TORONTO, Aug. 24 /CNW/ - LOREX Technology Inc. (the "Company") (TSX: LOX)
would like to provide an update on the previously announced issuance of a
minimum of $1.6 million CDN and maximum of $2 million CDN principal amount
secured subordinate series A convertible debentures (the "Debentures").
The investors agreed to increase the total offer to $2.3M USD after the
Company had been advised by its current lender that in order for the lender to
waive the default and extend the Company's current credit facility, the
Company will need to, among other things, raise a minimum of $2.3 million USD
(being an increase of $800,000 USD from the previous amount). There is no
assurance that the lender will not amend the terms and increase the amount
that the Company needs to raise or waive the default and extend the credit
With the increased offer the Company will issue 12,500,000 subscription
receipts (the "Receipts") at an issue price of $0.10 CDN per Receipt and will
issue $1.25 million CDN of Debentures.
The Debentures shall have the following features:
- convertible into common shares in the capital of the Company at a
conversion price of $0.10 CDN per share resulting in the issuance of
12,500,000 common shares;
- have a term of 36 months and shall have no interest; and
- be secured against all the assets of the Company, but shall be
subordinate to the Company's senior secured credit facilities.
The Receipts are exercisable, at no additional cost to the investors, into
12,500,000 preference shares (the "Preference Shares") in the capital of the
Company. The shareholders of the Company will, at a special meeting of
shareholders to be held no later than October 30, 2009 (the "Meeting"),
approve the creation of the Preference Shares which will have the following
- the Preference Shares will be convertible into common shares of the
Company on an one (1) for one (1) basis;
- each Preference Share shall carry the right to vote at shareholders'
meeting on the basis of one (1) vote for each Preference Share;
- the Preference Shares shall have to right to participate in dividends
on an equal basis with the holders of common shares; and
- the Preference Shares shall have priority over the common shares with
respect to the return of capital in the event of a liquidation,
dissolution or winding up of the Company.
Reuben Klein, a director of the Company, has agreed to vote all of the
common shares owned and/or controlled by himself (which represents
approximately 42% of the Company's current and issued outstanding capital) in
favour of the creation of the Preference Shares at the Meeting.
In the event that the shareholders do not approve the creation of the
Preference Shares at the Meeting, the Receipts will be exercisable, at no
additional cost to the subscribers, into 12,500,000 common shares in the
capital of the Company.
In addition, the investors shall have the right to nominate two (2)
additional individuals to the Company's board of directors and will be
entitled to a break-up fee of $125,000 CDN in the event that the Company does
not proceed with the issuance of the Debentures and Receipts and completes an
alternative transaction on or before August 20, 2010. Also, the investors are
entitled to an amount equal to 4% of their investment in order to cover the
expenses incurred by the investor with respect to issuance of the Receipts and
It is anticipated that the Receipts and Debentures will be taken up by
two (2) investors, all of whom are arm's length to the Company and each other.
Lorex Investors LLC ("LILLC"), a private company which indirectly owns and/or
controls an aggregate of 1,550,000 common shares (or 5.76%) of the Company,
will acquire $672,777.80 CDN of the Debentures (53.82% of the Debentures) and
6,727,778 Receipts (53.82% of the Receipts). Lorex Group LLC ("Lorex Group"),
a private company which does not own any shares of the Company, is anticipated
to acquire $577,222.20 CDN of the Debentures (46.18% of the Debentures) and
5,772,222 Receipts (46.18% of the Receipts).
Both LILLC and Lorex Group are prepared to proceed with the purchase of
the Receipts as soon as possible provided that the company receives all
requisite shareholder and regulatory approvals and the Company's lender does
not object to the issuance of the Receipts and the underlying securities.
The purchase of the Debentures is conditional on the Company's lender
agreeing to extend the Company's current credit facilities through August
2012, such extension subject to the Company accepting all of the terms and
conditions of the lender.
As the shares issuable on the conversion of the Receipts and Debentures
will result in the issuance of more than 25% of the issued and outstanding
capital of the Company and in a change in the effective control of the Company
as LILLC will control 25.89% of the issued and outstanding common shares,
assuming the conversion of the Debentures and exercise of the Receipts and
Lorex Group will control 22.22% of the issued and outstanding common shares,
assuming the conversion of the minimum and maximum amount of Debentures and
exercise of the Receipts, the rules of the TSX requires that the Company
obtain shareholder approval (excluding those shares owned and/or controlled by
LILLC) for the issuance of the Receipts and Debentures. In obtaining such
approval, the Company will be relying on the exemption contained in section
604(d) of the TSX Company Manual and will be obtaining shareholder approval by
way of written confirmation.
Closing of the issuance of the Receipts is scheduled for August 28, 2009
or such other day that the investors and the Company may agree to. Closing of
the Debentures is scheduled for September 15, 2009 or such other day that the
investor, the Company and its lender may agree to.
About LOREX Technology Inc.:
LOREX provides businesses and consumers with leading edge video
surveillance security solutions and sells its products through distinct market
channels under the LOREX and Digimerge brands. The LOREX brand, which caters
to both small business and consumer markets, is available in over 9,000 retail
locations across North America and the U.K. and has an established market
presence online selling through major e-tailers and through its in-house
webstore. The Digimerge division distributes its products through major
distributors in both North America and Europe. Both groups concentrate on the
sale of wired, wireless and IP security surveillance equipment including
cameras, digital video recorders and all-in-one systems.
LOREX subsidiaries include; LOREX Canada Inc., Digimerge Technologies
Inc., LOREX Corporation and Strategic Vista Corporation Limited, Hong Kong.
The TSX has not reviewed and does not accept responsibility for the
adequacy or accuracy of this release.
Certain information included in this news release contains statements
that are forward-looking, such as the statements about financing alternatives.
Such forward-looking information involves important risks and uncertainties
that could significantly affect anticipated results in the future, and,
accordingly, such results may differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Full financial
statements along with Management's Discussion and Analysis can be obtained
from SEDAR at www.sedar.com
For further information:
For further information: Adam Levin, Director, LOREX Technology Inc.,
Phone: (216) 595-9828 ext 105, www.lorextechnology.com