Rodeo Capital III Corp.
TSX VENTURE : ROP.P

February 11, 2015 08:00 ET

Rodeo Capital III Corp. Announces Amendment of Arrangement Agreement

CALGARY, ALBERTA--(Marketwired - Feb. 11, 2015) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

Further to its news releases of October 23, 2014, November 24, 2014, December 5, 2014 and January 30, 2015, Rodeo Capital III Corp. ("Rodeo") (TSX VENTURE:ROP.P), a capital pool company pursuant to Policy 2.4 of the TSX Venture Exchange (the "TSX-V"), is providing the following update in regard to its proposed Qualifying Transaction (as defined in TSX-V Policy 2.4) with Solegear Bioplastics Inc. ("Solegear").

Rodeo is pleased to announce that on February 10, 2015, Rodeo and Solegear entered into an amending agreement (the "Amending Agreement") which amends the arrangement agreement between Rodeo and Solegear dated November 24, 2014, as amended on December 3, 2014 (the "Arrangement Agreement"). As previously announced, pursuant to the Arrangement Agreement, among other things, Rodeo proposes to acquire all of the issued and outstanding Solegear Shares (as defined herein) in exchange for Rodeo Shares (as defined herein) by way of a court-approved plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia).

Notwithstanding recent market volatility, Rodeo and Solegear have committed to pursuing the previously announced proposed Qualifying Transaction. The parties have agreed to extend the outside date for the closing of the transaction to March 26, 2015, with Rodeo having a termination right exercisable on or after March 2, 2015 if it is not reasonably satisfied that the Arrangement will be consummated on or before the outside date. Under the terms of the Amending Agreement, Rodeo Shares (as defined herein) will be consolidated at a ratio of 1.75 pre-consolidation Rodeo Shares (previously 2.75 pre-consolidation Rodeo Shares) for every 1 post-consolidation Rodeo Share. The market price for the concurrent Financing (as defined herein) has been reduced from $0.50 per unit to $0.25 per Unit (as defined herein) with a minimum raise of $1.3 million being required to close the Qualifying Transaction.

Pursuant to the Amending Agreement, the following terms of the Arrangement Agreement and the Arrangement have changed:

Concurrent Financing

As previously announced, concurrently with the completion of the Arrangement, and immediately following the Solegear Consolidation (as defined herein), Solegear intends to complete a private placement financing (the "Financing"). The Financing will now consist of an offering of between 5.2 million and 16.0 million units (each, a "Unit") (previously 5.4 million to 8.4 million) with a subscription price of $0.25 per Unit (previously $0.50 per Unit) (all on a post-Solegear Consolidation basis), for gross proceeds of between $1.3 million and $4.0 million (previously $2.7 million and $4.2 million). Each Unit to be issued in the Financing will consist of one common share of Solegear (a "Solegear Common Share") and one-half of one transferable share purchase warrant (a "Solegear Financing Warrant"). Each whole Solegear Financing Warrant will entitle the holder thereof to acquire one additional common share of Solegear (a "Warrant Share") at a price of $0.35 per Warrant Share (previously $0.75 per Warrant Share) until the date that is 36 months (the "Warrant Expiry Date") from the closing of the Arrangement (the "Closing"). In the event the volume-weighted average trading price of the Rodeo Shares on the TSX-V exceeds $0.50 per share (previously $1.00 per share) for a period of 10 consecutive trading days following the closing of the Arrangement, the Company may, at its option, accelerate the Warrant Expiry Date by delivery of notice (a "Warrant Acceleration Notice") to the registered holders thereof and issuing a press release announcing such acceleration (a "Warrant Acceleration Press Release"), and, in such case, the Warrant Expiry Date shall be deemed to be the 30th day following the later of: (i) the date on which the Warrant Acceleration Notice is sent to Warrant holders; and (ii) the date of issuance of the Warrant Acceleration Press Release. Certain of Solegear's existing securityholders will also be converting (the "Debt Conversion") $1.8 million of convertible debt and accrued but unpaid interest thereon into Units before Closing, which, together with the proceeds of the Financing, is anticipated to result in a total equity issuance of $3.1 to $5.8 million.

Bridge Financing

On January 30, 2015, Solegear issued secured convertible promissory notes to Yaletown Venture Partners (the "2015 Notes") in the aggregate initial principal amount of $300,000, with a maximum principal amount of $600,000 (the "Bridge Financing"). It is expected that either Yaletown Venture Partners or a third party will subscribe for the remaining $300,000. These promissory notes bear simple interest at 10% per annum and are convertible on the closing of the Arrangement into Units at a price of $0.1875 per Unit, being 75% of the price at which the Units are issued in the Financing. Upon conversion of the 2015 Notes pursuant to the Arrangement and assuming a maximum principal amount of $600,000 and $5,904.38 of interest, a total of 3,231,490 Units will be issued.

Solegear intends to secure an additional $300,000 to $700,000 in bridge loan financing before the closing of the Arrangement, either by drawing down an additional $300,000 under the convertible notes issued to Yaletown or through the issue of additional promissory notes on similar terms to third party investors, or a combination of the foregoing. There is no guarantee, however, that any such additional bridge loan financing will be made available to Solegear.

Share Consolidations

As a condition of completion of the Arrangement, Rodeo has agreed to consolidate all of the issued and outstanding Rodeo Shares (the "Rodeo Consolidation") at a ratio of 1.75 pre-consolidation Rodeo Shares (previously 2.75 pre-consolidation Rodeo Shares) for every 1 post-consolidation Rodeo Share, resulting in 2,857,143 post-consolidation Rodeo Shares immediately prior to the Closing.

Pursuant to the Arrangement, Solegear will consolidate all of the issued and outstanding Solegear Common Shares and Solegear Preferred Shares (as defined herein) (the "Solegear Consolidation") at a ratio of 1.71561214 pre-consolidation Solegear Shares (as defined herein) (previously 1.741547 pre-consolidation Solegear Shares) to 1 post-consolidation Solegear Share.

Share and Warrant Exchange

The Arrangement Agreement contemplates that immediately following the closing of the Financing, Rodeo will acquire: (a) all of the issued and outstanding Solegear Common Shares and all of the issued and outstanding preferred shares of Solegear (the "Solegear Preferred Shares", and together with the Solegear Common Shares the "Solegear Shares") from the holders of the Solegear Shares (the "Solegear Shareholders") in exchange (the "Share Exchange") for the issuance of Rodeo common shares (each, a "Rodeo Share") and (b) all of the Solegear Financing Warrants from the subscribers in the Financing in exchange (the "Warrant Exchange") for the issuance of Rodeo warrants (the "Rodeo Warrants"), each Rodeo warrant will be exercisable to acquire one Rodeo Share at an exercise price of $0.35 (previously $0.75), and will have a term of three years from the Closing.

The Solegear Common Shares will be exchanged for Rodeo Shares on a one-for-one basis, the Solegear Financing Warrants will be exchanged for Rodeo Warrants on a one-for-one basis, and the Solegear Preferred Shares will be exchanged for Rodeo Shares at a ratio of between approximately 1.16 and 5.36 (previously 1.09 and 3.25) Rodeo Shares per Solegear Preferred Share, depending on the original issue price of the Solegear Preferred Share. The varying exchange ratio for the Solegear Preferred Shares is due to a preference payment built into Solegear's articles which varies on a per-share basis according to the initial issue price for each Solegear Preferred Share.

Upon completion of the Arrangement, 28,778,069 post-consolidation Rodeo Shares will be issued under the Arrangement to Solegear Shareholders, including post-consolidation Rodeo Shares issued pursuant to the Debt Conversion, an aggregate deemed consideration of about $7,194,517, but excluding post-consolidation Rodeo Shares issued pursuant to the Financing and the Bridge Financing.

Escrow Share Block Purchase

In connection with the Closing of the Transaction, Solegear has agreed to cause a principal of the resulting issuer to purchase, within escrow, 1,074,287 Rodeo Shares (previously 450,910 Rodeo Shares) (on a post-consolidation basis) held by the principals of Rodeo, at a price of $0.1225 per Rodeo Share (on a post-consolidation basis).

Amended Filing Statement

As a result of the amendments to the Arrangement Agreement discussed above, Rodeo will be amending its filing statement dated December 4, 2014 (the "Amended Filing Statement") which will be filed on SEDAR. Rodeo will issue a news release announcing the filing of the Amended Filing Statement when it becomes available prior to Closing.

Conditions to Closing

Completion of the Arrangement, as amended by the Amending Agreement, remains subject to a number of conditions, including Solegear Shareholder approval, approval of the TSX-V, approval of the Supreme Court of British Columbia (the "Court") and that the Financing raises at least $1.3 million.

Closing

Rodeo and Solegear have agreed to extend the outside date (the "Outside Date") for the completion of the Qualifying Transaction to March 26, 2015 (previously January 30, 2015). The parties currently anticipate that Closing will occur in early to mid-March, 2015.

Rodeo has also been given a termination right which is exercisable on 48 hours' notice to Solegear on or after March 2, 2015, if at any time following that date Rodeo is not reasonably satisfied that the Arrangement will be consummated on or before the Outside Date.

Solegear and Rodeo continue to market the Financing and the Qualifying Transaction and look forward to the completion of the Financing and the Qualifying Transaction in the first quarter of 2015.

About Solegear

Solegear, based in Vancouver, British Columbia, is an innovator in the field of next-generation plastics. The Company is an advanced materials firm that engineers, produces and distributes high-performance bioplastics (bioplastics are a category of plastics that are bio-based, compostable, or both). Founded in 2006, Solegear has developed, and is commercializing, proprietary bioplastics technologies that utilize annually renewable plant-based ingredients formulated using Green Chemistry, to address the market opportunity in rigid packaging and engineered plastics applications.

Trading Halt

Trading in the Rodeo Shares was voluntarily halted on October 22, 2014 and will remain halted until the documentation required by the TSX-V in connection with the Arrangement has been reviewed and accepted by the TSX-V. Subject to compliance with the policies of the TSX-V, Rodeo may also request that trading in the Rodeo Shares remain halted pending the Closing or abandonment of the Arrangement.

On behalf of the Board of Directors,

Michael Thomson, President, Chief Executive Officer and Director

Rodeo Capital III Corp.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the amended filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Disclaimer for Forward-Looking Information

This press release contains forward-looking statements and information that are based on the beliefs of management and reflect Rodeo's current expectations. When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. The forward-looking statements and information in this press release include information relating to the business plans of Rodeo and Solegear, the Financing, and the Arrangement (including TSX-V approval, Court approval of the Arrangement, approval of the Amending Agreement by the Solegear Shareholders, and the Closing thereof). Such statements and information reflect the current view of Rodeo. Risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following risks:

  • there is no assurance that the Financing will be completed or as to the actual proceeds to be raised in connection with the Financing or as to the offering price to be realized. In particular, the amount raised may be significantly less than the amounts indicated if investors are not prepared to invest;

  • post-Closing, Rodeo may require additional financing from time to time in order to continue its operations. Financing may not be available when Rodeo needs it;

  • information technology, network and data security risks could harm Rodeo's business;

  • Rodeo must invest in technological innovation in order to stay competitive. If Rodeo fails to make investments in technological innovations, its business and results of operations could be adversely affected;

  • new laws or regulations could adversely affect Rodeo's business and results of operations;

  • the stock markets have experienced volatility that often has been unrelated to the performance of companies. These fluctuations may adversely affect the price of Rodeo Shares, regardless of its operating performance;

  • there is no assurance that Solegear Shareholder approval of the Amending Agreement will be forthcoming or that the Court will approve the Arrangement; and

  • there is no assurance that the approval of the TSX-V required to complete the Arrangement will be obtained. Further, approval of the TSX-V may be conditional upon amendments to the Arrangement.

There are a number of important factors that could cause Rodeo's and the resulting issuer's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others: currency fluctuations; limited business history of Rodeo and Solegear; disruptions or changes in the credit or security markets; results of operation activities and development of projects; project cost overruns or unanticipated costs and expenses, fluctuations in the resulting issuer's product prices, and general market and industry conditions.

Rodeo cautions that the foregoing list of material factors is not exhaustive. When relying on Rodeo's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Rodeo has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE REPRESENTS THE EXPECTATIONS OF RODEO AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE RODEO MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Rodeo Capital III Corp.
    Michael Thomson
    President, Chief Executive Officer and Director
    (604) 312-4777
    tsxthomson@gmail.com