Northern Frontier Corp. Announces Definitive Agreement to Acquire Black Diamond Group's Construction Services Operation

CALGARY, ALBERTA--(Marketwired - July 15, 2015) - Northern Frontier Corp. (TSX VENTURE:FFF) (the "Corporation" or "Northern Frontier") is pleased to announce that it has agreed to acquire the construction services operation ("Construction Services") operated indirectly by Black Diamond Group Limited ("Black Diamond Group").

The acquisition is being completed pursuant to the terms of a share purchase agreement dated July 15, 2015 (the "Definitive Agreement") between the Corporation and Black Diamond Limited Partnership (the "Vendor"), a subsidiary of Black Diamond Group. Pursuant to the terms of the Definitive Agreement, on closing of the transactions contemplated thereunder (the "Transaction") (i) the Corporation will acquire all of the issued and outstanding shares of a wholly-owned subsidiary of the Vendor that will, at the time of closing, own the assets related to the Construction Services, (ii) the Corporation, or one of its subsidiaries, will employ certain of the employees currently engaged in the Construction Services operation (subject to acceptance of applicable employment offers), and (iii) the Corporation and the Vendor will enter into a master services agreement (the "Master Services Agreement") pursuant to which the Corporation will provide Construction Services to the Vendor. The purchase price (the "Purchase Price") payable by the Corporation in respect of the Transaction comprises: (i) the issuance to the Vendor of 4,533,934 common shares in the capital of the Corporation (the "Shares") with a deemed price per Share of $0.54 (approximately $2.4 million in aggregate) (determined based on the 10 day volume weighted average price of the Shares), representing approximately 19.5% of the current issued and outstanding shares in the capital of the Corporation; (ii) delivery of a promissory note (the "Promissory Note") due October 31, 2018 in the principal amount of $7.4 million (subject to adjustment as described below).

The transaction is expected to add in the range of $2.0 million to $5.0 million annually to the Corporation's EBITDA. The Corporation has agreed to increase the principal amount of the Promissory Note by the amount (the "Contingent Earn-Out Amount") equal to 80% of amount by which the three year, post-closing, average gross revenue generated by the Construction Services operation exceeds $25.0 million, less $0.4 million, up to a maximum additional amount payable of $11.6 million. The Corporation has also agreed to reduce the principal amount of the Promissory Note by the amount of $1.3 million at such time as the Vendor and Purchaser execute a land lease or sublease with respect to the use by the Vendor of a portion of the Corporation's Conklin, Alberta property which is expected to occur prior to December 31, 2015. The principal amount of the Promissory Note may be further adjusted in accordance with the terms thereof.

The Construction Services operation installs and dismantles remote workforce lodging and modular offices and carries out related tasks in the Western Canadian marketplace. Chris Yellowega, President and CEO, commented that "this transaction is transformative to Northern Frontier and represents the third platform acquisition to our strategy. We are very excited to add this operation to Northern Frontier's product offering and intend to increase the scale of this business by providing these services to both Black Diamond Group and other remote workforce lodging and related amenity service providers in Western Canada".

Master Services Agreement

Included as a principal term of the Definitive Agreement is the execution of the Master Services Agreement, which provides for a three year preferred supplier arrangement whereby the Corporation has a right of first refusal to provide services in Western Canada to Black Diamond Group that were previously conducted internally by the Construction Services operation. The arrangement is subject to reasonable competitive pricing limitations. Furthermore, the Corporation will not be restricted in providing these same services to other remote workforce lodging and modular office providers.

Promissory Note

The Promissory Note will be secured by way of a general security agreement in favour of the Vendor, bear interest at a rate of 10% per annum, interest only payable during the term (except with respect to the Contingent Earn-Out Amount, on which 10% interest will accrue, not compounded, per annum payable on maturity) and will be subject to a subordination and standstill agreement subordinating the Vendor's security and right of payment in favour of the Corporation's senior secured lender. As a subordinated debt, the Promissory Note is expected to be excluded from the Corporation's senior lending facilities determination of funded debt and the associated covenant calculation of funded debt to EBITDA.

Conditions to closing

The completion of the Transaction is subject to the approval of the TSX Venture Exchange and the Corporation's lenders. The Transaction is anticipated to close on or about July 31, 2015.

Relationship of Parties

The Chairman of the Board of Black Diamond Group is Trevor Haynes who is also the Chairman of the Board of Northern Frontier. As such, the parties have undertaken reasonable corporate governance steps and procedures to maintain the independence of both parties, including the abstention by Mr. Haynes from all negotiations and approvals of the Transaction.

Reader Advisory

Forward-Looking Statements

This news release includes certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. These forward-looking statements include, among other things, statements in respect of:

• the expected closing of the Transaction;

• approval of the Transaction by applicable regulatory authorities, including the TSX Venture Exchange;

• approval of the Transaction and exclusion of the Promissory Note from the definition of Funded Debt for purposes of the Corporation's senior credit facilities with the Corporation's lenders;

• anticipated benefits of completing the Transaction;

• expectations of future financial performance of the Corporation; and

• the diversification and expansion of the Corporation's operations.

These statements are only predictions and are based upon current expectations, estimates, projections and assumptions, which the Corporation believes are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In making such forward-looking statements, assumptions have been made regarding, among other things, industry activity, the state of financial markets, business conditions, continued availability of capital and financing, future oil and natural gas prices and the ability of the Corporation to obtain necessary lender and regulatory approvals. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. These risks and uncertainties include: the possibility that the parties will not proceed with the Transaction; that the ultimate terms of the Transaction will differ from those that are currently contemplated; that the Transaction will not be successfully completed for any reason (including the failure to obtain the required approvals from regulatory authorities, including the TSX Venture Exchange, and/or the Corporation's lenders); whether the Corporation's lenders exclude the Promissory Note from the definition of Funded Debt for the purposes of the Corporation's senior credit facilities; that the Corporation's financial performance does not transpire as expected; and regulatory changes. Investors are cautioned that forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. The Corporation has no obligation to update any forward-looking statements set out in this news release, except as required by applicable law.

Non-GAAP Measures

Selected financial information provided in this news release includes the following measures that are not recognized under International Financial Reporting Standards ("IFRS") and are non-generally accepted accounting principles ("non-GAAP") measures: pro forma EBITDA; working capital; and funded debt. This information should be read in conjunction with the consolidated financial statements for the 12 months ended December 31, 2014 and 13 months ended December 31, 2013 and the Corporation's MD&A for the year ended December 31, 2014 available under the Corporation's profile on SEDAR at www.sedar.com. Further information regarding these non-GAAP measures is contained in the Corporation's MD&A.

About Northern Frontier Corp.

Northern Frontier's strategic objective is to create a large industrial and environmental services business through a buy and build growth strategy. Currently, the Corporation provides civil construction and excavation services to the industrial industry, primarily in the in situ Oilsands region south of Fort McMurray, Alberta and bulk water and fluids transfer logistic services in western Canada.

The Corporation's common shares and common share purchase warrants are listed on the TSX Venture Exchange under the trading symbol "FFF" and "FFF.WT.A", respectively.

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