April 7, 2010 (Vancouver, BC) – Radiant Communications Corp. (the “Corporation”) (TSX-V: RCN), Canada's leading supplier of Broadband Solutions for Business™, today announced two non-brokered private placements that will increase the funds available to invest in new technologies and markets.
The Corporation proposes to complete two private placements of common shares of the Corporation (the “Common Shares”) to Maxam Opportunities Fund LP and Maxam Opportunities Fund (International) LP (collectively, “Maxam”) and Pender Growth Fund (VCC) Inc. (“PenderFund”) for aggregate proceeds of up to $4.2 million. The private placements, and certain other related transactions, will result in the creation of Maxam as a new control person of the Corporation under the rules of the TSX Venture Exchange (the “Exchange”), which will require the written consent of shareholders holding more than 50% of the Common Shares. Following the closing of the private placements, the Board of Directors of the Corporation will appoint Johnny Ciampi, Managing Partner of Maxam, to the Board.
“We are very pleased that Maxam has selected Radiant as a strategic investment for their portfolio”, said David Buffett, President and CEO of Radiant. “With the additional funds available from this transaction Radiant is now able to take full advantage of our recently announced strategic partnership agreement and build on our solid and profitable revenue base. We look forward to Mr. Ciampi joining the Radiant board and bringing with him his expertise and background in managing growth and corporate acquisitions.”
”We are pleased to make an investment in Radiant – a profitable company with growing revenues and a strong balance sheet that has been largely ignored by the capital markets in recent years”, said Mr. Ciampi, “We believe the injection of $4.2 million of new capital will allow Radiant to aggressively roll-out its Ethernet-First-Mile offering in conjunction with its recently announced deal with MTS Allstream, as well as pursue strategic acquisitions. We believe Radiant’s service offering is unique in the marketplace as it is able to serve large multi-location organizations as well as the growing connectivity needs of over 300,000 SME’s in Radiant’s markets in Canada.”
The Corporation expects the private placements to close concurrently on or about April 16, 2010.
Terms of the Private Placements
The Corporation will issue 1,550,000 Common Shares to Maxam at an issue price of $1.00 per Common Share (the “Maxam Private Placement”). The Corporation will issue a further 2,650,000 Common Shares to PenderFund at an issue price of $1.00 per Common Share (the “Pender Private Placement”). Pursuant to the Maxam Private Placement and the Pender Private Placement (together, the “Private Placements”), the Corporation’s Common Shares will be issued on a private placement basis and will not be qualified by a prospectus. As a result, the Common Shares will be subject to the applicable statutory hold periods. The Private Placements are subject to a number of conditions, including the execution of formal documentation and receipt of the applicable regulatory approvals.
Concurrently with the Maxam Private Placement, Maxam has also agreed to purchase 1,650,641 Common Shares currently held by PenderFund at a price of $1.00 per Common Share and an additional 1,700,000 Common Shares currently held by Pacific Venture Fund Limited Partnership and Working Opportunities Fund (EVCC) Ltd. (collectively, “Growthworks”) at a price of $1.00 per Common Share.
For a period of 90 days following the closing of the Maxam Private Placement, the Corporation may also, in its sole discretion, determine to offer up to 2,000,000 Common Shares on a best efforts agency basis (the “Offering”). In connection with any Offering, Maxam has agreed to acquire any unallocated Common Shares remaining unsold in the Offering at a maximum price of $1.00 per Common Shares (the “Maxam Backstop”), subject to the policies of the TSX-V and applicable regulatory approval. In consideration for the Maxam Backstop and subject to Exchange approval, the Corporation will issue to Maxam 200,000 warrants to purchase an equal number of Common Shares at the price of $1.20 per Common Share for a period of three years following the closing of the Maxam Private Placement.
Effect of the Private Placements and Related Transactions
As of April 7, 2010, the Corporation had 10,925,664 Common Shares and no preferred shares issued and outstanding. Following the completion of the Private Placements, it is expected that the Corporation will have 15,125,664 Common Shares and no preferred shares issued and outstanding, and that the shareholdings of Maxam, PenderFund and Growthworks in the Corporation will be as follows:
Use of Proceeds
The Corporation intends to use the proceeds of the Private Placements and, if undertaken, the Offering to fund potential acquisitions and the roll-out by the Corporation of Ethernet First Mile equipment across Canada.
Under the terms of the Maxam Private Placement, following the closing of the Maxam Private Placement, the Board of Directors of the Corporation will appoint to the Board a new Director nominated by Maxam, to hold office for a term expiring not later than the close of the next annual meeting of shareholders of the Corporation. Maxam intends to nominate Mr. Johnny Ciampi, the Managing Partner of Maxam Opportunities GP Ltd. Maxam will retain the right to nominate a Director for election to the Board for so long as Maxam holds not less than 10% of the issued and outstanding Common Shares.
If the Corporation undertakes the Offering and, following completion of the Offering, Maxam holds greater than 35% of the Common Shares, Maxam will be entitled to nominate from the business community a further Director, with appropriate business and industry expertise, for immediate appointment to the Board of Directors of the Corporation for a term expiring not later than the close of the next annual meeting of shareholders of the Corporation, subject to compliance with the Corporation’s articles and bylaws. Maxam will retain the right to nominate an additional Director for election to the Board for so long as Maxam holds not less than 35% of the issued and outstanding Common Shares.
The Corporation has agreed that, whether or not the Maxam Private Placement closes, it will pay all reasonable legal, due diligence and other fees, costs and expenses incurred by Maxam in connection with the Maxam Private Placement. The Corporation has also agreed that, other than the Private Placements, until April 30, 2010, neither it nor its agents, representatives or employees will enter into any agreement, understanding or other arrangement with any person other than Maxam and its affiliates, representatives and advisors in respect of a sale of any Common Shares, business combination, merger or other material transaction outside of the ordinary course of business of the Corporation without the prior written consent of Maxam.
Creation of a New Control Person
The Private Placements, together with the additional concurrent share purchases by Maxam, will result in the creation of Maxam as a new control person of the Corporation under the rules of the Exchange. Pursuant to the requirements of the Exchange, the Corporation expects to obtain written consent for the Maxam Private Placement from shareholders holding more than 50% of the Corporation’s Common Shares.
Approval of the Private Placements and Related Transactions
At a meeting of the Board of Directors held on April 6, 2010, at which the requisite quorum of directors was present, the Board of Directors approved the Private Placements and the transactions contemplated thereby. Mr. Edmison, Mr. Power, Mr. DeKleer and Mr. Ketcham, who have advised the Corporation’s Board of their respective connections to PenderFund, Growthworks and Maxam, as applicable, each waived notice of the meeting and did not attend.
Related Party Transaction Considerations
The Pender Private Placement is a “related party transaction” within the meaning of Multilateral Instrument 61-101 (“MI 61-101”), for which, pursuant to Sections 5.4 and 5.6 of MI 61-101 and absent certain exemptions, the Corporation would be required to obtain a formal valuation for the Pender Private Placement and the “minority approval” of the Corporation’s shareholders.
The Corporation is relying on the exemption in Section 5.5(a) to the requirement for a formal valuation and the exemption in 5.7(a) to the requirement for the “minority approval” of shareholders. The Corporation’s market capitalization at the time the Pender Private Placement was agreed to was $11,078,623.30 (the “Market Capitalization”) and the fair market value of both the subject matter of and the consideration for the Pender Private Placement is $2,650,000, the subscription price to be paid for the Common Shares to be issued to PenderFund (the “Fair Market Value”). Accordingly, the Fair Market Value is less than 25% of the Market Capitalization, which is $2,769,655.83.
The Corporation expects that the Pender Private Placement will close on or before April 16, 2010. A material change report relating to the Pender Private Placement was not filed 21 days prior to the expected closing date of the Pender Private Placement. The timing of the material change report is, in the Corporation’s view, both necessary and reasonable because the terms of the Pender Private Placement which were approved by the Corporation’s board of directors were not settled 21 days prior to closing.
Information Concerning Maxam
Maxam is comprised of two private equity funds focused on structured investments in mid-market companies, with approximately $100 million of committed capital under management. Maxam targets investments in a variety of complex situations, including non-core asset divestitures, management-led buyouts, recapitalizations, distressed debt, bridge loans and public market investing. Further information about Maxam can be found at www.maxamcapitalcorp.com.
In operation since 1996, the Corporation currently serves over 20,000 business locations in Canada and the United States from its offices in Vancouver, Toronto, Montreal, Calgary, and Edmonton.
Headquartered in Vancouver, Canada, Radiant Communications (www.radiant.net) provides businesses across Canada with the most comprehensive and innovative suite of data communications and cloud computing services: the largest on-net DSL footprint across Canada & the U.S., T1 and E10/E100 fibre broadband, MPLS private networking, and AlwaysThere Cloud Computing services. Over 40% of Canada’s largest retail chains and thousands of other small- to mid-sized businesses depend on Radiant solutions for their mission-critical data networks and enterprise-level applications.
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Broadband Solutions for Business and AlwaysThere are registered trademarks of Radiant Communications Corp. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.
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