EIL Empire Industries Ltd

Empire Industries Ltd. (TSX-V: EIL, OTC:ERILF) (“Empire”, “EIL” or the “Company”) is pleased to announce that it intends to complete an internal reorganization (the “Reorganization”) to create a new research and development subsidiary named Dynamic Structures Ltd. (“DSL”) and immediately fund the operation of DSL with the proceeds from a CDN$5 million private placement (the “Private Placement” and together with the Reorganization, the “Transactions”), subject to the consent of its senior secured lenders and the approval of the TSX Venture Exchange. The Company intends to close the Transactions as soon as possible, upon receipt of the necessary consents and approvals.

“Empire has invested over 600 person years into developing innovative ride technologies over the past five years and we wanted to create a company dedicated to continue this innovation,” stated Guy Nelson, CEO of Empire. “We have pivoted successfully to become a technology company with engineering expertise and unique technical knowledge that allows us to continue to be a leader in the ride business but also diversify our revenue streams beyond the ride business. This is what makes us global leaders in our areas of expertise and what makes our company so different. Empire’s right to repurchase the DSL shares being sold and the Investors’ right to exchange the DSL shares being purchased into Empire common shares are important features built into this financing because it positions Empire to be able to reacquire the DSL shares being sold today for an aggregate price as low as CDN$6.4 million and capped at a high of CDN$6.8 million after three years.”

Reorganization

Pursuant to the Reorganization Dynamic Attractions Ltd (“DAL”), Empire’s wholly owned ride manufacturing subsidiary, will transfer: (i) the employment of 31 highly skilled development engineers (the “R&D Employees”) to DSL; and (ii) certain intangible property consisting of all the knowledge and experience of the R&D Employees used in the engineering design business including all trade secrets, technical, scientific and other knowledge, skills and ideas (the “Know-How”), the Dynamic Structures website (the “Other Intangible Property”) and goodwill associated with the Know-How and Other Intangible Property valued at CDN$5 million.

Private Placement

Immediately after completion of the Reorganization, DSL will complete the Private Placement of Class C Shares for aggregate gross proceeds of CDN$5 million, which will provide the new investors (the “Investors”) with 50% ownership of DSL and effectively dilute Empire’s ownership of DSL to 50%.

As a condition of the Private Placement, Empire and the Investors will enter into a Shareholder Agreement governing the operation of DSL. The Shareholder Agreement also provides Empire and/or DSL the right to call the Investor’s Class C Shares for an aggregate price of CDN$5 million plus 12% per annum after 3 years. The Shareholder Agreement grants the Investors the right to: (i) put the Investors’ Class C Shares to DSL for an aggregate price of CDN$5 million plus 9% per annum after 3 years; (ii) to require Empire to exchange the Class C Shares for common shares of the Issuer (“Common Shares”) at the Discounted Market Price after 3 years; and (iii) in the event that Empire completes a private placement in the future, the Investors have the right to exchange the Class C Shares and accrued dividends for Common Shares at the price per Common Share that such future private placement is completed.

CDN$3 million of the Private Placement is to be funded in Renminbi (“RMB”). An arm’s-length third party finder is entitled to receive a finder’s fee equal to 7% of the RMB which will be paid in cash.

Empire, DAL and DSL Going Forward

DSL will continue to be responsible for R&D of ride systems for DAL as well as applications outside of the ride industry. DSL will sell development engineering services to DAL pursuant to an Engineering Services Agreement. DSL will also provide development engineering services to third party customers outside of the ride business.

Going forward, DSL will have the ability to serve non-ride business customers and to develop and own its own proprietary intellectual property (“IP”), which it can license. DAL has the exclusive right to license any ride business technologies developed by DSL. DAL will continue to employ all of its highly skilled product engineers, key to its manufacturing and installation services.

Empire and DAL will handle DSL’s corporate and administrative functions including, but not limited to, accounting, tax, human resources, legal, information technology, sales and marketing and all executive level managerial, supervisory and consulting functions pursuant to the terms of a Management Services Agreement.

MI 61-101 Disclosure

James Chui is a Director of Empire and also owns or controls 18.43% of the issued and outstanding shares of the Company and as such his participation in the Transactions, specifically as one of the Investors in the Private Placement, is a "related party transaction" within the meaning of TSX Venture Exchange Policy 5.9 and Multilateral Instrument 61-101. The Company is relying on an exemption from the formal valuation and minority approval provisions of Multilateral Instrument 61-101 pursuant to sections 5.5(a) and 5.7(a) on the basis that the aggregate fair market value of the Private Placement, insofar as the interested party is involved, does not exceed 25% of the market capitalization of the Company. It is expected that a material change report will be filed less than 21 days before the closing date of the Transactions. The Company considers this shorter period to be reasonable and necessary in the circumstances to allow the Company to close the transaction as soon as possible for sound business reasons, including the difficulties with raising capital during the Covid-19 pandemic.

About Empire Industries Ltd.

Empire focuses on designing, supplying, and installing iconic media-based attractions and ride systems for the global theme park industry. Empire also uses these same turn-key integration services for special projects such as large optical telescopes and enclosures. Empire also has commenced an initiative to leverage its world class flying theater and attraction development capability on a co-venture ownership basis. Empire was selected as a 2020 TSX Venture 50 company. The 2020 TSX Venture 50 is a ranking of top performers on the TSX Venture Exchange over the past year. The ranking is comprised of 10 companies from each of 5 industry sectors, with Empire being selected in the Diversified Industry category. Selection was based on three equally weighted criteria; share price, trading and market capitalization. Empire’s common shares are listed on the TSX Venture Exchange under the symbol EIL.

For more information about the Company, visit empind.com or contact:

Guy Nelson	Allan Francis
Chief Executive Officer	Vice President – Corporate Affairs and Administration
Phone: (416) 366-7977	Phone: (204) 589-9301
Email: gnelson@empind.com	Email: afrancis@empind.com

Reader AdvisoryThis news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Empire’s business and affairs. In certain cases, forward-looking statements can be identified by the use of words such as ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘budget’’, “booked”, ‘‘scheduled’’, “positions”, ‘‘estimates’’, “forecasts’’, ‘‘intends’’, ‘‘anticipates’’, “believes” or variations of such words and phrases or state that certain actions, events or results ‘‘may’’, “may be”, ‘‘could’’, “should”, ‘‘would’’, ‘‘might’’ or ‘‘will’’, ‘‘occur’’ or ‘‘be achieved’’. Such statements include statements with respect to: (i) completion of the Reorganization and Private Placement; (ii) the consent of the Company’s senior lenders to the Reorganization and Private Placement; (iii) the Company’s financial ability to reacquire the DSL shares being sold today for an aggregate price as low as CDN$6.35 million and capped at a high of CDN$6.8 million after three years and (iv) the approval by the TSX Venture Exchange of the Reorganization and Private Placement. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although Empire believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, and other factors, many of which are beyond the control of Empire. The forward-looking statements contained in this news release represent Empire’s expectations as of the date hereof, and are subject to change after such date. Empire disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.