DSS also intends to complete a brokered private placement in the form of convertible debentures (the "Debentures") through Fin-XO Securities Ltd. ("Fin-XO") to raise up to $1,500,000 in funds (the "Offering"). The Debentures shall be unsecured, have a term to maturity of thirty-six (36) months, and carry an interest rate of twelve percent (12%) per annum payable in cash on a semi-annual basis. The principal amount of the Debentures shall be convertible at the holder's option at any time into Common Shares at a conversion price of $0.10 per common share. The Corporation shall have the right to force the conversion of the Debentures into Common Shares in the event that the Common Shares trade at a price of at least $0.20 per Common Share for a period of at least fifteen (15) consecutive trading days. Following the six-month anniversary of issuance, the Company shall have the right to redeem the Debentures, in whole or in part, at a premium of five percent (5%) to the principal value plus any accrued interest. Subject to regulatory approval, Fin-XO shall have the right to increase the number of Debentures issued pursuant to the Financing by up to fifty percent (50%) under the same terms and conditions described herein by providing written notice to the Company no later than two (2) business days prior to the closing. The Offering is expected to close on or about April 15, 2013.
The Company has agreed to pay a cash commission to Fin-XO equal to 7.5% of the gross proceeds received by the Company from purchasers of the Debentures sold in the Offering, excluding units sold to purchasers that are insiders or affiliates of the Company. The Company has also agreed to pay Fin-XO a corporate finance fee of $7,500 upon closing of the Offering.
Monies raised from the Offering and private placement contemplated in the LOI will be used toward marketing and advertising, content development, transaction and related expenses, and working capital and general corporate purposes.
General Information and Information for Shareholders of SAO
The transaction terms outlined in the LOI are non-binding on the parties at this point and are expected to be superseded by a definitive subscription agreement to be signed between the DSS and SAO. The transactions are subject to requisite regulatory approval, including the approval of the Exchange and standard closing conditions, including the approval of the transaction by the directors of each of DSS and SAO, approval of the transaction by the shareholders of SAO as described below, as well as other closing conditions which will be set out in the definitive subscription agreement.
Upon completion of the private placement, SAO intends to distribute the Common Shares and DSS Warrants acquired in the private placement to the shareholders of SAO on a pro-rata basis as a return of capital. It is expected that each SAO shareholder will receive approximately 0.59 Common Shares and an equal number of DSS Warrants for every share of SAO held. The exact ratio will be announced upon execution of definitive agreements by the parties. Upon completion of the private placement and distribution of Common Shares and DSS Warrants to the shareholders of SAO, the shareholders of SAO will hold approximately 12% of the issued and outstanding Common Shares.
Shortly after the distribution of the Common Shares and DSS Warrants to its shareholders, SAO expects to delist its common shares from the Exchange and complete a voluntary dissolution. All unexercised options and broker warrants to acquire shares of SAO will be cancelled upon completion of the return of capital and dissolution.
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