Press release from Filing Services Canada
Carmanah Signs Definitive Merger Agreement with SOL Inc.
Monday, May 26, 2014
Carmanah Signs Definitive Merger Agreement with SOL Inc.21:54 EDT Monday, May 26, 2014
FSC / Press Release
Carmanah Signs Definitive Merger Agreement with SOL Inc.
NOT FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
Victoria, British Columbia CANADA, May 26, 2014 /FSC/ -Carmanah Technologies Corporation (TSX: CMH) ("the Company" or "Carmanah") today announced that it has signed a definitive merger agreement with SOL Inc., a privately-owned Florida-based company that designs, manufactures and sells solar outdoor LED lighting solutions ("SOL"), pursuant to which SOL will become a wholly owned subsidiary of Carmanah. The Company had previously announced a deal to acquire SOL on March 21, 2014 after the signing of a Letter of Intent.
Michael Sonnenfeldt, the Company's chairman of the board and largest shareholder, is also the majority shareholder of SOL. As a result of this common ownership, this transaction is considered a "related party transaction" for purposes of applicable Canadian securities laws, and the Company assembled an independent committee of the Company's directors to review the proposed transaction and oversee the negotiations and completion of a formal independent valuation and fairness opinion. The work of this independent committee and the results of the formal valuation and fairness opinion, along with background information on SOL and the merger will be contained in an information circular to be provided for an upcoming shareholders meeting at which shareholders of Carmanah will be asked to approve the transaction. Mr. Sonnenfeldt will not be entitled to vote any shares of Carmanah which he owns in respect of the resolution to approve the transaction.
Along with the definitive merger agreement, Carmanah has also signed a note purchase agreement. Under both of these agreements, Carmanah will issue 38,163,176 of its common shares to acquire (1) all of SOL's outstanding shares and (2) an outstanding related party debt beneficially owned by SOL's controlling shareholder, Mr. Sonnenfeldt. An additional earn-out of 3% of total revenues received by Carmanah is available to electing former shareholders of SOL. This earn-out applies to 10 specifically identified prospective sales opportunities brought forth by SOL and is subject to various conditions. Most significantly, each of these projects must result in revenues of at least $5.0 million and the sales order must be received and accepted by Carmanah prior to December 31, 2015, although cash and delivery can occur after that date. Mr. Sonnenfeldt and certain of his affiliates have elected to waive their right to receive all earn-out payments should they accrue. Accordingly any earn-out payment will be payable to the remaining SOL shareholders on a proportional basis.
The list of the 10 projects has been provided by Sol. These projects, a list of which will not be publicly disclosed for competitive reasons, have aggregate sales potential of more than $450 million. The projects are at various stages of development, with most in early points of discussion or evaluations. One project, with a sales potential of approximately $90 million, is the subject of an executed supply agreement. Notwithstanding the executed supply agreement, Carmanah is aware of significant conditions that must be met in order for this project to proceed and has no ability at this stage to predict if these conditions will be met or if the project will proceed. The same or greater degrees of uncertainty exist for all other projects.
Shareholders should be cautious about the prospects of these 10 projects. While Carmanah management is encouraged to be taking over a high value pipeline of potential projects, there is no clear way to determine at this stage if any of the projects will come to fruition.
The definitive agreement includes customary representations, warranties and covenants by the parties. In addition, Carmanah and certain SOL shareholders beneficially owning at least 89% of SOL's outstanding shares, including Mr. Sonnenfeldt, have entered into a voting and indemnity agreement pursuant to which (i) such SOL shareholders have agreed, among other things, to vote all of the SOL shares held by them in favor of the merger and to indemnify Carmanah for certain losses in connection with the merger and (ii) Carmanah has agreed to indemnify such shareholders for certain losses in connection with the merger.
Completion of the merger is subject to a number of conditions including: (a) absence of any change in the affairs of SOL or Carmanah that would have a material adverse effect on the relevant entity or its business between now and the closing; and (b) receipt of all necessary approvals, including the approval of the Toronto Stock Exchange and the approval of shareholders of Carmanah at the annual general meeting currently scheduled to be held on or about June 23, 2014. There can be no assurance at this point that all such conditions will be satisfied and, in the event any conditions are not satisfied or waived, the transaction would not be completed. If all conditions are satisfied or waived, the transaction is currently expected to close on or about July 1st, 2014.
The securities described in this press release have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent an exemption from such registration requirements.
About SOL Inc.
SOL Inc. is a global leader in commercial outdoor LED lighting solutions powered by solar energy and the market leader in North America. Over the past two decades, the company has installed more than 60,000 systems in more than 60 countries on six continents. SOL Inc. has provided reliable, cost-effective, customized and esthetically pleasing solar lighting solutions for a wide range of lighting applications including roadways, parking lots, paths and trails, perimeter security, campuses, military bases, storage areas and for ad lights or monument signs. SOL's lighting solutions are less expensive than grid-tied lighting for many applications because they eliminate the cost of wiring, trenching and other electrical and utility costs. For more information, please visit www.solarlighting.com."
About Carmanah Technologies Corporation
As one of the most trusted names in solar technology, Carmanah has earned a reputation for delivering strong and effective solar products for roadway, marine, airfield, traffic and obstruction applications worldwide. With products proven to perform reliably in some of the world's harshest environments, Carmanah solar LED lights, signaling and solar power systems provide durable, dependable and cost effective alternatives. Carmanah is a publicly traded company, with common shares listed on the Toronto Stock Exchange under the symbol "CMH". For more information, visit www.carmanah.com.
Carmanah Technologies Corporation:
Stuart Williams, (250) 380-0052
Chief Financial Officer/Corporate Secretary
Statements contained in this news release relating to future results, events or developments and statements containing the words "believes," "may," "could", "plans," "will," "estimate," "continue," "anticipates," "intends," "expects", "goal" and similar expressions, are "forward-looking statements" or "forward-looking information" under applicable Canadian securities laws. Forward-looking information relates to future events or future performance and reflects management of Carmanah's expectations or beliefs regarding future events. Examples of forward-looking information in this news release include, but are not limited to, statements with respect to the potential transactions involving SOL.
Forward-looking statements or information are subject to the related assumptions made by Carmanah and involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from those expressed or implied by such statements or information. Such factors and assumptions include, but are not limited to: uncertainty regarding the timing and satisfaction of closing conditions to the merger and debt purchase, including receipt of shareholder and regulatory approvals; uncertainty regarding the potential benefits of the merger; uncertainty regarding the amount of earn-out consideration that may be earned and paid.
Given the uncertainties, assumptions and risks, readers are cautioned not to place undue reliance on such forward-looking statements or information. We disclaim any obligation to update, or to publicly announce any revisions to, any such statements or information to reflect future results, events or developments, except as required by law.
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