Virtek Announces Major Strategic Initiatives to Maximize Shareholder Value



    
    -   Sale of Imaging and Templating Division for $26.5 Million
    -   $3.0 Million Share Private Placement at $0.85 Per Share
    -   Dutch Auction to Acquire for Cancellation up to $26 Million in Value
        or 30 Million Common Shares for $0.85 to $1.00 Per Share
    

    WATERLOO, ON, Aug. 4 /CNW/ - Virtek Vision International Inc. (TSX:VRK)
("Virtek" or the "Company"), a leading provider of high value industrial laser
solutions, today announced a definitive agreement to sell its Imaging and
Templating division ("I&T") to MiTek Holdings, Inc. for $26.5 million in cash.
Going forward, Virtek plans to focus exclusively on building the products,
technologies and customer base of its Marking and Engraving ("M&E") business.
Virtek intends to distribute the proceeds of the I&T sale to shareholders
through a major share buyback and, in addition, has entered into a private
placement agreement with Royal Capital Management Corp. The I&T sale, the
share buyback and the private placement are subject to conditions, including
those outlined below. Virtek will seek shareholder approval at a meeting to be
held on September 10, 2008.
    The agreement to sell I&T follows the unanimous rejection by Virtek's
Board of Directors of an unsolicited takeover bid by StockerYale Waterloo
Acquisition, Inc., a wholly owned subsidiary of StockerYale, Inc. Virtek's
Board of Directors is confident the I&T sale delivers to the Company full
value for the division. At the same time, shareholders will have the option of
either accepting a substantial issuer bid, or retaining their investment in a
pure play M&E company with attractive opportunities for strong and profitable
growth.
    "The StockerYale offer of $0.80 per share clearly undervalued Virtek.
MiTek has agreed to purchase - for $0.79 per share - less than half of the
Company, in terms of sales," said Brian Harrison, Chairman of Virtek's Board
of Directors. "Although we spoke to and encouraged StockerYale to make an
offer consistent with full and fair value to our shareholders, none was
forthcoming. Selling I&T and distributing the proceeds is a clearly superior
transaction. Moreover, under the leadership of Stephen J. Sorocky, our
President and Chief Executive Officer since January 2008, Virtek has greatly
intensified its strategic focus on M&E and aligned its key operating resources
around this business, which affords the most dynamic opportunities for
profitable growth and performance. Mr. Sorocky commissioned and is now
implementing - with encouraging early results - the recommendations of a
formal strategic review that identified six key addressable M&E markets with a
combined size of about $230 million in the next two-to-three years. Virtek's
prospects in these markets are excellent, based on factors such as competitive
position, growth rates and profitability. Accordingly, we encourage all
shareholders to vote in favour of the initiatives we are announcing today."
    From the total sale price of $26.5 million, Virtek expects to realize
immediate net proceeds of approximately $23.6 million upon closing of the I&T
transaction, after provision for taxes, expenses and an escrow amount of
$1.3 million. The amount in escrow will be paid to Virtek on the first
anniversary of closing, assuming Virtek satisfies transition obligations. The
sale to MiTek is expected to close on September 12, 2008.
    The agreement contains a 'go shop' provision that gives Virtek the right
to solicit and engage in discussions and negotiations regarding potential
competing proposals for the Company until August 8, 2008. After that date,
Virtek's ability to solicit third party proposals, provide information and
engage in discussions with third parties is restricted. However, subject to
certain conditions, Virtek can provide information and participate in
discussions on any unsolicited acquisition proposal that the Board of
Directors determines in good faith is or could result in a superior proposal.
    Virtek may terminate the agreement under certain circumstances, including
if the Board of Directors determines in good faith that it has received a
superior proposal. Under some conditions, including if Virtek terminates the
agreement to accept a superior proposal, Virtek must pay a noncompletion fee
of $927,500 and reimburse certain MiTek expenses.

    $3.0 Million Share Private Placement at $0.85 Per Share
    -------------------------------------------------------
    In a separate matter, Virtek has entered into an agreement with Royal
Capital Management Corp. ("Royal Capital") for the issuance and sale of
$3.0 million in shares in the Company by way of a private placement at a price
of $0.85 per share (the "Private Placement"). The sale is conditional on
shareholder and regulatory approval. Royal Capital has agreed not to tender
any of the new shares issued to the substantial issuer bid and not to tender
any of its existing shares to the current StockerYale offer. The Private
Placement is indicative of investor support for Virtek's M&E strategy and will
provide capital to pursue the growth of the M&E business.

    Dutch Auction to Acquire for Cancellation up to $26 Million in Value or
    -----------------------------------------------------------------------
    30 Million Common Shares for $0.85 to $1.00 Per Share
    -----------------------------------------------------
    Virtek intends to use a portion of the net proceeds from the sale of I&T
to repurchase for cancellation up to $26 million of its common shares, or a
maximum of 30 million shares, whichever is reached first. The offer price will
be between $0.85 and $1.00 per share, through a share buyback process known as
a substantial issuer bid (the "Offer"). The total number of shares to be
purchased represents approximately 80% of the Company's 37.1 million fully
diluted issued and outstanding common shares. The Dutch auction tender process
allows shareholders to individually select the price, within the specified
range, at which they are willing to sell all or a portion of their shares.
When the Offer expires, the Company will select the lowest price allowing it
to buy $26 million of shares (the "Purchase Price"), or a maximum of
30 million common shares. All shares tendered at or below the selected price
level will be bought at the Purchase Price, subject to proration in the event
that the aggregate cost to purchase all of the shares exceeds $26 million.

    Shareholder Meeting September 10, 2008

    The sale of I&T, the private placement and the substantial issuer bid
will be presented for approval at a shareholder meeting on September 10, 2008.
If the buyback is approved, shareholders electing not to tender will own a
proportionately larger stake in the 'new' Virtek, which will have fewer shares
outstanding. The transactions described in this news release are subject to
customary conditions, such as receiving shareholder and regulatory approvals.
    Virtek has set August 11, 2008 as the record date for the special
meeting. The I&T sale must be approved by more than two-thirds of the shares
represented at the meeting. The proposed issuer bid and the Private Placement
must be approved by more than half of the shares represented at the meeting.
Virtek anticipates that a substantial issuer bid circular will be mailed to
shareholders promptly following the closing of the I&T sale. Anyone depositing
shares as a result of the bid will receive within 45 days any cash proceeds
payable.

    Strategic Focus on Marking and Engraving

    The divestiture of I&T is the latest in a series of measures intended to
maximize M&E's potential. These include purchasing 75% of the FOBA M&E
business in 2003 and the remaining 25% in 2007; the partial transfer of FOBA
production to Waterloo last year; and divesting the iLS division of I&T. As
outlined in the Directors' circular dated July 11, 2008, Virtek is pursuing a
number of strategic initiatives to drive the M&E business, including:

    
    -   Highlighting six priority markets in which Virtek enjoys strong
        customer relationships and proven competitive advantages;
    -   Restructuring M&E from a regional to an integrated global business,
        while building and enhancing key client relationships, increasing
        account penetration and lowering sales costs per transaction;
    -   Expanding after-sales services in Europe on machines installed at
        customer sites;
    -   Introducing business unit managers' incentives that reflect the
        Company's emphasis on profitable growth;
    -   Streamlining German operations to improve work flows, reduce working
        capital, increase product quality and consistency, and lower warranty
        costs; and
    -   Cutting overhead expenses through a cost reduction program.
    

    Virtek's financial advisor, Genuity Capital Markets, provided opinions to
Virtek's Board of Directors that, from a financial point of view, the I&T sale
is fair to shareholders but the StockerYale offer of $0.80 per share is
inadequate. Crosbie & Company advised Virtek on the sale of I&T to MiTek.

    How to Support the Sale of I&T and Distribution of Proceeds to
    Shareholders

    Shareholders wishing to support the sale of I&T and the distribution of
the proceeds to shareholders should not tender their shares to the StockerYale
offer. They will be asked to vote in favour of the transactions announced in
this news release, either in person or by proxy, at a shareholder meeting on
September 10, 2008. Provided these measures are approved by a majority of
shareholders represented at the meeting, the share buyback will be launched
immediately thereafter. Shareholders will then have the opportunity to either
sell their shares under the terms of the substantial issuer bid, or retain
them.

    How to Withdraw Your Shares from the StockerYale Offer

    Shareholders who have already tendered their shares to the StockerYale
offer and who now wish to withdraw their shares are encouraged to contact
Kingsdale Shareholder Services Inc., toll free at 1-866-581-1571.

    About Virtek Vision International Inc.

    Virtek Vision International Inc. is a leading provider of high value
industrial laser solutions focused on the needs of the global manufacturing
sector, providing templating, inspection, marking and engraving products.
Virtek serves customers in the prefabricated construction, transportation,
metalworking, tool and die and mold making industries worldwide. Virtek is a
full service provider, with services including manufacturing, development,
integration, training, after sales support and installation. The Company
delivers high value to its customers, including feature-rich systems with a
quick payback, productivity enhancements and total turnkey solutions. The
majority of Virtek's sales are in the United States and Europe. Virtek
maintains offices in Waterloo, Ontario, Canada; Boston, Massachusetts, United
States; Ludenscheid and Nurnberg, Germany; and Busto Arsizio, Italy. Please
visit www.virtek.ca for more information.

    About MiTek

    MiTek, Inc. is the world's leading supplier of state-of-the-art
engineered connector products, equipment, software and services for the
building components industry. MiTek, Inc., based in Chesterfield, Missouri,
has operations on five continents and has been a subsidiary of Berkshire
Hathaway Inc. since July 31, 2001. MiTek Holdings, Inc. is a subsidiary of
MiTek, Inc.

    Forward-looking Statements

    Except for historical information provided herein, this news release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of
future events. Such factors may include, without excluding other
considerations, fluctuations in quarterly results, evolution in customer
demand for the Company's products and services, the impact of price pressures
exerted by competitors, and general market trends or economic changes. As a
result, readers are advised that actual results may differ from expected
results.

    %SEDAR: 00006230E




For further information:

For further information: about Virtek Vision International Inc. please
visit www.virtek.ca or contact: Peter Monsberger, VP Finance and CFO, Tel:
(519) 746-7190, Fax: (519) 746-3383, e-mail: peter.monsberger@virtek.ca;
Stephen J. Sorocky, President and CEO, Tel. (519) 746-7190, Fax. (519)
746-3383, e-mail: stephen.sorocky@virtek.ca; Jo Mira Clodman, Clodman Hecht
Communications Inc., (416) 787-3773, e-mail: jomira@clodmanhecht.com;
Kingsdale Shareholder Services Inc., 1-866-581-1571, email:
contactus@kingsdaleshareholder.com

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VIRTEK VISION INTERNATIONAL INC.

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