FXC FAX Capital Corporation

FAX Capital Corp. (the “Company”) (TSX: FXC) is pleased to announce that it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) with Federated Capital Corp. (“FCC”) and Fax Investments Inc., a wholly-owned subsidiary of FCC (together with FCC, the “Purchaser”), pursuant to which the Purchaser has agreed to acquire, indirectly through an acquisition company, all of the Company’s outstanding subordinated voting shares (the “Subordinate Voting Shares”) not currently owned by the Purchaser or Blair Driscoll, the Company’s Chief Executive Officer (together, the “Continuing Shareholders”), by way of a court-approved plan of arrangement under the Canada Business Corporations Act (the “Transaction”). As at the date hereof, the Continuing Shareholders own or control, directly or indirectly, an aggregate of 609,247 Subordinate Voting Shares, representing 3.92% of the Company’s issued and outstanding Subordinate Voting Shares and the Purchaser owns 26,971,411 of the Company’s outstanding multiple voting shares (the “Multiple Voting Shares”), representing 100% of the Company’s issued and outstanding Multiple Voting Shares.

In accordance with the terms of the Arrangement Agreement, the holders of the Subordinated Voting Shares will receive cash consideration of $5.18 per Subordinate Voting Share, representing a premium of approximately 53.7% to the closing price on the Toronto Stock Exchange (the “TSX”) of $3.37 per Subordinate Voting Share on April 29, 2022, the last trading day prior to the announcement of the Transaction, and a premium of approximately 47.7% to the 20-day volume weighted average trading price per Subordinate Voting Share on the TSX of $3.51 as at that date.

The Company’s board of directors (the “Board”), with certain directors declaring their conflicts of interest and abstaining from voting, unanimously approved the Arrangement Agreement following receipt of the unanimous recommendation of a special committee made up solely of independent directors (the “Special Committee”), appointed by the Board to, among other matters, consider strategic alternatives for the Company, including reviewing and considering the Transaction and providing the Board with advice and recommendations with respect to the Transaction. As such, the Board intends to unanimously, with certain interested directors abstaining from voting, recommend that holders of Subordinate Voting Shares vote in favour of the Transaction. The Company intends to hold an Annual General and Special Meeting in June 2022 (the “Shareholders’ Meeting”), where the Transaction will be considered and voted upon by shareholders of record. Assuming the timely receipt of all required approvals, the Transaction is expected to close early in the third quarter of 2022.

In connection with their review and consideration of the Transaction, the Special Committee engaged Scotia Capital Inc. (“Scotiabank”) as its independent valuator and exclusive financial advisor in respect of the Transaction. Scotiabank prepared a formal valuation, in accordance with Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”), opining that, as of April 29, 2022 and subject to the assumptions, limitations and qualifications contained in Scotiabank’s formal valuation presentation to the Special Committee, the fair market value of the Subordinate Voting Shares ranged between $4.25 and $5.25 per Subordinate Voting Share. In addition, Scotiabank provided an opinion to the Special Committee that, subject to the assumptions, limitations and qualifications set out in its presentation to the Special Committee, the consideration to be received by the holders of Subordinate Voting Shares (other than the Continuing Shareholders) pursuant to the Transaction is fair, from a financial point of view, to such shareholders.

Additional Transaction Details

The Transaction is to be completed by way of a plan of arrangement under the Canada Business Corporations Act and will constitute a “business combination” for purposes of MI 61-101. The Transaction is subject to approval at the Shareholders’ Meeting by: (i) at least two-thirds of the votes cast by shareholders (voting together as a single class, with each holder of Subordinate Voting Shares being entitled to one vote per share and each holder of the Multiple Voting Shares being entitled to ten votes per share); and (ii) a simple majority of the votes cast by holders of Subordinate Voting Shares (excluding the Subordinate Voting Shares held by the Continuing Shareholders and any other shares required to be excluded pursuant to MI 61-101). In addition, completion of the Transaction is subject to other customary conditions, including receipt of court approval and approval from the TSX. The Transaction is not subject to a financing condition.

The Arrangement Agreement includes customary non-solicitation provisions, which are subject to customary "fiduciary out" provisions that entitle the Company to terminate the Arrangement Agreement and accept a superior proposal if the Purchaser does not match the superior proposal. Each party has agreed to pay the other’s transaction expenses upon the termination of the Arrangement Agreement in certain circumstances, as set out in the Arrangement Agreement.

Each of the directors and executive officers of the Company have agreed to vote in favor of the Transaction pursuant to voting and support agreements.

Further information regarding the Transaction, the Arrangement Agreement and the Shareholders’ Meeting, including a copy of Scotiabank’s formal valuation and fairness opinion, will be included in the management information circular expected to be mailed to holders of Subordinate Voting Shares of record in early June 2022. Copies of the Arrangement Agreement and proxy materials in respect of the Shareholders’ Meeting will be available on SEDAR at www.sedar.com.

Early Warning Disclosure by the Purchaser

Further to the requirements of National Instrument 62-104 Take-Over Bids and Issuer Bids and National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, the Purchaser, being entities that are owned and controlled by the Driscoll family, will file an early warning report stipulating, they intend to acquire, directly or indirectly, all of the issued and outstanding Subordinate Voting Shares (other than those owned by the Continuing Shareholders) by way of a plan of arrangement.

Upon closing of the Transaction, the Purchaser intends to cause the Subordinate Voting Shares to cease to be listed on the TSX and to cause the Company to submit an application to cease to be a reporting issuer under applicable Canadian securities laws.

A copy of the Purchaser’s early warning report will be filed with the applicable securities commissions and will be made available on SEDAR at www.sedar.com. Further information and a copy of the Purchaser’s early warning report may be obtained by contacting Blair Driscoll, at 416-364-8788.

Advisors

Scotiabank is acting as exclusive financial advisor to the Special Committee and as independent valuator. Norton Rose Fulbright Canada LLP is acting as legal advisor to the Company. Dentons Canada LLP is acting as legal advisor to the Special Committee. Aird & Berlis LLP is acting as legal advisor to the Purchaser and Federated Capital Corp. McCarthy Tétrault LLP is acting as legal counsel to Scotiabank.

About FAX Capital Corp.

The Company is an investment holding company with a business objective to maximize its intrinsic value on a per share basis over the long-term by seeking to achieve superior investment performance commensurate with reasonable risk. The Company intends to invest in equity, debt and/or hybrid securities of high-quality businesses. The Company initially intends to invest in approximately 10 to 15 high-quality small cap public and private businesses located primarily in Canada and, to a lesser extent, the United States. For further information, please visit the Company’s website at www.faxcapitalcorp.com.

For additional information please contact:

Investor RelationsTim ForanEmail: IR@faxcapitalcorp.comWebsite: www.faxcapitalcorp.com

Media RelationsKieran LawlerTelephone: (416) 303-0799Email: Kieran.lawler@loderockadvisors.com

No Offer or Solicitation

This announcement is for informational purposes only and does not constitute an offer to purchase or a solicitation of an offer to sell Subordinate Voting Shares.

Cautionary Note Regarding Forward-Looking Information

This press release contains forward-looking information. Such forward-looking information or statements (“FLS”) are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Any such FLS may be identified by words such as “proposed”, “expects”, “intends”, “may”, “will”, and similar expressions. FLS contained or referred to in this press release includes, but is not limited to, statements regarding the proposed timing and various steps contemplated in respect of the Transaction, the holding of the Shareholders’ Meeting, and the completion of the proposed Transaction, as well as statements concerning the Company’s investment approach, objectives and strategy. Although the Company believes that the expectations reflected in such FLS is reasonable, undue reliance should not be placed on FLS because the Company can give no assurance that such expectations will prove to be correct.

FLS are based on a number of factors and assumptions which have been used to develop such statements and information, but which may prove to be incorrect, including: assumptions as to the ability of the parties to receive, in a timely manner and on satisfactory terms, the necessary shareholder, court and stock exchange approvals; the ability of the parties to satisfy, in a timely manner, the other conditions to the completion of the proposed Transaction; and other expectations and assumptions concerning the proposed Transaction. The anticipated dates indicated may change for a number of reasons, including the inability to receive, in a timely manner, the necessary shareholder approvals, and court approvals or the necessity to extend the time limits for satisfying the other conditions to the completion of the proposed transaction. Accordingly, investors and others are cautioned that undue reliance should not be placed on any forward-looking statements.

Risks and uncertainties inherent in the nature of the proposed Transaction that could cause actual results to differ materially from those described in such FLS include, but are not limited to, the failure of the parties to obtain the necessary shareholder, court and stock exchange approvals or to otherwise satisfy the conditions to the completion of the proposed Transaction; failure of the parties to obtain such approvals or satisfy such conditions in a timely manner; significant transaction costs or unknown liabilities; the failure to realize the expected benefits of the proposed Transaction; and general economic conditions; as well as the identified risk factors included in the Company’s public disclosure, including the annual information form dated March 29, 2022, which is available on SEDAR at www.sedar.com and on the Company’s website at www.faxcapitalcorp.com. Failure to obtain the necessary shareholder, court and stock exchange approvals, or the failure of the parties to otherwise satisfy the conditions to the completion of the proposed transaction or to complete the proposed transaction, may result in the proposed Transaction not being completed on the proposed terms, or at all. In addition, if the proposed Transaction is not completed, and the Company continues as an independent entity, there are risks that the announcement of the proposed Transaction and the dedication of substantial resources of the Company to the completion of the proposed Transaction could have an impact on its business, operating results and activities in general. The FLS in this press release reflect the current expectations, assumptions, judgements and/or beliefs of the Company based on information currently available to the Company, and are subject to change without notice. Consequently, the reader is cautioned not to place undue reliance on the forward-looking statements and information contained in this press release.

Any FLS speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any FLS, whether as a result of new information, future events or results or otherwise. The FLS contained in this press release are expressly qualified by this cautionary statement. For more information on the Company, please review the Company's continuous disclosure filings that are available at www.sedar.com.

No securities regulatory authority has either approved or disapproved of the contents of this news release. The TSX accepts no responsibility for the adequacy or accuracy of this release.