LANGLEY, BC - Hardwoods Distribution Income Fund (the "Fund") today announced that the Supreme Court of British Columbia has approved the calling of a meeting of its unitholders to approve the previously announced conversion from an income trust structure to a publicly traded corporation called "Hardwoods Distribution Inc." at its annual general and special meeting of unitholders scheduled for May 19, 2011. If approved by unitholders at the meeting and by the Supreme Court of British Columbia, the conversion is expected to be completed on July 1, 2011.
The Fund also announced today that it has entered into an arrangement agreement with its subsidiaries and a support agreement (the "Support Agreement") with Sauder Hardwoods Inc., Hardwoods Inc. and certain of their affiliated entities and associates (the "Sauder Parties"). Sauder Hardwoods Inc. and Hardwoods Inc. are the holders of a 20% interest in the Fund's operating subsidiaries Hardwoods Specialty Products LP and Hardwoods Specialty Products US LP (collectively, "Hardwoods") in the form of special voting units of the Fund and Class B limited partner units of Hardwoods (the "Retained Interest").
Pursuant to the Support Agreement, the Sauder Parties have agreed to vote the 270,000 units and 3,602,500 special voting units of the Fund held by them in favour of the special resolution approving the conversion. The Sauder Parties have also agreed to amend the ratio at which the Retained Interest may be exchanged from one unit of the Fund to 0.3793 units of the Fund and to exchange their Retained Interest as part of the conversion for common shares of Hardwoods Distribution Inc. at the new exchange ratio, subject to the conversion becoming effective on or before July 1, 2011.
The proposed conversion transaction was announced by the Fund in its news release of April 5, 2011. Under the conversion transaction, Hardwoods will continue to conduct the business but will now be wholly owned by Hardwoods Distribution Inc. Holders of units of the Fund will receive one common share of Hardwoods Distribution Inc. for each unit of the Fund held by them and the Retained Interest will be exchanged for common shares of Hardwoods Distribution Inc. at the new exchange ratio. Upon completion of the conversion transaction, Sauder Hardwoods Inc. and Hardwoods Inc. will hold an aggregate of 1,366,428 common shares of Hardwoods Distribution Inc., representing approximately 8.56% of the issued and outstanding shares, and the other Sauder Parties will hold an aggregate of 270,000 common shares of Hardwoods Distribution Inc., representing approximately 1.69% the issued and outstanding shares.
It is expected that the Trustees of the Fund (Messrs. Holland, Purchase and Wilson) and Messrs. Lawrence Sauder and William Sauder, all of whom are the current directors of the general partner of Hardwoods Specialty Products LP, will become the directors of Hardwoods Distribution Inc., and the current officers and management of Hardwoods will become officers and management of Hardwoods Distribution Inc.
About the Fund
Hardwoods Distribution Income Fund is an unincorporated, open-ended, limited purpose trust established to hold, indirectly, securities which represent an 80% ownership interest in Hardwoods.
Hardwoods is one of North America's largest distributors of high-grade hardwood lumber and sheet goods to the cabinet, moulding, millwork, furniture and specialty wood products industries. The company currently operates a network of 26 distribution centers in the U.S. and Canada.
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