ProPhotonix Announces Merger Agreement

Rhea-AI Summary

ProPhotonix Limited has announced a recommended acquisition by Exaktera, LLC valued at approximately $11.6 million ($0.117 per share), pending stockholder approval at a meeting on December 15, 2021. The acquisition represents a premium of 54.6% over the thirty-day average closing price. The ProPhotonix board unanimously endorses the deal, which includes plans for the company's shares to be delisted from AIM following completion. Tim Losik, CEO, will receive a $300,000 performance bonus upon closure, with the board asserting the transaction is in the best interest of stockholders.

Positive

• Acquisition price offers a premium of approximately 54.6% over the thirty trading day average closing price.
• Transaction has unanimous board approval, indicating strong confidence in the acquisition.
• CEO Tim Losik's performance bonus of $300,000 reflects positive leadership during challenging periods.

Negative

• The acquisition requires stockholder approval which introduces uncertainty.
• Cancellation of trading on AIM means loss of a formal market for shares and fewer disclosures.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

SALEM, NH / ACCESSWIRE / November 11, 2021 / The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

RECOMMENDED CONDITIONAL CASH ACQUISITION

of

ProPhotonix Limited ("ProPhotonix" or the "Company")

by Exaktera, LLC ("Exaktera")

through its wholly owned subsidiary PPL Merger Sub Inc. ("Merger Sub")

to be effected under the terms of a merger agreement by and among ProPhotonix, Exaktera and Merger Sub

Proposed Cancellation from Trading on AIM

Related Party Transaction

ProPhotonix, a designer and manufacturer of LED illumination systems and laser diode modules with operations in Ireland and the United Kingdom, is pleased to announce that it has reached an agreement on the terms of a recommended acquisition ("Acquisition") under which Exaktera will, subject to stockholder approval, acquire all of the outstanding shares of ProPhotonix ("Company Common Stock") for an aggregate consideration of approximately $11,600,000 (which equates to £8,700,000 as of the date of the Merger Agreement, as defined below) in cash (or $0.117 per share) pursuant to the terms of an agreement and plan of merger entered into on 10 November 2021 between ProPhotonix, Exaktera, Merger Sub and others (the "Merger Agreement"). All amounts shown in Pounds Sterling (£) are based on the closing foreign currency rate as at 10 November 2021.

Exaktera was founded by Union Park Capital ("Union Park") to act as a holding company for a group of companies Union Park is building in the high-precision OEM market.

The ProPhotonix Board of Directors (the "Board") unanimously approved the Merger Agreement and has recommended that the Stockholders vote in favour of adoption of the Merger Agreement. As described in greater detail below, this transaction will require the approval of Stockholders at the Stockholders Meeting of the Company to be held on 15 December 2021 as described below. At the same time, and conditional upon the successful approval of the Merger Agreement, the Company is also seeking Stockholder approval for the proposed cancellation of the Company's common stock from trading on AIM, a market of the London Stock Exchange. Further details of which, including a timetable of principal events, are set out below.

Certain capitalized terms used in this announcement have the meanings specified in the Appendix affixed hereto.

Key terms of the Acquisition

• Under the terms of the Merger Agreement, Stockholders will be entitled to receive $0.117 (which equates to £0.087 as of the date of the Merger Agreement) for each share of Company Common Stock.
• The Acquisition Price is fixed and will be paid in US Dollars.
• The Acquisition Price values the entire issued and to be issued share capital of the Company at approximately $11.6 million (which equates to £8.7 million as of the date of the Merger Agreement) and represents a premium of:
  • 1. approximately 54.6% over the thirty trading day average closing price of the Company's Common Stock on the OTC market of $0.076 ending on 9 November 2021; and
  • 2. approximately 53.8% over the thirty trading day average closing price of the Company's Common Stock on AIM of 0.056 pence ending on 9 November 2021.
• As at the date of this announcement, ProPhotonix has 93,300,402 shares of Company Common Stock outstanding and admitted to trading on AIM.
• Tim Losik, the Company's CEO, has agreed to personally indemnify the acquiror for damages up to $341,362 resulting from the potential breach of certain representations and warranties by the Company in the merger agreement.
• Merger Sub is a newly incorporated company formed for the purpose of implementing the Acquisition. Merger Sub has not carried on any business prior to the date of the Merger Agreement and has not prepared any historical financial accounts. The Acquisition is proposed as a merger of Merger Sub with and into the Company, in accordance with the Delaware General Corporation Law, with the Company being the surviving corporation. The Acquisition is not governed by the UK City Code on Takeovers and Mergers ("Takeover Code") by virtue of ProPhotonix's status as a corporation incorporated in Delaware with its registered office located outside the UK. Accordingly, the Acquisition is not subject to the jurisdiction of, nor is it being regulated by, the Panel on Takeovers and Mergers in the UK and Stockholders will not be afforded the protections of the Takeover Code.
• The Acquisition is subject to the approval of Stockholders at the Stockholders Meeting of the Company to be convened by way of an explanatory circular and notice of meeting ("Proxy Statement") to be published as soon as practicable and, in any event, within 30 days of the date of this Announcement. A copy of this document will also be available, pursuant to the Aim Rules for Companies, on the Company's website (www.prophotonix.com) from that date. Please see "Expected Timetable of Principal Events" below. At the Stockholders Meeting, the Stockholders will be asked to consider and vote on two resolutions (the "Resolutions") as follows:
  • 1. a resolution approving and adopting the Acquisition and the terms of the Merger Agreement (the "Merger Resolution"), which resolution will require approval by Stockholders holding a majority (greater than 50%) of the issued and outstanding shares of Company Common Stock entitled to vote at the Stockholders Meeting; and
  • 2. a resolution approving the cancellation of the admission of the Company's Common Stock from trading on AIM prior to the closing of the Acquisition (the "Delisting Resolution"), which resolution will require approval by Stockholders holding at least 75% of the votes cast at the Stockholders Meeting.
• In connection with the entry into the Merger Agreement, Tim Losik, holding approximately 15.6 percent of the outstanding Company Common Stock, entered into the Joinder Agreement, which, among other things, obligates him to affirmatively vote all of his shares of Company Common Stock in favour of the Resolutions and against any competing proposal.
• The Board considers the terms of the Acquisition to be fair to all Stockholders. Accordingly, the Board has unanimously approved the transaction and intends unanimously to recommend that the Stockholders vote in favour of the Resolutions to be proposed at the Stockholders Meeting.
• The Proxy Statement, which will be posted to stockholders shortly after this Announcement, incorporates a notice convening the Stockholders Meeting at 11:30 a.m. Eastern Time (U.S.) on 15 December 2021 at the offices of Nutter, McClennen & Fish LLP, 155 Seaport Boulevard, Boston, Massachusetts, 02210, United States.
• The Acquisition is subject to the satisfaction or waiver of the conditions and further terms that are set out in the Merger Agreement and will be further described in the Proxy Statement.
• Conditional to the Acquisition closing, Tim Losik, the president and chief executive officer of the Company will receive a performance/retention bonus of US$300,000 (which equates to £225,000 as of the date of the Merger Agreement) (the "Performance Bonus") in recognition of the many contributions he made to the Company, including exceptional leadership through challenging periods (including but not limited to those resulting from the COVID-19 global pandemic), reducing the debt burden on the Company (thereby eliminating the Company's dependence on lenders and debt), strengthening the Company's balance sheet, voluntarily reducing his compensation to reduce expenses during the COVID-19 pandemic and then being the last employee to reinstate his full salary, frequent international travel on behalf of the Company, improved operational and financial results, leadership in connection with the Company's efforts to identify and consummate a favorable transaction with an acquiror and his willingness to remain an employee of the Company subsequent to the closing of the transaction. The bonus was approved by the Governance, Nominations and Remuneration committee of the Board at a meeting held on 10 November 2021. Given the nature of this payment, it is deemed to be a related party transaction pursuant to AIM Rule 13 of the AIM Rules for Companies, and further details on this are set out below.

The Board considers the Acquisition to be advisable and in the best interests of the Stockholders. Accordingly, the Board unanimously recommends that Stockholders vote in favour of the Resolutions to be proposed at the Stockholders Meeting.

Proposed Cancellation

If the Merger Agreement is approved then, following the associated Merger, the Common Stock of the Company will cease to exist in its current form and accordingly the Directors have agreed it is necessary to seek the Cancellation. In accordance with Rule 41 of the AIM Rules for Companies ("AIM Rules"), the Company has notified the London Stock Exchange of the proposed Cancellation which is conditional upon the consent of not less than 75 per cent. of votes cast by the Company's stockholders in the meeting detailed above

Subject to the relevant resolutions being passed at the stockholder meeting, it is anticipated that trading in the Common Stock on AIM will cease at close of business on 16 December 2021 with Cancellation taking effect at 7.00 am on 17 December 2021. A full timetable of events is set out below.

Upon Cancellation becoming effective, WH Ireland will cease to be nominated adviser and broker to the Company and the Company will no longer be required to comply with the AIM Rules.

The principal effects of the Cancellation would be that:

• there would no longer be a formal market mechanism enabling Stockholders to trade their shares on AIM or any other market or trading exchange;
• the Company would not be bound to announce material events, administrative changes or material transactions nor to announce interim or final results;
• the Company would no longer be required to comply with any of the additional specific corporate governance requirements for companies admitted to trading on AIM; and
• the Company would no longer be subject to the AIM Rules and Stockholders will no longer be required to vote on certain matters as provided in the AIM Rules.

Related Party Transaction

The payment of the Performance Bonus is deemed to be a related party transaction pursuant to AIM Rule 13 of the AIM Rules for Companies. The Company's board of directors (excluding Tim Losik, who is the recipient of the Performance Bonus) having consulted with Company's Nominated Adviser, WH Ireland Limited, consider that the terms of the Performance Bonus are fair and reasonable insofar as the Stockholders of the Company are concerned.

For Further Information:

ProPhotonix Limited:

Tim Losik

President and CEO

Tel: +1 603 893 8778

Email: ir@prophotonix.com

WH IRELAND LIMITED (NOMAD and Broker):

Katy Mitchell/Harry Ansell

Nominated Adviser and Broker

Tel: +44 (0) 20 7220 1666

Please click on, or paste the following URL into your web browser to view the full announcement:

http://www.rns-pdf.londonstockexchange.com/rns/0696S_1-2021-11-11.pdf

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

SOURCE: ProPhotonix Limited

View source version on accesswire.com:
https://www.accesswire.com/672310/ProPhotonix-Announces-Merger-Agreement

FAQ

What is the acquisition price for ProPhotonix?

The acquisition price is approximately $11.6 million, equating to $0.117 per share.

When will the stockholder meeting for the acquisition take place?

The stockholder meeting is scheduled for December 15, 2021.

What premium does the acquisition offer over previous trading prices?

The acquisition offers a premium of about 54.6% over the thirty trading day average closing price.

What will happen to ProPhotonix shares after the acquisition?

ProPhotonix shares will be delisted from AIM following the completion of the acquisition.

Who is indemnifying Exaktera in the acquisition?

Tim Losik, the CEO of ProPhotonix, has agreed to indemnify Exaktera for up to $341,362.