 1347 Capital.

In light of the foregoing, the Investment is considered a "related party transaction" under the policies of the TSX Venture Exchange (the "TSXV") and for the purposes of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Investments ("MI 61-101"). As well, the Investment constitutes a reviewable transaction under TSXV Policy 5.3 - Acquisitions and Dispositions of Non-Cash Assets. Accordingly, the completion of the Investment will be subject to receipt of TSXV approval.

The Company is relying on the formal valuation exemption in section 5.5(b) of MI 61-101 on the basis that its securities are not listed on any exchange other than the TSXV. The Company is also relying on the formal valuation exemption in section 5.5(e) of MI 61-101 and the minority approval exemption in section 5.7(c) of MI 61-101 on the basis that the interested party in respect of the Investment, KFSI, beneficially owns, or exercises control or direction over, voting securities of Itasca that carry fewer voting rights than the voting securities beneficially owned, or over which control or direction is exercised, by another security holder of Itasca that is a control person of Itasca and who, in the circumstances of the Investment, (a) is not an interested party, (b) is at arm's length to KFSI, and (c) supports the Investment.

The independent directors undertook a review of the proposed Investment, and ultimately recommended to the board of Itasca, with Messrs. Swets, Fitzgerald and Powell abstaining from voting, that it is in the best interests of the Corporation to approve the Investment.

1347 LLC Limited Liability Company Agreement Terms

In connection with the Investment, Itasca entered into an amended and restated limited liability company agreement by and among the existing members of 1347 LLC, which governs, among other things, the rights of the members of 1347 LLC and the management and governance of 1347 LLC. The initial managers of 1347 LLC shall be Larry Swets and Kyle Cerminara, in whom the management and control of 1347 LLC shall be exclusively vested. A manager of 1347 LLC may be removed or replaced at any time, with or without cause, upon the approval of holders of 2/3 of the outstanding interests in 1347 LLC.

The Class A Interests in 1347 LLC (100% of which will be held by Itasca after completion of the Investment) will rank senior to all classes and series of units in 1347 LLC outstanding at the time of issuance of the Class A Interests. 1347 LLC shall not issue any other units or securities convertible into units of 1347 LLC that rank senior to or pari passu with the Class A Interests without consent of the holders of a majority of the Class A Interests. For so long as any Class A Interests are outstanding, 1347 LLC will not repurchase, redeem or retire any units of 1347 LLC other than the Class A Interests. Commencing on the date that is five years from the date of issuance of the Class A Interests and on each one-year anniversary of such date thereafter, holders of at least a majority of the then issued and outstanding Class A Interests may request 1347 LLC to redeem their units at a price equal to $1.00 per Class A Preference Unit, plus an accrued amount equal to 1% per month, whether declared or not (the "Preferential Accrual"), such amount to be paid by 1347 LLC at its option in cash or with assets of equivalent value (as determined by the board of directors). The holders of Class A Interests shall have a preference upon liquidation over all holders of units of any other class of 1347 LLC ranking junior for an amount equal to $1.00 per Class A Preference Unit plus the Preferential Accrual, and such amount shall be paid before any amount shall be paid or any assets distributed to holders of units of 1347 LLC ranking junior as to the return of capital to the Class A Interests, and thereafter, once distributions have been made on all of the other outstanding classes of units, 44.44% of any balance to the holders of Class A Units.

The Company did not file a material change report at least 21 days prior to the anticipated date of completion of the Investment due to the timing of finalizing the terms of the Investment and the anticipated closing date of the Limbach Merger, being July 21, 2016.

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

Forward Looking Information

Certain information contained in this news release constitutes forward looking information. All information other than information of historical fact is forward looking information. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "predict" and "potential" and similar expressions are intended to identify forward looking information. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking information. No assurance can be given that this information will prove to be correct and such forward looking information included in this news release should not be unduly relied upon. This information speaks only as of the date of this news release. Such forward looking information includes, among other things, statements or information relating to the terms and completion of the Investment and the Limbach Merger and any plans in respect of Itasca's future prospects or activities.

With respect to forward looking information contained in this news release, assumptions have been made regarding, among other things: the approval of the TSXV in connection with the Investment; and the conditions to the Limbach Merger being satisfied or waived.

Actual results could differ materially from those anticipated in the forward looking information contained in this news release as a result of certain risk factors, including: the risk that the necessary regulatory and other approvals required to complete the Investment and the Limbach Merger will not be obtained.

The forward looking information included in this news release is expressly qualified by this cautionary statement and is made as of the date of this news release. The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.

Contact

Itasca Capital Ltd.
Larry G. Swets, Jr.
Chief Executive Officer
630-290-2432