Mr. Mark Bamford reports

ESTEC SYSTEMS CORP. ENTERS INTO LETTER OF INTENT FOR A GOING PRIVATE TRANSACTION

ESTec Systems Corp. has entered into a letter of intent with 2000285 Alberta Ltd. (AcquisitionCo), an entity controlled indirectly by Anthony B. Nelson, a director, officer and shareholder of the company. The LOI sets out the non-binding intention of the parties to negotiate and enter into a definitive agreement pursuant to which AcquisitionCo would, through a series of transactions, acquire all of the issued and outstanding common shares in the capital of the company. Pursuant to the proposed transaction, shareholders of the company who are not also shareholders of AcquisitionCo (or an affiliated entity) at the time of closing of the transaction would receive 12 cents in cash for each common share held.

The transaction is anticipated to be structured as an amalgamation of AcquisitionCo and ESTec under the laws of the Province of Alberta. Provided all conditions and approvals are met, upon closing of the transaction, shareholders of ESTec immediately prior to the time of closing (other than shareholders of ESTec who are also shareholders of AcquisitionCo or its affiliates) would be entitled to receive one redeemable preferred share of the amalgamated entity for each common share held. Each redeemable preferred share would be immediately redeemed for 12 cents in cash. Shareholders of the amalgamated entity (or an affiliate thereof) following the cash distribution to minority shareholders upon closing of the transaction would consist of the Nelson family and other ESTec shareholders acting jointly and in concert with the Nelson family. It is anticipated that the interested shareholders will transfer substantially all of their common shares to AcquisitionCo (or an affiliate thereof) immediately prior to the closing of the transaction.

Under the LOI, the company and AcquisitionCo shall use their reasonable commercial efforts to negotiate a definitive agreement in respect of the transaction by Oct. 31, 2016.

Pursuant to Multilateral Instrument 61-101, the proposed transaction is a business combination, and the completion of the transaction will require simple majority approval of the company's minority shareholders. Of the 10,461,629 currently issued and outstanding common shares, interested shareholders own or control, directly or indirectly, approximately 7,726,758 common shares in aggregate, and the votes attached to such shares would be excluded for the purposes of obtaining minority shareholder approval under MI 61-101.

The board of directors of the company formed an independent special committee, consisting of David Wright and Barbara Fraser, in connection with the transaction. The special committee has retained Quantum Advisory Inc. to provide a fairness opinion with respect to whether the consideration offered under the transaction is fair from a financial point of view to the ESTec shareholders (other than AcquisitionCo or its affiliates). The special committee will review and recommend or reject that the board approve the transaction, after considering all aspects of the transaction and the outcome of the fairness opinion to be provided from the company's financial adviser. The board may proceed to approve the transaction at a later date and advise that shareholders vote in favour of the transaction after considering the recommendation of the special committee, all aspects of the transaction and the outcome of the fairness opinion to be provided from the company's financial adviser.

The acquisition price of 12 cents represents a 26-per-cent premium to the closing price of the common shares on Oct. 21, 2016, and a premium of approximately 32 per cent to the 30-day weighted-average price of the common shares on the TXV Venture Exchange up to and including Oct. 21, 2016. Following completion of the transaction, it is anticipated that the common shares will be delisted from the TSX Venture Exchange, and the company will apply to the applicable securities commissions to cease to be a reporting issuer.

The company and AcquisitionCo have agreed, on a binding basis, to a period of exclusivity commencing on the date hereof and ending on the earlier of the date the LOI is terminated or the date that a definitive agreement in connection with the transaction is executed, during which period the company will work exclusively and in good faith with AcquisitionCo in an effort to negotiate a definitive agreement and will not solicit or initiate discussions regarding any other business combination or sale of material assets. The company has also provided AcquisitionCo the right to match any unsolicited acquisition proposals.

The transaction is subject to a number of conditions, including the receipt of the required shareholder approvals and regulatory and TSX Venture Exchange approval. It is anticipated that an annual and special meeting of shareholders of the company will be held on or about Dec. 9, 2016, at which the transaction would be considered and that meeting materials in respect of such meeting will be mailed on or about Nov. 17, 2016. The transaction must be approved by 66-2/3rds per cent of all shareholders of ESTec, as well as a simple majority of the company's minority shareholders (as described herein). It is anticipated that closing of the transaction would occur within seven business days of shareholder approval and, in any event, not later than Dec. 30, 2016.

We seek Safe Harbor.