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TORONTO and PICKERING, Ontario, Feb. 26, 2018 (GLOBE NEWSWIRE) -- Automodular Corporation (AM.H-NEX) (“AMD”) and HLS Therapeutics Inc. (“HLS”) are pleased to announce that they have entered into an amendment (the “Amendment”) to the arrangement agreement between AMD and HLS dated December 21, 2017, as amended on January 30, 2018 (the “Arrangement Agreement”) in connection with the amalgamation of HLS and AMD by way of a plan of arrangement under the provisions of the Business Corporations Act (Ontario) (the “Arrangement”). Pursuant to the Amendment, AMD and HLS have made certain amendments to the Arrangement Agreement itself, as well as to the attached plan of arrangement and to the terms of the Resulting Issuer Preferred Shares (as defined below) to be issued to shareholders of AMD (each, an “AMD Shareholder”) under the Arrangement.
As previously disclosed, on February 17, 2018 AMD settled its litigation with General Motors (the “GM Claim”). In accordance with the terms of the settlement for the GM Claim, AMD is to receive the settlement proceeds on or before March 6, 2018. The Amendment provides that, subject to receipt by AMD of the proceeds of the GM Claim on or before March 7, 2018, the final step in the Arrangement will be a redemption of Resulting Issuer Preferred Shares held by AMD Shareholders for an aggregate redemption amount of C$6,300,000, such amount representing a recovery by AMD Shareholders of all of the net proceeds from the GM Claim. The Amendment also provides that, if the proceeds of the GM Claim are received after March 7, 2018 and an interim redemption of Resulting Issuer Preferred Shares therefore occurs after closing of the Arrangement rather than as a step in the Arrangement, AMD shareholders will also be entitled to receive all of the net proceeds of the GM Claim (rather than 95% of the net proceeds, as contemplated by the pre-amendment terms of the Resulting Issuer Preferred Shares).
As a result of the settlement of the GM Claim, AMD and HLS have made certain consequential amendments to the form of Claims Administration and Escrow Agreement that will be entered into by AMD prior to the completion of the Arrangement. Assuming receipt of the GM Claim settlement proceeds on or before March 7, 2018, the net settlement proceeds will be paid out to AMD Shareholders under the Arrangement and the cash to be deposited by AMD into the escrow account (governed by the Claims Administration and Escrow Agreement) prior to closing of the Arrangement will be used principally to fund certain administrative costs in connection with post-closing matters, to pay taxes payable by AMD in connection with receipt of the settlement proceeds from the GM Claim, and to cover other legacy claims, if any, that arise on or before December 23, 2020. Following that date, the outstanding Resulting Issuer Preferred Shares will be redeemed in return for the net funds in the escrow account as at that date, if any.
Except as described above, the principal terms and effects of the Arrangement remain unchanged. Under the Arrangement, AMD and HLS will amalgamate to form an amalgamated company to be named “HLS Therapeutics Inc.” (the “Resulting Issuer”). The transaction will constitute a reverse takeover of AMD by HLS under the rules and policies of the TSX Venture Exchange (the “Exchange”). Upon the amalgamation (i) AMD Shareholders will receive, for each common share of AMD held, one preferred share in the capital of the Resulting Issuer (each, a “Resulting Issuer Preferred Share”) and 0.165834 common shares in the capital of the Resulting Issuer (each, a “Resulting Issuer Common Share”) and (ii) shareholders of HLS (each, an “HLS Shareholder”) will receive, for each common share of HLS held, one Resulting Issuer Common Share. Immediately following completion of the Arrangement, former AMD Shareholders are anticipated to own approximately 8% of the issued and outstanding Resulting Issuer Common Shares and 100% of the issued and outstanding Resulting Issuer Preferred Shares and former HLS Shareholders are anticipated to own approximately 92% of the issued and outstanding Resulting Issuer Common Shares.
Assuming receipt of the GM Claim settlement proceeds on or before March 7, 2018, as the last step in the Arrangement, 9,689,289 Resulting Issuer Preferred Shares will be redeemed on a pro rata basis for a total redemption price of C$6,300,000 (or approximately C$0.6502 per redeemed preferred share). For Canadian federal income tax purposes, approximately C$5,925,000 of the total redemption price (or approximately C$0.6115 per redeemed preferred share) will be treated as a return of capital and approximately C$375,000 of the total redemption price (or approximately C$0.0387 per share) will be treated as a deemed dividend. Holders of Resulting Issuer Preferred Shares are hereby notified that the portion of the redemption price treated as a dividend for Canadian tax purposes is designated to be an eligible dividend in accordance with subsection 89(14) of the Income Tax Act (Canada). For U.S. federal income tax purposes, the tax treatment of the redemption will depend on the individual circumstances of each U.S. holder of Resulting Issuer Preferred Shares. For additional information about certain Canadian and U.S. federal income tax considerations for the Arrangement, please refer to the Circular (as defined below) under the headings “Certain Canadian Federal Income Tax Considerations” and “Certain United States Federal Income Tax Considerations”, respectively.
If the settlement proceeds of the GM Claim are not received on or before March 7, 2018, the Arrangement will proceed as originally contemplated (and the Resulting Issuer expects to initiate an interim redemption of Resulting Issuer Preferred Shares post-closing to allow AMD Shareholders to recover the proceeds from the GM Claim), except the Amendment provides that holders of the Resulting Issuer Preferred Shares will receive all of the net proceeds of the GM Claim (rather than 95% of the net proceeds, as contemplated by the pre-amendment terms of the Resulting Issuer Preferred Shares) in connection with such interim redemption.
The boards of directors of AMD and HLS unanimously recommend that AMD shareholders and HLS Shareholders, respectively, vote in favour of the resolutions approving the Arrangement.
The board of directors of AMD is pleased that Institutional Shareholder Services Inc. and Glass Lewis have also previously recommended that shareholders of AMD vote in favour of the Arrangement.
AMD and HLS will proceed to hold a meeting of AMD Shareholders and HLS Shareholders, respectively, to consider the Arrangement on March 6, 2018, as previously announced. Directors and officers of AMD, and Polar Securities Inc., collectively holding approximately 36.1% of the common shares of AMD, have agreed to vote their eligible securities in favour of the Arrangement, pursuant to voting support agreements entered into with HLS. Directors, officers, and certain other shareholders of HLS, holding approximately 88.0% of the common shares of HLS, have agreed to vote their eligible securities in favour of the Arrangement, pursuant to voting support agreements entered into with AMD.
AMD intends to seek an order dismissing the GM Claim with prejudice and without costs upon receipt of the settlement funds.
Shareholders of HLS and AMD who wish to exercise their right to vote by proxy are reminded that they must submit their proxies by March 2, 2018, in accordance with the procedures described in the joint management information circular (the “Circular”) prepared by AMD and HLS in connection with the Arrangement, which has been mailed to AMD Shareholders and HLS Shareholders and is available on www.sedar.com.
A copy of the Amendment (which includes the plan of arrangement and the terms of the Resulting Issuer Preferred Shares) is available on www.sedar.com, and a copy of the Claims Administration and Escrow Agreement will be made available when it is executed by the parties thereto.
About AMD
AMD since 1997 provided sequencing and sub-assembly services for modules that were installed in vehicles assembled by North American Original Equipment Manufacturers at plants in Canada and the United States. AMD provided these services to the Ford Motor Company (“Ford”) until the completion of the multi-year agreement and its related amendments on December 23, 2014. Following the expiry of AMD’s commercial agreement with Ford on December 23, 2014, AMD ceased operations at its two remaining operating facilities in Oakville, Ontario. During the first quarter of 2015 both facilities were returned to the respective landlords. At the current time, AMD has no active operations. The remaining employees have assisted in pursuing the GM Litigation. Both the AMD board of directors and the remaining members of the executive management team have been focused on finding ways to leverage AMD’s cash balance and public company listing.
About HLS
Formed in 2015, HLS is a specialty pharmaceutical company focused on the acquisition and commercialization of late stage development, commercial stage promoted and legacy stage managed branded pharmaceutical products in the North American markets. HLS’s focus is on products targeting the central nervous system and cardiovascular therapeutic areas. HLS’s management team is composed of seasoned pharmaceutical executives with a strong track record of success in these therapeutic areas and at managing products in each of these lifecycle stages.
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 release.
THIS PRESS RELEASE DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION, NOR SHALL THERE BE ANY OFFER, SALE, OR SOLICITATION OF SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SALE, OR SOLICITATION WOULD BE UNLAWFUL.
THE SECURITIES PROPOSED TO BE ISSUED IN THE PROPOSED ARRANGEMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “1933 ACT”) AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT. THE RESULTING ISSUER INTENDS TO ISSUE SUCH SECURITIES PURSUANT TO THE EXEMPTION FROM REGISTRATION SET FORTH IN SECTION 3(a)(10) OF THE 1933 ACT.
Notice on forward-looking statements:
This release includes forward-looking information or forward-looking statements within the meaning of applicable securities laws, which may include, but are not limited to, statements with respect to the completion of the Arrangement, the terms on which the Arrangement is intended to be completed, the ability to obtain regulatory and shareholder approvals and other factors, and the settlement of the GM Claim. Often but not always, forward-looking information can be identified by the use of words such as “expect”, “intends”, “anticipated”, “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would” or “will” be taken, occur or be achieved. Such statements are based on the current expectations and views of future events of the management of AMD and HLS, and are based on assumptions and subject to risks and uncertainties. Although management of each entity believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and neither AMD nor HLS undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
For More Information
AMD Contact Information
Christopher S. Nutt
President and Chief Executive Officer
Automodular Corporation
(905) 420-0200
invest@automodular.com
HLS Contact Information
Ross Marshall
Investor Relations
HLS Therapeutics Inc.
(416) 526-1563
ross.marshall@loderockadvisors.com
Gilbert Godin
President and Chief Operating Officer
HLS Therapeutics Inc.
(484) 232-3400 ext101
g.godin@hlstherapeutics.com