Knol Resources Corp. Announces Update to Proposed Reverse Takeover with KEWA Financial Inc. and Minimum C$8.4 Million KEWA Financing of Subscription Receipts

Vancouver, British Columbia--(Newsfile Corp. - September 7, 2016) - Further to its press release dated July 25, 2016, Knol Resources Corp. (TSXV: NOL.H) ("Knol") is pleased to provide an update with respect to the proposed transaction (the "Proposed Transaction") that will result in Knol acquiring all of the common shares (the "KEWA Shares") and other securities of KEWA Financial Inc. ("KEWA"), as well as provide an update with respect to the KEWA Financing (as defined herein) intended to be undertaken in connection with the Proposed Transaction.

Overview of KEWA

KEWA, through its wholly-owned subsidiary KEWA Re Inc. ("KRI"), is engaged in the business of providing reinsurance to U.S.-domiciled insurance companies for environmental surety bonds, which guarantee that land used for mining will either be returned to its pre-existing condition or to previously agreed upon standards after mining activities have concluded. KEWA's surety bonding solution provides capital relief to the bonded principals while ensuring their compliance with rapidly increasing environmental remediation obligations. KRI is a Barbados-domiciled and licensed reinsurance company that currently reinsures bond portfolios for two U.S.-domiciled insurance companies.

Management of KEWA believes that KEWA has identified a unique opportunity to build a low-risk environmental surety business in an industry perceived to be high-risk, and that KEWA holds a potential advantage relative to its competitors as a result of its management team's previous operational experience in the mining industry where most of the environmental surety bonds it seeks to reinsure are written.

Proposed Transaction

Knol's common shares are currently listed on the NEX and it is intended that the Proposed Transaction will constitute its "reactivation" under the policies of the TSX Venture Exchange (the "Exchange") and upon completion of the Proposed Transaction (the "Closing") and satisfaction of all the conditions of the Exchange will have its listing transferred from the NEX to the Exchange.

The Proposed Transaction is currently expected to be completed by way of a three-cornered amalgamation or similar transaction between Knol and KEWA resulting in KEWA becoming a wholly-owned subsidiary of Knol.

The issuer resulting from the Proposed Transaction (the "Resulting Issuer") will be a diversified financial services company engaged in the business of providing environmental surety bonding (insurance) and reclamation solutions for carefully selected U.S.-based mining companies. The Resulting Issuer will receive cash collateral, bond premiums, inspection fees and reclamation related income as consideration for providing surety bonds and reclamation expertise. Upon closing of the Proposed Transaction and Ancillary Acquisitions (as defined herein), the Resulting Issuer will own 100% of:

  1. an A.M. Best A- rated, U.S. Treasury listed, licensed U.S. insurance company that over the last decade has paid US$12.0 million in dividends to its shareholders,

  2. a Barbados-domiciled licensed reinsurance company,

  3. a licensed insurance agency with over 35 years of premium writing history, and

  4. an environmental reclamation services company.

Upon closing of the Proposed Transaction and the Ancillary Acquisitions, the Resulting Issuer, through the Agency (as defined herein), will have the ability to originate reclamation bonding opportunities from a rapidly expanding marketplace. The Resulting Issuer's licensed insurer will write the surety bonds on a risk-adjusted basis after its team of seasoned experts has assessed the risk on the ground of the remediation and priced the premiums and collateral requirements to reflect real-time data. Many sites will generate both bond premiums and revenue derived from the Resulting Issuer's reclamation business through its team's ability to collaborate with regulators to engineer solutions that satisfy all stakeholders.

Adjustment of Knol Consolidation Ratio

As previously disclosed, Knol entered into a non-binding letter of intent dated June 20, 2016 with KEWA which outlines the general terms of the Proposed Transaction and which is to be superseded by a definitive agreement (the "Definitive Agreement") between Knol and KEWA. The Proposed Transaction is subject to, among other things, receipt of all applicable shareholder and regulatory approvals, including the final approval of the Exchange.

As was also previously disclosed, Knol intends to undertake a consolidation (the "Consolidation") of its issued and outstanding common shares at a ratio to be agreed between KEWA and Knol prior to execution of the Definitive Agreement. It is now expected that the Consolidation will be in the range of one "new" Knol common share (a "Knol Share") for every 7.6 to 8.6 "old" Knol common shares, a change from the previously anticipated range of one Knol Share for every 14.0 to 16.0 "old" Knol common shares. The implied pre-money valuation of KEWA is approximately US$8.1 million.

Proposed KEWA Financing

In connection with the Proposed Transaction and in lieu of the previously announced non-brokered private placement, KEWA and Knol have entered into an engagement letter (the "Engagement Letter") with Sprott Private Wealth LP and Mackie Research Capital Corporation, as co-lead agents (the "Agents"), to complete a best efforts private placement of non-transferable subscription receipts of KEWA (the "KEWA Subscription Receipts") at a price of C$0.70 per KEWA Subscription Receipt and for minimum aggregate gross proceeds of C$8.4 million (the "KEWA Financing"). The Engagement Letter is to be superseded by an agency agreement between the parties. Affiliates of Sprott Private Wealth LP own or exercise control or direction over (including managed accounts), directly or indirectly, approximately 16% of Knol's current outstanding common shares and, if warrants held by them were exercised, would hold approximately 25% of Knol's then outstanding common shares.

Each KEWA Subscription Receipt will be deemed to be converted into one unit of KEWA (a "KEWA Unit") without further payment from or action on the part of the holder and concurrently with the satisfaction of certain escrow release conditions (the "Escrow Release Conditions"), including confirmation that:

  1. there is no impediment to the completion of (a) the Consolidation, (b) the Ancillary Acquisitions, and (c) the Proposed Transaction;

  2. the terms of a credit facility (the "Credit Facility"), if entered into by KEWA, being reasonably satisfactory to each of Knol and the Agents; and

  3. KEWA and Knol having received all necessary regulatory and other approvals required for the KEWA Financing, the Proposed Transaction and the Ancillary Acquisitions.

Each KEWA Unit will consist of one KEWA Share and one half KEWA Share purchase warrant. Each whole KEWA Share purchase warrant (a "KEWA Warrant") will be non-transferable and entitle the holder thereof to purchase one KEWA Share at a price of C$1.10 for three years from the closing date of the Proposed Transaction, subject to adjustment and acceleration in certain circumstances. Upon completion of the Consolidation and the Proposed Transaction, holders of KEWA Shares and KEWA Warrants will receive Knol Shares, which shall be immediately free trading on the Exchange, and Knol common share purchase warrants ("Knol Warrants") in exchange for their KEWA Shares and KEWA Warrants, with such Knol Warrants being exercisable on the same terms as the KEWA Warrants.

Use of Proceeds

Concurrent with closing of the Proposed Transaction, KEWA intends to use the net proceeds from the KEWA Financing, the Credit Facility (if applicable) and Knol's existing cash on hand to acquire 100% of the outstanding equity interest in each of the Carrier (as defined herein) and the Agency Holdco (as defined herein) (collectively, the Carrier and the Agency Holdco acquisitions referred to herein as the "Ancillary Acquisitions").

KEWA has entered into a letter of intent to purchase 100% of the outstanding shares of a multi-line property and casualty insurance company domiciled in the U.S. (the "Carrier"). The principal business of the Carrier involves the writing of environmental surety bonds for mining companies. KEWA has indicated that A.M. Best Company, a U.S.-based rating agency that focuses on the insurance industry, has given the Carrier a current financial strength rating of A- (excellent) and a long-term issuer credit rating of A-.

The contemplated purchase price of the Carrier payable at closing is approximately US$13.5 million. Additional contingent consideration may become payable in certain circumstances post-closing.

KEWA has also entered into letters of intent to purchase 100% of the outstanding units of a holding company (the "Agency HoldCo") that owns 100% of both a licensed insurance agency with over 35 years of history (the "Agency") and a profitable environmental reclamation services company (the "ReclamationCo").

The Agency is focused on providing traditional agency and underwriting services, specifically for environmental reclamation bonds. The ReclamationCo works to reduce sureties' loss exposure through "on-the-ground' risk mitigation services. The ReclamationCo monitors mining operators' compliance with the requirements of the applicable mining permits. By keeping environmental reclamation current, losses that would potentially occur in the event of a bond forfeiture are significantly reduced. The ReclamationCo's process involves an active monitoring program for tracking environmental reclamation activities and a proactive communication program with various regulatory bodies. Additionally, the ReclamationCo offers environmental reclamation management services to mining companies and regulatory agencies.

The net purchase price for the Agency HoldCo is approximately US$1.9 million.

Proposed Management and Board of Directors of the Resulting Issuer

It is currently anticipated that all of the current officers and all of the current directors of Knol will resign from their respective positions and, subject to Exchange approval, on completion of the Proposed Transaction, it is currently anticipated that the board of directors of the Resulting Issuer will be nominated upon agreement between KEWA and Knol and will include the following:

David Wiley will serve as a director and President and Chief Executive Officer of the Resulting Issuer. Mr. Wiley has over 20 years of executive experience in mining, finance and capital markets. Prior to founding KEWA, Mr. Wiley was a Founding Partner of Raven Hill Partners Inc., a Toronto-based merchant bank focused on funding early stage ventures. Previously, he co-founded and was the President and Chief Executive Officer of Phoenix Coal Inc. where he was instrumental in growing the company from a private enterprise to a publicly listed company on the Toronto Stock Exchange. Mr. Wiley also previously served as a Managing Director of MHI Energy Partners (energy and mining focused private equity fund).

Brian W. Barr will serve as Chairman of the board of directors of the Resulting Issuer. Mr. Barr has over 28 years of director experience in the insurance industry through his former directorships of Aviva Canada Inc. and Norwich Union Life Insurance Company Ltd. where he also served as Chairman.

James Falle, FCPA, FCA, ICD.D will also serve as a director of the Resulting Issuer. Mr. Falle has over 25 years of executive experience in the financial services industry. Most recently he served as Executive Vice President and Chief Financial Officer of Aviva Canada Inc. where he oversaw the Finance, Actuarial, Legal and Compliance, Reinsurance and Corporate Development teams. Previously, he has served in executive officer roles for AEGON Canada / Transamerica, Zurich Financial services, Bank of America Canada and Paribas Bank of Canada.

Details with respect to the additional proposed officers and directors of the Resulting Issuer, including the background of each such proposed individual, will be announced in subsequent disclosure.

Trading Halt of Knol's Common Shares

In accordance with the policies of the Exchange, Knol's common shares are currently halted from trading and will remain halted until further notice.

Further Information

In accordance with the requirements of the Exchange, further details about the Proposed Transaction and the Resulting Issuer will be provided in a comprehensive press release when the parties enter into the Definitive Agreement, including details related to the business and assets of KEWA, proposed consideration, description of financing arrangements and loans. Further details will also be provided in the disclosure document to be prepared and filed in respect of the Proposed Transaction.

Investors are cautioned that, except as disclosed in the disclosure document to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon.

For further information, please contact:

Michael Atkinson, President and Chief Executive Officer of Knol Resources Corp.
Phone: (604) 689-1428

Nicole Marchand, Investor Relations for KEWA Financial Inc.
Phone: (416) 428-3533

All information contained in this press release with respect to Knol and KEWA was supplied by the parties, respectively, for inclusion herein, and Knol and its directors and officers have relied on KEWA for any information concerning such party.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States.  No public offering of the securities will be made and the securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act of 1933, as amended, and applicable state securities laws or an exemption from such registration requirement is available.

The Exchange has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release.

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

Forward-Looking Information

This news release contains forward-looking statements relating to, among other things, the Proposed Transaction, the Ancillary Acquisitions, the KEWA Financing and the use of net proceeds therefrom, the Consolidation, the Resulting Issuer and other statements that are not historical facts. Forward-looking statements are often identified by terms such as "will", "may", "should", "anticipate", "expects" and similar expressions. All statements other than statements of historical fact included in this release, including, without limitation, those statements regarding the Proposed Transaction, the Ancillary Acquisitions, the KEWA Financing (including the Escrow Release Conditions) and the use of net proceeds therefrom and the Consolidation are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Knol's, KEWA's, and the Resulting Issuer's expectations include the failure to satisfy the conditions to completion of the Proposed Transaction, the Ancillary Acquisitions, the KEWA Financing (including the Escrow Release Conditions), the Consolidation and other risks detailed from time to time in the filings made by Knol, KEWA and the Resulting Issuer with securities regulators.

The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Knol, KEWA, and the Resulting Issuer. As a result, Knol, KEWA and the Resulting Issuer cannot guarantee that the Proposed Transaction, the Ancillary Acquisitions, the KEWA Financing (including the Escrow Release Conditions) and the Consolidation will be completed on the terms disclosed herein or at all. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and Knol, KEWA, and the Resulting Issuer will update or revise publicly any of the included forward-looking statements only as expressly required by Canadian securities law.