An anonymous director reports

TERAGO ANNOUNCES TRANSFORMATIVE RECAPITALIZATION PLAN

TeraGo Inc. has signed a commitment letter to effect a comprehensive recapitalization of its business and raise new capital.

New term debt facility

The company has entered into a commitment letter with EdgePoint Investment Group Inc. in respect of a 36-month term loan in the principal amount of $21-million (U.S.) to refinance the company's term debt facility (as defined herein). The new term debt facility is contingent on the satisfaction of customary conditions, including the execution of definitive loan documents, including such terms and provisions reasonably satisfactory to EdgePoint, and conditional on TeraGo securing $12-million in financing from the completion of the rights offering (as defined herein) and the concurrent private placement (as defined herein) (including a standby commitment from Cymbria Corp., for which EdgePoint acts as portfolio manager, in the amount of $4-million). The new term debt facility will be subject to an annual interest rate of 15 per cent on the annual balance of the new term debt facility, with 10 per cent payable in cash on an annual basis and 5 per cent shall be accrued to the balance of the new term debt facility and shall be payable upon maturity. Further, in connection with the new term debt facility, the lenders will be issued 2,053,411 warrants to purchase one common share in the capital of the company at the subscription price (as defined herein) for a period of 60 months.

On Sept. 29, 2022, TeraGo Networks Inc., TeraGo's wholly owned subsidiary, entered into a credit and guarantee agreement with CrowdOut Capital LLC in the amount of $20-million (U.S.). On March 31, 2025, the company, CrowdOut and Cymbria executed a second amendment to the credit and guarantee agreement, which amended certain terms of the original agreement, as amended by the first amendment to the credit and guarantee agreement dated as of May 29, 2024, among CrowdOut, Cymbria and the company relating to the company's secured debt facility. The first amending agreement served to reduce the amount of the term debt facility from $20-million (U.S.) to $19-million (U.S.) and add Cymbria to the syndicate of lenders under the term debt facility. The second amending agreement served to increase the amount of the term debt facility from $19-million (U.S.) to $21-million (U.S.) while maintaining consistency with the initial framework of the credit agreement, with the $2-million (U.S.) increase in the term debt facility financed by Cymbria.

CrowdOut and Cymbria have agreed to extend the maturity date (as defined herein) of the term debt facility to Oct. 31, 2025, pursuant to a third amendment to the credit agreement to provide additional time to close the new term debt facility.

Rights offering

As a condition precedent to the commitment letter, the company is conducting a rights offering to eligible holders of common shares. The company is issuing to the shareholders at the close of business on Sept. 23, 2025, and who are resident in a province or territory of Canada, rights to subscribe for common shares on the terms described in the rights offering circular. Each shareholder on the record date who is resident in an eligible jurisdiction will receive one right for each common share held and upon payment of the subscription price, will be eligible to receive one common share in respect of each right.

Pursuant to the rights offering, the company will issue up to 20,053,411 common shares at a price of per common share equal to a 20-per-cent discount to the company's five-day volume-weighted average trading price as at Sept. 10, 2025. The subscription price for the rights offering shall be 84 cents per common share. The rights offering is not subject to any minimum subscription level. If all rights are exercised under the rights offering, the company will raise proceeds of approximately $16.8-million.

In connection with the rights offering, the company has entered into standby purchase agreements with Cymbria and Hunsbury Capital -- Belco Special Situations Fund LP, pursuant to which the standby purchasers have agreed, subject to satisfaction or waiver of the conditions in the standby purchase agreements, to purchase up to an aggregate of $5.2-million in common shares under the rights offering. Cymbria has agreed to purchase up to $4-million of common shares pursuant to its standby commitment provided under Cymbria's standby purchase agreement, while Hunsbury has agreed to purchase up to $1.2-million of common shares pursuant to its standby commitment provided under Hunsbury's standby purchase agreement.

The standby shares (as defined in the standby purchase agreements) will be subject to a lock-up period of four months plus one day, while the rest of the securities issued pursuant to the rights offering will be freely trading after the expiry date (as defined herein).

The period during which the rights may be exercised under the rights offering will begin on the record date and will end at 5 p.m. Toronto time on Oct. 15, 2025, after which time, unexercised rights will be void and of no value. Commencing on Sept. 23, 2025, the rights will be listed on the Toronto Stock Exchange under the symbol TGO.RT and will continue to be posted for trading on the TSX until 12 p.m. Toronto time on the expiry date, at which time they will cease trading.

Shareholders who fully exercise all of their rights will be entitled to subscribe for additional common shares, if available, as a result of unexercised rights prior to the expiry time on the expiry date, subject to certain limitations as set out in the company's rights offering circular and the notice of rights offering on Form 45-106F14. Both the rights offering circular and rights offering notice will be available on SEDAR+ under the company's corporate profile on SEDAR+.

The new term debt facility is conditional on TeraGo securing $12-million in financing from the completion of the rights offering and the concurrent private placement. At this time, only $5.2-million has been currently committed in connection with the standby commitment for the rights offering. As a result, TeraGo must raise a minimum additional $6.8-million from the concurrent private placement and the rights offering to close the recapitalization transactions. If TeraGo does not raise this additional amount, the standby purchase agreements will be terminated. If TeraGo does not receive the funds from the standby purchasers pursuant to such termination, the rights offering will not be completed. In addition, if the rights offering were not to be completed, although any subscription payments paid in connection with the exercise of rights would be returned promptly to subscribers by the subscription agent without interest or deduction, any person who had purchased rights in the market would lose the entire purchase price paid to acquire such rights. If the recapitalization transactions were to be terminated, TeraGo would have limited cash resources and anticipates that it would not have sufficient capital to repay the term debt facility on the maturity date. The recapitalization transactions are not expected to have any effect on control of TeraGo.

The company intends to close the rights offering on Oct. 15, 2025, or such other date or dates as the company may determine and is subject to certain conditions, including, but not limited to, the receipt of all necessary approvals including the approval of the TSX.

Concurrent private placement

Concurrent with the rights offering, the company also intends to complete a non-brokered private placement of common shares for additional gross proceeds of up to $5.5-million, at a price per common share equal to the subscription price. Pursuant to the concurrent private placement, it is expected that an additional 6,547,619 common shares will be issued and outstanding, representing 32.65 per cent of the current issued and outstanding number of common shares. The common shares offered pursuant to the concurrent private placement will be offered to persons resident in Canada who qualify as accredited investors under National Instrument 45-106, Prospectus Exemptions, and may be offered to persons who reside outside of Canada who qualify under prospectus exemptions in those jurisdictions.

The company has retained Origin Merchant Securities Inc. as its exclusive financial adviser in connection with the recapitalization transactions. At closing, the company will pay customary fees to Origin from the gross proceeds from the new term debt facility and the concurrent private placement.

The company expects insider participation from directors and officers to represent less than 2 per cent of the concurrent private placement.

The company intends to use the proceeds of the rights offering, the transactions contemplated by the standby purchase agreements and the concurrent private placement to finance capital expenditures, other related transaction fees and expenses, and general corporate working capital purposes.

All securities issued in connection with the concurrent private placement will be subject to a statutory hold period of four months plus one day from the date of issuance in accordance with applicable securities legislation.

Upon completion of the rights offering and the concurrent private placement, assuming all rights are exercised and the concurrent private placement is fully subscribed, the company will issue 26,601,030 common shares, representing 132.65 per cent of the current issued and outstanding number of common shares.

The recapitalization transactions are all subject to TSX approval.

Application for exemptive relief

The company also wishes to announce that it has submitted a financial hardship exemption application (from securityholder approval) for certain transactions provided for in Subsection 604(e) of the TSX company manual for the recapitalization transactions, on the basis that the company is in serious financial difficulty and the recapitalization transactions are designed to address these financial difficulties in a timely manner.

The maximum amount of interest consideration and warrants payable to Cymbria, an insider and the company's largest shareholder, under the new term debt facility is approximately $14,052,603 (assuming an exchange rate of 1.38 to U.S. dollars) and 2,053,411 warrants, respectively. As the new term debt facility and the concurrent private placement will result in the issuance of consideration to insiders of the company in an amount greater than 10 per cent of the market capitalization of TeraGo and greater than 25 per cent of the number of common shares outstanding, respectively, disinterested shareholder approval of such issuances would be required pursuant to subsections 604(a)(ii) and 607(g)(i) of the TSX company manual. The company's reliance on the financial hardship exemption also applies to the fixing of the subscription price for the rights offering, the subscription price for the concurrent private placement. and the exercise price of the warrants before disclosure of the concurrent private placement and the new term debt facility. The rights offering, the concurrent private placement and the new term debt facility are interrelated transactions and cross-conditional, each dependent on completion of the others.

As Cymbria (acting at the direction of its portfolio manager, EdgePoint) is not considered a disinterested shareholder for the purposes of securities laws, it would not be entitled to vote in respect of the requisite approvals under Subsection 604(a)(ii) and Subsection 608 (a)(ii). For further clarity, the warrants are priced below the market price and would not be acceptable under Subsection 608 without reliance on the financial hardship exemption. As of the date hereof, Cymbria holds 4,706,715 common shares and 854,100 warrants, each exercisable to purchase one common share. Cymbria is the only entity that is anticipated to hold more than 10 per cent of the issued and outstanding common shares upon completion of the recapitalization transactions, and it may hold up to 9,468,619 common shares at that time.

Management and the board of directors of the company have assessed and evaluated various opportunities to raise capital, and, in light of the significant capital requirements of the company and the close nexus to the maturity date of the term debt facility, the company does not have time to seek securityholder approval for the recapitalization transactions and must rely on the financial hardship exemption in these circumstances.

The board established a special committee of independent directors, free from any material interest in the recapitalization transactions and unrelated to the parties to the recapitalization transactions, to consider and assess the company's financial situation and the company's intention to file the financial hardship application with the TSX for the financial hardship exemption. The recapitalization transactions are designed to improve the company's financial situation, and the special committee has determined that the recapitalization transactions are reasonable for the company, under its current circumstances.

The special committee has considered and reviewed the circumstances currently surrounding the company and the recapitalization transactions, including, among other factors: the company's current financial difficulties and immediate capital requirements; the lack of alternative financing arrangements available; and the fact that the recapitalization transactions are the only viable financing option at the present time. The special committee has considered and assessed the company's financial situation and the proposed application for the financial hardship exemption and made a unanimous recommendation to the board that the company make the financial hardship application to the TSX. The board, upon the recommendation of the special committee, has determined that: (i) TeraGo is in serious financial difficulty; (ii) the recapitalization transactions are designed to improve TeraGo's financial situation; and (iii) based on the determination of the special committee, the recapitalization transactions are reasonable for TeraGo in the circumstances.

The current financial difficulties are directly linked to amounts owing under the term debt facility. On Sept. 29, 2025, the term debt facility becomes due and payable, and TeraGo still owes $22,008,833, including principal, interest and fees under the term debt facility. The company is not currently generating sufficient cash from its operations to make payments owed under the term debt facility and to otherwise meet its financial and non-financial obligations under the credit agreement. The company has pursued a number of other financing alternatives and other opportunities, all designed to improve the company's distressed financial condition and ensure its continuing viability as a going concern, and has been unable to bring any such alternatives or opportunities to fruition.

The proceeds from the rights offering, assuming 50 per cent of the rights offering is completed, is expected to remedy the financial problems by providing the capital necessary to sustain the company's operations for the next 12 months.

There can be no assurance that the TSX will accept the financial hardship application for the use of the financial hardship exemption from the requirement to obtain shareholder approval for the recapitalization transactions.

In connection with reliance on the above-described financial hardship exemption from the TSX's shareholder approval requirements, it is expected that the TSX will place TeraGo under a remedial delisting review, which is normal practice when a listed issuer seeks to rely on this exemption.

As Cymbria is a related party of the company, the new term debt facility and the issuance of the warrants in connection with the new term debt facility will constitute related party transactions within the meaning of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, and are subject to the formal valuation and minority approval requirements thereof, as applicable, unless an exemption is available. It is the intention of the company to rely on the exemptions in sections 5.5(a) and 5.7(1)(a) (Fair Market Value Not More Than 25 Per Cent of Market Capitalization) of MI 61-101 for the issuance of the warrants and Section 5.7(1)(f) (Loan to Issuer, No Equity or Voting Component) of MI 61-101 for the new term debt facility. The corporation notes that Cymbria's participation in the rights offering would ordinarily be considered a related party transaction, but, per Section 5.1 (k), the rights offering is exempt from the rules under MI 61-101.

About TeraGo Inc.

TeraGo provides managed network and security services to businesses across Canada, ensuring highly secure, reliable and redundant connectivity, including private 5G wireless networks, fixed wireless access, fibre and cable wireline network connectivity. As Canada's biggest millimetre-wave spectrum holders, the company possesses spectrum licences in the 24-gigahertz and 38-gigahertz spectrum bands, which it utilizes to provide secure, dedicated SLA (service-level-agreement) guaranteed enterprise-grade performance that is technology diverse from buried cables, ensuring high-availability connectivity services. TeraGo serves Canadian and global businesses operating in major markets across Canada, including Toronto, Montreal, Calgary, Edmonton, Vancouver, Ottawa and Winnipeg, and has been providing wireless services since 1999.

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