Mr. Paul Cataford reports

LOOP ENERGY AND H2 PORTABLE ANNOUNCE MERGER TRANSACTION TO CREATE LEADING HYDROGEN INDUSTRIAL EQUIPMENT COMPANY

Loop Energy Inc. and H2 Portable Power Corp. Inc. have entered into an amalgamation agreement dated Feb. 9, 2024, in respect of a three-cornered amalgamation, pursuant to which H2P will amalgamate with a subsidiary of Loop, Loop will acquire all of the issued and outstanding common shares of H2P, and H2P shareholders will receive common shares of Loop. This transaction will constitute a backdoor listing of H2P under Toronto Stock Exchange policies.

H2P Portable Power is a British Columbia based industrial equipment developer of hydrogen-enabled industrial equipment designed for customers advancing decarbonization strategies and for which grid-tied or battery-only electrification does not meet their operating needs. H2P is developing modular and expandable advanced power systems integrating the technology advantages of the Loop fuel cell. Focused on high demand applications, H2P is working with recognized leaders in port operations, rail, film and construction to transform and convert legacy diesel equipment assets and power generators to clean, zero-emission hydrogen technology. Supported by a strategic relationship with product developer and scale manufacturer Tycrop Manufacturing Ltd. (Chilliwack, B.C.), H2P is launching multiple high-profile pilot projects in and around the Lower Mainland of British Columbia beginning mid-2024.

The transaction between Loop and H2P provides an unmatched platform to deliver hydrogen-enabled equipment across H2P and Loop's existing and prospective customer bases, in addition to leveraging Loop's supply of hydrogen fuel cells for industrial use cases led by customer demand.

Transaction highlights

Provided that the transaction is completed in accordance with the provisions of the amalgamation agreement (see the section on condition to completion of the transaction), the following benefits are anticipated for the combined entity following the amalgamation:

• Strong incoming team -- board and operational expertise in industrial equipment integration and sales: Led by chief executive officer Scott Mason (Tycrop), the combined entity's directors at closing are also to include Gary Teichrob (Tycrop), Ken Hallat, Greg Bay and Jim Barton:
  • Mr. Hallat -- formerly a director of Sun Rype Products and a founding director of Sleeman Breweries;
  • Mr. Bay -- founding partner of Cypress Capital Management Ltd., which has assets under management of over $4.5-billion;
  • Mr. Barton -- formerly president for Canada and Midwest at Hub International.
• Operational efficiencies: Significant cost and operational savings will be implemented immediately upon closing of the transaction, including downsizing Loop's leased real estate portfolio, selling non-core equipment and rationalizing operating expenses.
• Proven record in selling industrial solutions to customers: H2P director Gary Teichrob founded and leads Tycrop (1978), a multifaceted organization known for bringing ideas to life, serving customers with innovative industrial equipment solutions across multiple industries, and supported by 650 employees and five facilities in Canada and the United States.
• Concurrent financing: Concurrently with the transaction, H2P plans to raise approximately $15-million in equity in a brokered private placement of subscription receipts, which will provide growth capital and stability to the combined entity upon closing of the transaction.

Additionally, H2P has agreed to provide Loop $2-million in financing in February through the purchase of $500,000 of certain fixed assets and inventory of Loop and a further $1.5-million in the form of either a bridge loan or further asset purchase, at H2P's election, which financing will provide immediate improvement for Loop's balance sheet and ability to maintain operations through to the anticipated closing of the transaction.

"Hydrogen is the way, and customers are asking for solutions to replace their diesel-powered equipment. This transaction provides what the hydrogen sector in Canada and around the world is missing -- the integration of fuel cells into transformative equipment the market can begin adopting now, not in another five or 10 years. We are partnering with industry leaders and government to deliver on the promise of the zero-emissions hydrogen economy," said Scott Mason, chief executive officer of H2 Portable Power.

Transaction terms

The transaction will be carried out by way of the amalgamation under the Business Corporations Act (British Columbia). Following the completion of a share consolidation and closing of the transaction and the concurrent financing, existing shareholders of Loop will own approximately 9.0 per cent to 9.6 per cent of the combined entity shares and existing shareholders of H2P will own approximately 60.5 per cent to 62.0 per cent of the combined entity shares on a fully diluted basis. Investors in the concurrent financing are expected to own 28.4 per cent to 30.5 per cent of the combined entity shares on a fully diluted basis.

Combined entity shares held by the principals of the combined entity may be held in escrow pursuant to the terms of an escrow agreement and will be released over a period of 18 months in accordance with the terms of such escrow agreement, all as prescribed by the TSX's escrow policy statement.

Deal protection measures/fiduciary out

The amalgamation agreement contains customary deal protection provisions, including non-solicitation covenants, a fiduciary out, a right to match, and a break fee payable to H2P under certain circumstances.

The company anticipates that it will file the amalgamation agreement on Loop's profile on SEDAR+ on Feb. 13, 2024.

Conditions to completion of the transaction

The transaction is subject to receipt of approval of holders of common shares of Loop at a special meeting of Loop shareholders to be called in April, 2024, with the transaction subject to approval by a majority vote of Loop shareholders and the consolidation by a two-thirds majority vote of the Loop shareholders, in each case, voting in person or by proxy at the Loop meeting. Loop and H2P are arm's-length parties, and, accordingly, the transaction is not a related party transaction under applicable securities laws.

Other conditions to completion of the transaction include: (a) approval of the amalgamation by H2P shareholders; (b) approval of the TSX to the listing; (c) approval of the Minister responsible for Pacific Economic Development Canada; (d) there being no material adverse changes in respect of either Loop or H2P; and (e) other standard conditions of closing for a transaction of this nature. There can be no assurance that all of the necessary approvals will be obtained or that all conditions of closing will be satisfied in which event the transaction may not proceed.

Concurrent financing

H2P has represented the following to Loop with respect to the concurrent financing

The concurrent financing will be in the form of a brokered private placement offering of subscription receipts to raise gross proceeds of approximately $15-million, which gross proceeds (net of certain expenses) will be held in escrow pending closing of the transaction. Each subscription receipt shall entitle the holder thereof to receive, without payment of any additional consideration or further action on the part of the holder, one H2P share upon the satisfaction or waiver of all conditions to the completion of the transaction in accordance with the terms of the amalgamation agreement.

Provided that the escrow release conditions are satisfied or waived (where permitted), the escrowed proceeds will be released from escrow to or as directed by H2P and the subscription receipts shall be automatically converted into H2P shares without payment of any additional consideration or further action on the part of the subscribers. These H2P shares will then be immediately exchanged for combined entity shares pursuant to the amalgamation on the closing of the transaction. In the event that the escrow release conditions are not satisfied, the escrowed proceeds will be returned to the holders of subscription receipts and such subscription receipts will be cancelled.

The net proceeds of the concurrent financing will be used to finance continuing operations and product and technology development for the combined entity as well as for working capital and general corporate purposes.

The concurrent financing is to be conducted in all of the provinces and territories of Canada pursuant to private placement exemptions, in the United States pursuant to available exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended, and applicable state securities laws, and in such other jurisdictions outside of Canada and the United States, in each case, in accordance with all applicable laws, provided that no prospectus, registration statement or similar document is required to be filed in such foreign jurisdiction. Completion of the concurrent financing is subject to satisfaction of customary closing conditions.

The subscription receipts to be issued in connection with the concurrent financing will be subject to an indefinite statutory hold period in Canada from the closing date of the concurrent financing; however, the combined entity shares issuable to holders of subscription receipts on conversion thereof will be freely tradable in Canada. The closing date of the concurrent financing is expected to be on or around March 15, 2024.

Transaction timeline

Pursuant to the amalgamation agreement and subject to satisfying all necessary conditions and receipt of all required approvals, the parties anticipate completion of the transaction in April, 2024.

Complete details of the transaction and disclosure in respect of H2P will be included in a management information circular of Loop that will be sent to Loop shareholders in advance of the Loop meeting.

Recommendations by the boards of directors and fairness opinion

After consultation with its financial and legal advisers, the board of directors of Loop unanimously approved the entering into of the amalgamation agreement. Raymond James Ltd. provided a fairness opinion to the board of directors of Loop, stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the consideration payable pursuant to the amalgamation is fair, from a financial point of view, to the Loop shareholders.

Advisers and counsel

Raymond James is acting as financial adviser and Osler Hoskin & Harcourt LLP is acting as legal counsel to Loop. Moneta Partners is acting as financial adviser and Gowling WLG is acting as legal counsel to H2P.

Officer changes at Loop

In conjunction with the signing of the amalgamation, Ben Nyland has resigned as president and chief executive officer of Loop. Paul Cataford has been appointed interim chief executive officer and Daryl Musselman has been appointed interim chief financial officer and chief operating officer of Loop. Mr. Cataford will remain corporate secretary and director and Mr. Nyland will remain a director of Loop.

About Loop Energy Inc.

Loop Energy is a leading designer and manufacturer of hydrogen fuel stacks targeted for the electrification of commercial vehicles such as buses and trucks as well as stationary power applications. Loop Energy's products feature the company's proprietary eFlow technology in the fuel cell stack's bipolar plates. eFlow technology enables customers to achieve superior performance and higher fuel efficiency when using Loop Energy's fuel cell stacks; this lowers operating cost for end-users while enabling OEMs (original equipment manufacturers) to achieve lower capital cost and faster time to market. Loop Energy works closely with its partners to enable the production of hydrogen electric solutions.

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