TORONTO, May 16, 2017 /CNW/ - Redknee Solutions
Inc. ("Redknee" or the "Company") (TSX: RKN)
announces that it has entered into a non-binding letter of intent
in respect of a proposed transaction that will accelerate the
Company's previously announced Strategic Plan, which is aimed at
creating a strong platform for long-term growth, simplified
operations, and sustained profitability. The proposed transaction
(the "Proposed Transaction") will be comprised of:
- a rights offering by the Company for a subscription price per
right of no more than the Canadian dollar equivalent of
US$0.50, subject to any adjustments
required under applicable law, and for aggregate gross proceeds of
no less than US$54 million, which rights offering will be
backstopped by Wave Systems Corp. ("Wave"), an affiliate of
ESW Capital LLC ("ESW"), for an amount of rights of up to
100% of the rights offering (the "Rights Offering"); and
- contemporaneously with the closing of the Rights Offering, the
entering into of (i) a services agreement between the Company
and Crossover Markets, Inc. or an affiliate thereof
("Crossover") pursuant to which Crossover will provide the
Company with access to service providers (the "Crossover
Services Agreement"), and (ii) a technology services
agreement between the Company and DevFactory FZ-LLC or an affiliate
thereof ("DevFactory") pursuant to which DevFactory will
provide certain technology services to the Company (the
"DevFactory Services Agreement" and, together with the
Crossover Service Agreement, the "Services Agreements").
Each of Crossover and DevFactory is an affiliate of ESW.
In connection with the Proposed Transaction, Wave will be
granted a warrant to acquire 2,500,000 subordinate voting shares at
a price of US$0.50 per share as a fee
for providing the Standby Guarantee (the "Standby Guarantee
Fee").
The Proposed Transaction is subject to a number of conditions
including, the following:
- the negotiation and entering into of a standby purchase
agreement between the Company, ESW and Wave pursuant to which Wave
will agree to subscribe for all of the rights offered under the
Rights Offering that were not otherwise subscribed for and taken up
under the Rights Offering;
- negotiation of the proposed Services Agreements;
- the independent directors of the board of directors of the
Company (the "Board") shall have approved the Proposed Transaction,
including the approval of the Rights Offering and the approval of
the terms and conditions of the Services Agreements;
- the receipt of all required regulatory approvals in respect of
the Proposed Transaction shall have been obtained, including
approvals under applicable securities laws and the rules of the
Toronto Stock Exchange; and
- shareholder approval of the Rights Offering and Standby
Guarantee Fee.
Both the Company and Wave are committed to closing this
transaction in the shortest allowable timeframe and, as such, the
parties have begun to work on definitive documentation.
Services Agreements
Implementation of Redknee's strategy of customer success
requires an immediate need to respond to the challenges arising
from global restructuring of the Company and dedicate resources in
areas where there are gaps. As a result, the Company intends to
retain the services of Crossover and DevFactory as the go-to
service providers with proven skills, efficiencies and quality to
meet the requirements of the Company.
The independent directors have engaged KPMG to share leading
practices for 3rd party services agreements including but not
limited to contract terms and conditions, governance, service
levels, and retained organizational roles. Additionally, the
independent directors have requested KPMG to provide observations
on the two proposed Services Agreements.
The Services Agreements previously announced on May 8, 2017 have been amended and form part of
the conditions necessary to closing the Proposed Transaction.
Amendments are as follows:
- The Short-Term Crossover Services Agreement shall not have
expired or been terminated in accordance with its terms, and: (i)
its term shall have been extended from six (6) weeks to twelve (12)
weeks; and (ii) the hiring cap of 125 shall be amended to 250.
- The Short-Term DevFactory Services Agreement shall not have
expired or been terminated in accordance with its terms, and its
term shall have been extended from six (6) weeks to twelve (12)
weeks.
Shareholder Approval of Rights Offering and Standby Guarantee
Fee
As the Rights Offering is conditional on the entering into of
the Services Agreements to which affiliates of ESW are parties, the
Rights Offering is considered to be a related party transaction for
purposes of Multilateral Instrument 61-101 Protection of
Minority Security Holders in Special Transactions ("MI
61-101"). As such, the Rights Offering will be subject to
receipt of approval of a majority of the minority of the
shareholders of the Company, excluding ESW and its
associates. The Rights Offering will be exempt from the
formal valuation requirements of MI 61-101 as the consideration to
Wave in connection with the Rights Offering is the subordinate
voting shares of the Company and the Standby Guarantee Fee.
The Standby Guarantee Fee is also subject to receipt of
required shareholder approval under applicable securities law.
ESW's direct and indirect ownership of the subordinate voting
shares of the Company will increase from 13% to 56% if Wave
subscribes for all of the rights offered under the Rights Offering
that were not otherwise subscribed for and taken up pursuant to the
proposed standby purchase agreement.
In addition, pursuant to the terms of the subscription agreement
entered into between ESW, Wave and the Company dated December 18, 2016, Wave has the right, but not
the obligation, to subscribe for additional subordinate voting
shares of the Company at the rights offering subscription price, to
ensure that following the Rights Offering, the fully-diluted
ownership of Wave and ESW, excluding the shares underlying the
Standby Guarantee Fee, remains at 39% of the outstanding
subordinate voting shares. The issuance of additional
subordinate voting shares to Wave pursuant to this right is subject
to receipt of all necessary regulatory and shareholder
approvals.
After a rigorous review of potential financing options, the
Independent Directors, Board and Management have agreed that this
transaction is the best course of action for shareholders and will
allow them to participate in the long-term upside of the company.
The Board firmly believes that this transaction will create
significant value for shareholders and will enable Redknee to
effectively execute on its strategic plan.
Upon entering into of definitive documentation, Redknee intends
to call and hold a special meeting of the shareholders of the
Company to obtain shareholder approval in respect of the Proposed
Transaction (the "Meeting"). Additional information
regarding the Proposed Transaction will be outlined in the
Company's Information Circular to be delivered to shareholders in
connection with the Meeting and the rights offering circular to be
filed in connection with the Rights Offering.
"This transaction is a crucial milestone in our journey to
create the One Redknee Way. We have to refocus our efforts and
ensure that we make our customers successful, in turn, making
Redknee successful," said Danielle
Royston, CEO, Redknee. "The capital we raise from this
offering will enable us to invest in key areas of the business such
as: delivering success to our customers, reskilling critical teams,
hiring top talent, and removing inefficiencies. We look forward to
rebuilding Redknee."
About Redknee
Redknee monetizes today's digital world. We provide a complete
portfolio of mission-critical monetization and subscriber
management solutions and services that allow communications service
providers to charge for things in new and innovative ways.
Redknee's real-time billing, charging, policy and customer care
offerings provide the agility and scalability to drive a unique
user experience, increase profitability and support any new product
or business model. Available on premise, cloud-based, or as a
Software-as-a-Service, Redknee's low-risk, flexible solutions power
more than 250 communication service providers across the globe.
Established in 1999, Redknee Solutions Inc. (TSX: RKN) is the
parent of the wholly-owned operating subsidiary Redknee Inc. and
its various subsidiaries.
References to Redknee refer to the combined operations of those
entities. For more information about Redknee and its solutions,
please go to www.redknee.com.
SOURCE Redknee Solutions Inc.