May 26, 2011
VANCOUVER: Avcorp Industries Inc. (“AVP” or the “Company”) today announced that it has entered into an extension to its banking agreement, which will provide the Company’s operating
lines of credit through to April 2012. In conjunction with the renewal of the operating lines of
credit agreement, the Company has entered into a $6,000,000 principal amount, 10% secured
term loan agreement with Panta III B.V. (a wholly-owned subsidiary of Panta Holdings B.V., a
private investment vehicle, the principal of which is Mr. Jaap Rosen Jacobson, a director and
controlling shareholder of the Company) (“Panta”).
The term loan contains a conversion right to convert all or any portion of the principal amount of
the Term Loan as elected by Panta, at a conversion price of $0.07 per Common Share, into up to
85,714,286 Common Shares (the “Term Loan”). The Term Loan may be converted on or before
the date which is 60 months from the date of advance of the Term Loan. Interest on the Term
Loan is not convertible.
The Term Loan is secured by the assets of the Company however is subordinate to other preexisting
debt instruments. The proceeds of the Term Loan will provide the Company with further
financial operational flexibility to carry out the Company’s business plan, the proceeds to be used
specifically for the reduction of the Company’s operating facility.
As partial consideration for the Term Loan, the Company will issue to Panta, 19,550,532 common
share purchase warrants (the “Panta Warrants”), each Panta Warrant exercisable on or before
January 1, 2015 with respect to one Common Share at an exercise price of Cdn.$0.0713 per
The policies of the Toronto Stock Exchange (the “TSX”) require that shareholder approval be
obtained for private placements where, during any six month period, result in the number of listed
securities being issued or made issuable to insiders of greater than 10% of the number of
securities of the listed issuer which are outstanding, prior to the date of closing of the first private
placement to an insider during the six month period.
As a result of the conversion feature of the Term Loan and the issuance of the Panta Warrants, a
total of 105,264,818 Common Shares are being made issuable to Panta (representing
approximately 53.8% of the current issued and outstanding Common Shares). The Company has
made application to the TSX for approval to the issuance of up to 85,714,286 Common Shares on
conversion under the Term Loan; however, TSX approval will be conditional upon the Company
obtaining shareholder approval of such conversion pursuant to TSX Exchange policies.
Currently Mr. Rosen Jacobson (the principal of Panta) beneficially owns or exercises control over
88,314,176 Common Shares (representing approximately 45.2% of the current issued and
outstanding Common Shares) and also, through Panta Canada B.V., holds a $1,771,000 principal
amount 6% secured convertible note, convertible for up to 29,516,666 Common Shares (which
note received both TSX approval and shareholder approval at the Company’s May 28, 2010
annual meeting) (the “Convertible Securities”). Assuming, the conversion of the Convertible
Securities, the exercise of the Panta Warrants and the conversion of the Term Loan, Mr. Rosen
Jacobson would then beneficially own or exercise control over 223,095,660 Common Shares
(representing approximately 67.5% of the Common Shares outstanding after given effect to all
such exercises and conversions).
The Board is seeking shareholder approval at its June 16, 2011 Annual Meeting for the issuance
of Common Shares to Panta on the conversion of the Term Loan. In the event that shareholder
approval is not obtained, the interest rate under the Term Loan will be 15% per annum
commencing July 1, 2011. Until such shareholder approval is obtained, the Term Loan will not be
convertible into Common Shares.
The issuance of Common Shares on the exercise of the Panta Warrants does not require
shareholder approval but is subject to TSX approval, which the Company is currently seeking.
The Company deems it to be in its best interest to complete the transactions referenced in this
news release. No other insiders of the Company are participating in these transactions.
Any securities issued in connection with the Term Loan and Panta Warrant will be subject to a
restriction from resale for a period of four months and one day from the date of issue in
accordance with applicable Canadian securities laws.
Avcorp designs and builds major airframe structures for some of the world’s leading aircraft companies,
including Boeing, Bombardier, and Cessna. With more than 50 years of experience, 565 skilled employees
and 354,000 square feet of facilities, Avcorp offers integrated composite and metallic aircraft structures
to aircraft manufacturers, a distinct advantage in the pursuit of contracts for new aircraft designs, which
require lower‐cost, light‐weight, strong, reliable structures. Avcorp is a Canadian public company traded
on the Toronto Stock Exchange (TSX:AVP).
Sandi DiPrimo, Investor Relations Contact | 604-587-4938