Zaio Announces Conversion Opportunity for Debentureholders and Early Warrant Exercise Program

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS/

CALGARY, Dec. 9, 2013 /CNW/ - Zaio Corporation (TSX-V:ZAO), ("Zaio" or the "Company") announces that it is offering the holders (the "Debentureholders") of its 10% secured, redeemable, convertible debentures due May 9, 2017 (the "Debentures") with a one-time right to convert their Debentures into units in the capital of the Company ("Units") in accordance with the terms of the trust indenture governing the Debentures dated May 9, 2013 (the "Trust Indenture"), each unit consisting of a common share in the capital of the Company ("Common Share") and a common purchase warrant exercisable into one Common Share at a price of $0.15 per share ("Warrant") and to contemporaneously exercise their Warrants. In consideration of such early conversion and exercise of the Warrants, the Company is offering Debentureholders a one-time, "make-whole" amount payable in Common Shares (the "Make Whole Amount") to compensate the Dentureholders for foregone interest between the conversion date (fixed as at December 31, 2013) and the maturity date of the Debentures, being May 9, 2017, determined by the following formula:

85% of total future interest from January 1, 2014 to May 9, 2017 divided by the market price of the Common Shares at December 31, 2013 plus a 30% premium.

"We have structured this early exercise program to benefit both the Company and Debentureholders.  Debentureholders who participate get 3 years of interest payments now, which accelerates and locks in their return on the Debenture. This also strengthens the balance sheet of the Company by reducing long term debt and conserving cash for operations and the previously announced strategic transactions," said David King, President and CEO of Zaio Corporation. "This proposal has been structured in discussions with a few key Debentureholders, and it positions the Company for additional and significant revenue in 2014. Debentureholders that participate are positioned to fully participate in the equity upside of the Company."

The exercise of Warrants provides the Company with additional working capital and allows management to focus on day-to-day operations and growth plans and reduces the long term cash commitments required to service the Debenture interest and principal repayments.

To provide Debentureholders with the opportunity to elect an early conversion and receive the Make Whole Amount, the Trust Indenture must be amended and a meeting of Debentureholders is required, and has been scheduled for December 31, 2013. Materials in respect of such meeting have been mailed to Debentureholders, who should be receiving such materials in the near future.

In order for the early exercise of Debentures and the payment of the Make Whole mount to take place, the following is required:

  1. Approval from the Debentureholders at the meeting scheduled to take place at 10:00am (Calgary Time) on December 31, 2013 at the offices of Dentons Canada LLP, 15th floor Bankers Court 850 - 2nd Street SW, Calgary, Alberta.
  2. Debentureholders must submit the Make Whole Amount Notice of Election, which will be included with the meeting materials to be received by mail by the Debentureholders, to Olympia Trust Company at the address provided in the meeting materials on or before January 15, 2014; and
  3. Debentureholders must immediately exercise the Warrants underlying each of the Units issued on the early conversion of any Debentures tendered for payment of the Make Whole Amount.

If all of the conditions above, and any additional conditions more particularly set forth in the meeting materials, are met, the effective date of the early conversion will be December 31, 2013.

The number of Warrants to be received by a redeeming Debentureholder will be equal to the amount of Debentures converted divided by the conversion price of $0.12. The Warrant exercise amount will be the number of Warrants received multiplied by the exercise price of $0.15 per Warrant. This means that for each $1.00 principal amount of Debenture converted, the Warrant exercise amount to be provided by the Debentureholder will be $1.25.

The Company asks Debentureholders to fill out the proxy form, which they will receive by mail with the meeting materials, and to vote in favor of the special resolution approving the amendment to the Trust Indenture to allow for the early conversion described above. Debentureholders interested in participating in this early exercise program are encouraged to submit their vote, and also to include their completed and executed Make Whole Amount Notice of Election together with payment for the Warrant exercise made payable to "Olympia Trust Company ITF Zaio Corporation" in accordance with the instructions set out in the meeting materials for the Debentureholder meeting.

The Company will be pleased to guide any Debentureholders or their financial advisors through this proposal to calculate the beneficial impact of their election to convert and exercise their Warrants.

About Zaio Corporation
Zaio provides customers in the property valuation, underwriting and lending industries with real-time access to certified appraisal reports from the company's patented database of proactively maintained residential property valuations prepared by licensed appraisers across the United States. Visit the company online at zaio.com.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities of the Company will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except in certain transactions exempt from the registration requirements of the U.S. Securities Act.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release contains forward-looking statements within the meaning of applicable securities laws, including expectations regarding the early redemption of the Debentures, the use of proceeds from such early redemption and conversion of the Warrants and the financial impact of same on the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. These risks include, but are not limited to: the risks associated with the industry in which the Company operates (e.g. operational risks; delays or changes in plans with respect to planned projects or capital expenditures relating thereto; the uncertainty of estimates and projections relating to the Company's operations as well as the costs and expenses relating to servicing the interest payments of the Debentures), uncertainties resulting from potential delays or changes in plans with respect to planned projects or capital expenditures and uncertainties regarding whether regulatory approval for the early conversion described above will be received and if received, on the timelines expected, as well as the intended use of the proceeds of the early redemption. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. 

SOURCE: Zaio Corporation

For further information:

For further information, visit zaio.com or contact:

David King
President & CEO
Zaio Corporation
(403) 984-ZAIO
dking@zaio.com

Babak Pedram
Investor Relations
Virtus Advisory Group Inc.
416-995-8651
bpedram@virtusadvisory.com

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Zaio Corporation

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