Dynex Announces Strategic Transaction

01.03.08

TORONTO, Canada (March 31, 2008) The Board of Dynex Power Inc. (TSX VENTURE: DNX) ("Dynex") is pleased to announce that the company has entered into a non-binding letter of intent dated March 28, 2008 related to the proposed acquisition of control of Dynex by Zhuzhou CSR Times Electric Co., Ltd. (“Times Electric”), a leading Chinese manufacturer of mass transit electrical systems, based in Hunan Province, People’s Republic of China (“PRC”).


Times Electric, at its option, will acquire either 80% or 100% of the outstanding common equity shares of Dynex for cash at a price of Cdn$0.55 per share. This price is non-binding on Times Electric, except as explained below. The transaction is subject to a definitive agreement being entered into by Dynex and Times Electric. There can be no assurances that this transaction will close. Times Electric has, however, agreed to use its reasonable efforts to reaffirm the price within sixty days of March 28, 2008. The structure to be used for the proposed transaction remains to be determined and will be the subject of further negotiation between Dynex and Times Electric, as will the terms to be contained in the definitive agreement.

If the proposed transaction proceeds, the entry into the definitive documentation and the closing of the transaction will be subject to conditions including the following: satisfactory completion of due diligence by Times Electric, the execution of the definitive support agreement and the replacement irrevocable lock-up agreements (referred to below), approvals by the board of directors and shareholders of Times Electric, approvals from certain Chinese regulators and the TSX Venture Exchange, as well as the approval of the board of directors of Dynex and the approval or acceptance of the transaction by the shareholders of Dynex.

The letter of intent includes binding exclusivity whereby Dynex agrees not to solicit, either actively or passively, offers to acquire all or part of Dynex, or accept or entertain offers from any party other than Times Electric to acquire all or part of Dynex for a period of 100 days from the date a letter of credit is opened for the Dynex Break Fee (as defined below). This exclusivity period may be extended by up to 25 days. The exclusivity provision does not preclude the directors of Dynex from exercising their fiduciary duties in the context of an unsolicited offer, subject to Dynex immediately making Times Electric aware of such offer. During the exclusivity period, Times Electric will conduct its due diligence and the parties will engage in negotiation towards concluding the definitive agreement.

In exchange for granting the exclusivity period, Times Electric has agreed to deliver to Dynex within fifteen business days from March 28, 2008, an irrevocable letter of credit on a reputable PRC bank advised by a reputable Canadian bank, in favour of Dynex’s legal counsel, LaBarge Weinstein Professional Corporation in the amount of Cdn$715,777 (the “Dynex Break Fee”).

The Dynex Break Fee will be paid to Dynex if the proposed transaction does not close by reason of Times Electric refusing to proceed, save where (a) such failure to proceed is due to a force majeure event or by reason of Dynex, both of which exempting circumstances are defined in greater detail in the letter of intent; or (b) Times Electric decides after conducting its due diligence that the price of Cdn$0.55 per share is too high, because it is not within the current range of market multiples that an investment bank experienced in Canadian merger and acquisition transactions would normally apply to the annual revenue, EBITDA and pre-tax profits in establishing the enterprise value of a company.

A break fee of 5.0% of the purchase price for 80% of the common equity shares of Dynex (or 100% if Times Electric has provided prior written notice of its intention to proceed with 100%) will be payable to Times Electric by Dynex if Dynex closes an offer from another party to acquire Dynex during the exclusivity period, if Dynex refuses to execute a mutually agreed support agreement or Dynex otherwise fails to proceed with closing after the execution of the support agreement.

In addition, Times Electric has obtained from Messrs. David Banks and Daniel Owen, who collectively own approximately 40.95% of Dynex’s outstanding common equity shares, irrevocable voting and lock-up undertakings to vote their shares in favour of the proposed transaction and (depending on the transaction structure) to tender their shares to the transaction at a price of Cdn$0.55 per share. Times Electric’s purpose in obtaining these voting and lock-up undertakings is to seek to ensure a successful transaction. The voting and lock-up undertakings would be superseded by replacement irrevocable lock-up agreements to be entered into contemporaneously with the execution of a definitive agreement once the form of the transaction is determined.

A separate and potentially additional break fee of 2.5% of the purchase price for 80% of the common equity shares of Dynex (or 100% if Times Electric has provided prior written notice of its intention to proceed with 100%), shall be payable by Dynex upon either of David Banks or Daniel Owen (a) refusing to execute and deliver the related replacement irrevocable lock-up agreements concurrently with the definitive support agreement between Dynex and Times Electric; (b) materially breaching his irrevocable voting and lock-up undertakings; or (c) otherwise failing to proceed with closing.

There can be no assurance that any definitive agreement will be entered into, that any proposed transaction will be accepted or approved by the shareholders of Dynex or that any transaction will be completed as a result of the execution of the letter of intent. Investors are cautioned against trading in Dynex common equity shares based on the fact of this non-binding letter of intent.

Times Electric has stated its intention to retain the services of the senior management team as well as retain Dynex’s manufacturing plant in Lincoln, England.

Dr. Paul Taylor, President and Chief Executive Officer of Dynex, said, “I am very satisfied with this proposed transaction. The firm that is proposing to acquire Dynex is large, highly regarded and has a bright future. We have worked diligently with them over the past five months to achieve this result. We are optimistic the transaction will close on schedule, starting a long and productive working relationship with a company and a management team we greatly admire. We are also pleased with the potential of larger and more reliable capital resources to fund our future developments.”

David Banks, Chairman of Dynex, also commented, “The Board is delighted with this transaction. We are satisfied that the price is fair and we are delighted to have our company in the hands of owners who will help it achieve the great destiny we know it can enjoy as well as look after our people. Our counterparty is made up of people with impressive commercial skill and integrity. We will be very pleased to present this proposed transaction to our shareholders in due course. We are also pleased that some shareholders may remain invested in what we believe will be a strategically exciting firm that will grow in value and importance.”

About Zhuzhou CSR Times Electric Co., Ltd
Times Electric is a limited liability company established in Hunan Province, PRC whose shares are listed and traded on the Hong Kong Stock Exchange. It is a leading supplier of on-board electric systems in the PRC rail-transport industry, and its principal business activities include research and development, design, manufacture and sale of a wide range of mass transit electric drive converters and control systems. The company also produces electrical components including semiconductor devices, sensors and other related products.