Power/Lumenpulse -- summary under Privatizations

Overview

Under the proposed privatization of the Corporation pursuant to a CBCA Plan of Arrangement, the public shareholders would receive cash for their common shares, and the specifically-listed “Rollover Shareholders” (holding 38% of the common shares) would receive common shares of the newly-incorporated purchaser, which is an indirect subsidiary of Power Corporation of Canada. The Circular does not mention whether the “Rollover” contemplated is under s. 85 or 85.1.

The Corporation

A TSX-listed CBCA corporation that manufactures LED lighting solutions. 25,941,748 common shares (the “Common Shares”) are issued and outstanding.

The Purchaser

The Purchaser was incorporated under the CBCA and is a wholly-owned Subsidiary of Power Energy Corporation, which is a wholly-owned subsidiary of Power Corporation of Canada and was established in 2012, with an objective to invest in the sustainable and renewable energy sector.

Rollover Shareholders

The Rollover Shareholders are shareholders listed in the Circular who collectively own or exercise control or direction over approximately 38% of the outstanding common shares of the Corporation and have agreed pursuant to their respective support and voting agreements to transfer common shares of the Corporation to the Purchaser in exchange for shares of the Purchaser as part of the Arrangement. The Rollover Shareholders include François-Xavier Souvay (the Chairman, President and CEO), who holds 4,175,003 common shares (16.1% of the issued and outstanding).

Plan of Arrangement

(a) each Shareholder, other than the Rollover Shareholders in respect of Common Shares transferred to the Purchaser in exchange for Purchaser Shares and other than dissenting Shareholders, will be entitled to receive from the Purchaser $21.25 in cash for each Common Share;

(b) each Rollover Shareholder will be entitled to receive one common share of the Purchaser for each Common Share transferred to the Purchaser;

(c) each holder of vested Options shall be entitled, at his/her option, to either (i) receive a cash payment from the Corporation for each vested Option in an amount equal to $21.25 less the applicable exercise price and applicable withholding in respect of such Option; or (ii) continue to hold each vested Option which shall be governed by the Stock Option Plan and any applicable Option Agreement;

(d) each holder of unvested Options shall continue to hold such options, which shall be governed by the Stock Option Plan as amended to take into account the privatization of the Corporation; and

(e) each holder of DSUs, RSUs or PSUs, whether vested or unvested, shall be entitled to receive a cash payment from the Corporation for each unit equal to the amount of $21.25, less applicable withholding (which assumes, in the case of any unvested PSUs, a level of attainment of the Corporation's performance objectives at 100%).

Debt financing of privatization

Pursuant to a debt commitment letter dated April 26, 2017, a Canadian Chartered Bank has agreed to make available to the Purchaser a 5-year non-revolving term facility in the principal amount of $100,000,000. The proceeds will be used to finance a portion of the total consideration payable by the Purchaser in connection with the Arrangement.

Equity financing of privatization

On April 26, 2017, the Purchaser entered into equity commitment letters with each of Power Energy and Mica3 (an entity controlled by Michel Ringuet, a director of the Corporation) pursuant to which they agreed to make direct or indirect cash equity investments in the Purchaser in a maximum aggregate amount of $277,000,000 in the case of Power Energy (such amount to be reduced, as applicable, in the event that the Purchaser does not require the full amount by reason of the Purchaser having obtained funds from other sources) and $3,000,000 in the case of Mica3 to finance a portion of the total consideration payable by the Purchaser in connection with the Arrangement.

Canadian tax consequences

A resident Canadian shareholder (other than a Rollover Shareholder, whose consequences are not discussed) will realize a capital gain (or a capital loss) equal to the amount by which the aggregate cash payment exceeds (or is less than) the aggregate of the adjusted cost base to the resident holder of such Common Shares and any reasonable costs of disposition.