TORONTO, Dec. 19, 2016 /CNW/ - Redknee Solutions Inc. ("Redknee" or the "Company") (TSX: RKN) announced today that it has received an unsolicited offer from ESW Capital, LLC ("ESW Capital") and Wave Systems Corp. (the "ESW Capital Investor"), an affiliate of ESW Capital, for an alternative financing transaction (the "ESW Capital Offer"). Under the ESW Capital Offer, Redknee would complete a private placement of 800,000 Series A Preferred Shares of the Company (the "Preferred Shares") and a common share purchase warrant (the "ESW Capital Warrant") to the ESW Capital Investor for gross proceeds of US$83.2 million. The Warrant would entitle the ESW Capital Investor to acquire a number of common shares (each a "Warrant Share") equal to US$60,000,000 divided by the exercise price per Warrant Share (the "Warrant Exercise Price"). The ESW Capital Warrant would be exercisable to acquire a number of Warrant Shares that would result in fifty percent less dilution to Redknee shareholders as compared to the Constellation Warrant (defined below). Additionally, pursuant to the ESW Capital Offer, (i) all or any part of the Preferred Shares will be redeemable by the Company from time to time without the payment of any redemption premium in addition to accrued and unpaid dividends on the Preferred Shares, as is contemplated under the Constellation Agreement (defined below); and (ii) the ESW Capital Investor would assume the obligation to pay the Constellation Termination Payment in the amount of US$3.2 million (described below) payable under the terms of the Constellation Agreement, which payment would non-refundable and credited against ESW Capital Investor's obligation to pay the proceeds of US$83.2 million to the Company on closing.

The Company's Board of Directors (the "Board") has, in good faith, unanimously determined, after receiving the advice of its financial advisors and outside counsel, that the ESW Capital Offer constitutes a superior proposal within the meaning of the Constellation Agreement.

As previously announced by the Company on December 9, 2016, the Company entered into an agreement (the "Constellation Agreement") with Constellation Software Inc. ("Constellation") and a subsidiary thereof (the "Constellation Investor") providing for an investment of US$80 million in Redknee. The Constellation Agreement provides for a private placement of 800,000 Preferred Shares and a common share purchase warrant (the "Constellation Warrant") for gross proceeds of US$80 million to the Constellation Investor. The Constellation Warrant would entitle the Constellation Investor to acquire a number of Warrant Shares equal to US$120,000,000 divided by the Warrant Exercise Price. The Constellation Agreement provides that in the event that Redknee receives a competing proposal that is considered to be superior by Redknee to the transaction contemplated by the Constellation Agreement, the Constellation Investor has the right to offer to amend the Constellation Agreement such that the competing proposal is no longer a superior proposal within a 5 business day matching period.  If the Constellation Investor does not make such an offer, Redknee has a customary "fiduciary out" provisions that entitle Redknee to terminate the Constellation Agreement and make the payment of a break free on termination (the "Constellation Termination Payment"), and enter into an agreement with the party having made a superior proposal.

In accordance with the Constellation Agreement, Redknee has notified the Constellation Investor of the Board's determination that the ESW Capital Offer is a superior proposal and that subject to the Constellation Investor's rights under the Constellation Agreement, it has determined to accept the ESW Capital Offer. The Constellation Investor now has five business days, expiring at 11:59 p.m. on December 23, 2016 (the "Response Period"), during which it may choose to make a proposal which it believes would cause the ESW Capital Offer to no longer constitute a superior proposal (a "Matching Proposal").

If Constellation and the Constellation Investor make a Matching Proposal and the Board determines in good faith, after consultation with its financial advisors and outside counsel, that the ESW Capital Offer no longer constitutes a superior proposal, the Board will support an amended transaction with Constellation and the Constellation Investor. Otherwise, following the expiry of the Response Period, the Company may terminate the Constellation Agreement, pay the Constellation Termination Payment of US$3.2 million and execute an agreement (the "ESW Capital Agreement") with the ESW Capital Investor and ESW Capital in respect of the ESW Capital Offer.

The ESW Capital Offer provides for, among other things, a non-solicitation covenant on the part of the Company, subject to a customary "fiduciary out" provision that entitles the Company to consider and accept a superior proposal subject to the right of the ESW Capital Investor to match, over a period of two business days, the superior proposal and the payment to the ESW Capital Investor of a termination payment of US$3.2 million.

If accepted, the ESW Capital Agreement will be subject to the approval of the holders of common shares of the Company, of: (a) the issuance of the Preferred Shares and the ESW Capital Warrant, as required pursuant to the rules of the Toronto Stock Exchange ("TSX"); and (b) the termination of Redknee's Shareholder Rights Plan dated March 9, 2016. Closing of the transaction contemplated by the ESW Capital Agreement will also be subject to approval of the TSX and customary closing conditions.

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, utility companies, auto makers and enterprise businesses of all types 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 businesses 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.

About ESW Capital, LLC

Based in Austin, Texas, the ESW Capital group (www.eswcapital.com) focuses on buying, strengthening, and growing mature business software companies. By taking advantage of its unique operating platform, ESW revitalizes its acquisitions for sustainable success while making customer satisfaction a top priority. The ESW family of companies have been in the enterprise software space since 1988, and the group includes notable brands such as Aurea, Ignite Technologies, Trilogy, and Versata. For more information, email info@eswcapital.com.

Forward-Looking Information

Certain statements in this document may constitute "forward-looking" statements regarding Redknee and its business, which may include, but are not limited to the anticipated benefits of the ESW Capital Offer, assumption of the Constellation Termination Payment by the ESW Capital Investor, the possibility that the Constellation Investor makes a Matching Proposal, the possibility that the Company executes the ESW Capital Agreement, the Company's ability to close the transactions contemplated by the ESW Capital Offer or the Matching Proposal, and similar statements concerning anticipated future events, results, circumstances, performance or expectations, that reflect management's current expectations and are based on information currently available to management or Redknee. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Persons reading this news release are cautioned that such information may not be appropriate for other purposes. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future events or results, and will not necessarily be accurate indications of whether or not such events or results will be achieved. Actual events or results could differ materially from those contemplated in forward-looking statements as a result of risks and uncertainties relating to among other things, Redknee's inability to obtain TSX or shareholder approval of the transactions contemplated by the ESW Capital Agreement or Matching Proposal, litigation proceedings related to such transactions, Redknee's inability to complete such transactions, the occurrence of a material adverse change in the business, operating results or financial condition of Redknee, and other factors discussed under the "Risk Factors" section of Redknee's most recently filed annual information form which is available on SEDAR at www.sedar.com and on Redknee's web-site at www.redknee.com. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual events or results to differ materially from those in the forward-looking statements. Redknee does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

SOURCE Redknee Solutions Inc.