Ms. Danielle Royston reports

REDKNEE ANNOUNCES STANDBY PURCHASE AGREEMENT IN FURTHERANCE OF ITS STRATEGIC PLAN

Redknee Solutions Inc. has entered into a standby purchase agreement with Wave Systems Corp., an affiliate of ESW Capital LLC, and ESW in connection with the launching of an approximately $54-million (U.S.) rights offering, fully backstopped by Wave. The net proceeds of the rights offering will be used to finance a restructuring of the business in furtherance of the previously announced strategic plan which will, among other things, create a strong platform for long-term growth, simplified operations and sustained profitability for the company. The company is also announcing certain leadership changes in connection with the restructuring.

Subject to the closing of the rights offering, the company will enter into (i) a services agreement with Crossover Markets Inc. pursuant to which Crossover will provide the company with access to service providers, and (ii) a technology services agreement with DevFactory FZ-LLC pursuant to which DevFactory will provide certain technology services to the company. The company has extended the interim services agreements with Crossover and DevFactory to the earlier of (i) the special meeting referred to below, if the necessary shareholder approvals are not obtained, and (ii) the termination of the standby purchase agreement. Crossover and DevFactory are affiliates of ESW.

Entering into the standby purchase agreement represents the outcome of a review of alternatives undertaken by a special committee of independent directors of the board of directors of the company, comprising Keith Graham (chair), Christina Jones and Farhan Thawar. The special committee was advised by TD Securities Inc., as financial adviser, and Goodmans LLP, as legal adviser. The special committee, with the assistance of its advisers, has determined that the rights offering, the standby purchase agreement and the services agreements collectively represent the best available alternative for the company.

A copy of the standby purchase agreement will be available on the company's profile at SEDAR.

Rights offering, standby purchase agreement and related transactions

Subject to receipt of all necessary shareholder and regulatory approvals, including those required by the Toronto Stock Exchange, the company will undertake the rights offering and offer to holders of subordinate voting shares of Redknee one right for each subordinate voting share held at the close of business on the record date for the rights offering. The record date, currently anticipated to be in or around early August, 2017, will be specified in a rights offering circular of the company which is expected to be filed with securities regulatory authorities in each province and territory of Canada in late July, 2017. The rights offering will allow all shareholders the opportunity to maintain their pro rata equity interests in the company.

Each right will be transferable. One right will entitle the holder to purchase one subordinate voting share at a price equal to the Canadian-dollar equivalent of 50 U.S. cents per subordinate voting share, as determined on the business day prior to the special meeting (defined below).

The rights offering will remain open for at least 21 calendar days following the date of mailing to shareholders of the rights offering notice of the company for the rights offering. Any rights not exercised on or before the time that the rights expire will be void and will have no value.

Pursuant to applicable securities laws, and to the extent that other holders of rights do not exercise all of their rights under the basic subscription privilege, each holder of rights who exercises their full basic subscription privilege will be entitled to subscribe for additional subordinate voting shares on a pro rata basis at the subscription price in the manner prescribed by securities laws and as further detailed in the rights offering circular.

Pursuant to the standby purchase agreement, ESW has agreed to exercise its basic subscription privilege and additional subscription privilege. In addition, Wave has agreed to acquire, at the subscription price, any subordinate voting shares available under the rights offering that are not otherwise subscribed for by shareholders, ensuring that Redknee will receive not less than approximately $54-million (U.S.) in gross proceeds under the rights offering. The standby commitment provides certainty that the rights offering for aggregate gross proceeds of approximately $54-million (U.S.) will be completed, subject to the terms of the standby purchase agreement and any applicable regulatory approvals.

Subject to the terms of the standby purchase agreement, including certain non-solicitation covenants, the company may terminate the standby purchase agreement, upon the payment to Wave of $1.08-million, if, prior to obtaining shareholder approval of the transaction resolution (as described further below) and subject to a right of Wave to amend its standby commitment to match any superior proposal (as defined in the standby purchase agreement), the company accepts an alternative financing transaction proposal or acquisition proposal (each as defined in the standby purchase agreement) that, in either case, constitutes a superior proposal.

Pursuant to the standby purchase agreement, and in consideration solely for the standby commitment, the company will issue to Wave a subordinate voting share purchase warrant. The standby warrant will entitle Wave to acquire 2.5 million subordinate voting shares at an exercise price of 50 U.S. cents per share for a period of 10 years from the date of closing of the rights offering. The standby warrant will provide for a cashless exercise feature and will contain customary anti-dilution provisions. The issuance of the standby warrant is subject to the successful completion of the rights offering and performance by Wave of its obligations under the standby purchase agreement.

The completion of the rights offering is conditional upon the satisfaction of certain conditions, including the company receiving all required approvals, including TSX approval and shareholder approval as further described below.

The closing of the rights offering is expected to occur in early September, 2017.

Further details on the rights offering (including the record date for participation by shareholders) and the procedures to be followed by shareholders in order to subscribe for rights will be included in the rights offering circular and rights offering notice, which will be filed with the securities regulatory authorities in the qualifying jurisdictions and also on SEDAR after obtaining the approvals required in connection with the rights offering from shareholders and after the date on which all necessary approvals and consents are received, including from the TSX.

The rights will be issued to shareholders (i) resident in the qualifying jurisdictions, and (ii) resident in any other jurisdiction provided that the company has satisfied itself that such shareholder is entitled to receive the rights and subordinate voting shares issuable under the rights offering in accordance with the laws of such jurisdiction without obliging the company to register the rights or subordinate voting shares issuable under the rights offering or file a prospectus or other similar disclosure document or to make any other filings or become subject to any reporting or disclosure obligations that the company is not otherwise already obligated to make.

Pursuant to the terms of the subscription agreement between the company, Wave and ESW dated Dec. 18, 2016, Wave is entitled, but not obligated, to maintain its pro rata interest on a fully diluted basis or its investor's percentage (as defined in the subscription agreement) following completion of the rights offering. As at the date hereof, the investor's percentage is 39 per cent.

If, following and as a result of the rights offering, including pursuant to the standby commitment, the investor's percentage is less than 39 per cent, Wave Systems Investment Corp. (the current holder of the company's Series A preferred shares) will be entitled, but not obligated, to subscribe for such number of additional subordinate voting shares as is necessary to return the investor's percentage to 39 per cent, subject to receipt of all required shareholder and regulatory approvals, including the approval of the TSX. The subordinate voting shares issued pursuant to the subsequent issuance will be issued at a price per share equal to the subscription price. If all rights are exercised under the rights offering by the holders thereof, Wave Systems Investment Corp. will have the right, but not the obligation, to acquire up to an additional 46.3 million subordinate voting shares, resulting in additional proceeds to the company of $23.1-million (U.S.).

As a result of the rights offering and the anti-dilution provisions of the 46,285,582 warrants issued to Wave on Jan. 26, 2017, the exercise price of the Wave warrants will be reduced from $1.30 (U.S.) per subordinate voting share to 73 U.S. cents, assuming no additional shares are issued as a result of the subsequent issuance. If 46.3 million subordinate voting shares are issued pursuant to the subsequent issuance, the exercise price of the Wave warrants will be reduced to 68 U.S. cents.

If holders of the rights, other than ESW and its affiliates, do not exercise their rights, ESW and its affiliates' participation in the rights offering and the standby purchase agreement may result in a significant increase in their ownership interest of subordinate voting shares. If only ESW and its affiliates participate in the rights offering, their collective ownership interest in the subordinate voting shares, prior to the exercise of the Wave warrants and the standby warrant, will increase from approximately 13 per cent to approximately 56 per cent (approximately 64 per cent on a fully diluted basis assuming the exercise of the Wave warrants and the standby warrant). Wave Systems Investment Corp. is the holder of the company's outstanding Series A preferred shares which entitle it to elect a majority of the board. In the event that ESW and its affiliates' holdings of subordinate voting shares increases significantly following the completion of the transactions described above, ESW and its affiliates will likely have the ability to elect the balance of the directors of the company, being the independent directors.

Special meeting of shareholders

ESW is a related party of the company as defined in Multilateral Instrument 61-101 -- protection of minority security holders in special transactions. Each of the rights offering and the subsequent issuance is considered a related-party transaction for purposes of MI 61-101. While MI 61-101 provides for an exemption from the protections that generally apply to related-party transactions where the transaction is a rights offering, this exemption is not available where the transaction has an interested party (as defined in MI 61-101). ESW meets the definition of interested party by virtue of the benefit it and its affiliates will receive through the subsequent issuance and the services agreements, respectively. Therefore the exemption from the minority approval requirements of MI 61-101 is not available. In addition, under the rules of the TSX, the rights offering, the issuance to Wave of the standby warrant and the subsequent issuance are subject to receipt of approval by an affirmative vote of a majority of the votes cast by disinterested shareholders, at a meeting called to consider such matters.

Accordingly, a special meeting of shareholders will be called to consider a resolution to approve the rights offering, the issuance of the standby warrant and the subsequent issuance. In order for the transaction resolution to be effective, it must be approved by an affirmative vote of a majority of the votes cast by shareholders present in person or represented by proxy at the special meeting, after excluding the votes cast by ESW, Wave or any of their associates or affiliates or any other joint actor and any other person whose vote must be excluded under applicable securities laws.

Upon the recommendation of the special committee, the board (other than Scott Brighton and Andrew Price who abstained from voting) has unanimously resolved to recommend that shareholders vote in favour of the transaction resolution.

The special meeting will be held on July 25, 2017, and the record date for determining shareholders entitled to receive notice of and to vote at such meeting will be June 20, 2017. An information circular providing details of the special meeting will be mailed in late June, 2017.

Restructuring

To achieve its strategic plan, the company plans to reduce head count worldwide by approximately 500 employees. Redknee expects that the majority of the net proceeds from the rights offering will be used to finance associated employee severance payments. The balance of the net proceeds will be used for location rationalization, entity simplification and associated fees. It is expected that all of the net proceeds from the rights offering will be used by the company within the 12 months following the rights offering.

The services agreements

The services agreements will assist the company with the implementation of the restructuring and the strategic plan. Resources provided by Crossover will enable Redknee to dedicate personnel in countries where its customers are operating. By sourcing local talent to work directly in the regions where Redknee's customers are domiciled, the company expects to improve its customer success while optimizing its cost structure.

DevFactory provides a technology tool set that will enable Redknee to better manage its technology suite. The DevFactory platform facilitates software source code management leading to improvements in the quality of the code. The company expects that this technology will enable it to enhance the quality of its products going forward.

In connection with the review of the services agreement, the independent directors, on behalf of the board, retained KPMG LLP to share leading practices for third party services agreements including but not limited to contract terms and conditions, governance, service levels, and retained organizational roles. The board has determined that the services agreements are on reasonable commercial terms to the company that are no less favourable than an arm's-length transaction.

Set out below is a summary of the key terms of the Crossover services agreement and the DevFactory services agreement. The summary below is qualified entirely by reference to the full text of the services agreements which are attached to the standby purchase agreement and will be available on the company's profile at SEDAR.

Crossover services agreement

The company will outsource to Crossover the recruitment and hiring of its employees and independent contractors. Through its proprietary network of resources, Crossover will provide the company with access to globally sourced personnel at competitive prices. Crossover's proprietary platform, WorkSmart, provides a software suite which includes time tracking and productivity management that Redknee will use to manage some of its service providers.

It is currently expected that during the first 12 months of the Crossover services agreement, Crossover will provide the company with access to a number of Crossover-sourced independent contractor and/or employee service providers.

Crossover will receive a fee equal to 10 per cent of the resource fee which is calculated as the time worked by each service provider multiplied by the hourly rate of such service provider. The time worked by the service provider is tracked by WorkSmart. It is estimated that Crossover will receive a fee not exceeding $6.8-million (U.S.) for services provided during the first 12 months of the agreement.

Crossover will warrant to the company that the service providers will perform their services in a good and workmanlike manner, acting in good faith and in the best interests of the company. Crossover will remove a service provider and furnish a replacement service provider at the request of the company and will refund moneys paid for the specific service provider for up to four weeks of compensation and fees for the specific service provider removed.

Crossover will indemnify and hold the company harmless for direct and third party claims of (i) gross negligence or intentionally wrongful acts of Crossover, and (ii) infringement of patent, copyright or trade secrets relating to WorkSmart. The company will indemnify and hold Crossover harmless for direct and third party claims related to (i) the classification of a service provider as an independent contractor, (ii) the classification of Crossover as an employer, (iii) gross negligence or intentionally wrongful acts of the company, and (iv) any employment-related or pre-employment-related claims.

The company will agree not to, without Crossover's consent, directly or indirectly consult with, hire, solicit or attempt to solicit service providers identified by Crossover for a period of the later of (i) one year after the service provider last performed a service for the company or one year after the service provider was identified by Crossover, unless the company pays to Crossover a finder's fee equal to 100 per cent of such service provider's gross annual compensation, which finder's fee will be reduced to 50 per cent in the event that the company hires 100 or more service providers.

The Crossover services agreement may be terminated by the company upon 30 days prior notice and by Crossover immediately upon non-payment of fees. There are no termination fees payable by the company in connection with the termination of the Crossover services agreement.

DevFactory services agreement

The company will acquire services from DevFactory to improve the quality of its source code. DevFactory's services run proprietary diagnostics on the company's existing code base, and on future improvements and bug fixes, to identify portions of the code that are failing or hindering functionality. DevFactory's services will highlight anti-patterns in the code base and developers' work product. DevFactory will also improve the code base directly by enhancing its built-in testing capacity. DevFactory will write unit test code that provides early warning of introduced errors.

DevFactory will receive a monthly fee for each of the company's active developers and for unit test code written by DevFactory per line of executable code. The fees will be set out in a statement of work (SOW) that will provide the company an opportunity to assess unit test code before corresponding fees are incurred. The SOW sets out objective criteria for such assessment. DevFactory will provide work credits in the event that the company's fees are less favourable than the fees of any non-affiliated DevFactory customer. It is estimated that DevFactory will receive a fee of $10.5-million (U.S.) for all of the services provided during the first 12 months of the DevFactory services agreement pursuant to the SOW.

DevFactory will warrant that the services it provides operate in a workmanlike and professional manner. It will indemnify the company for certain intellectual property claims, and will agree to maintain minimum data security standards, preserve confidentiality and adhere to the company's code of conduct. DevFactory and the company will agree not to solicit each other's staff for a period of one year after termination of the agreement.

The SOW will have a term of one year and will automatically renew for successive one-year periods unless either party provides 30 days notice of non-renewal prior to the end of the applicable term. Either DevFactory or the company may terminate the DevFactory services agreement on breach, subject to cure periods, after the termination of the SOW on 30 days notice. On a change of control of the company, the company may terminate the DevFactory services agreement on 90 days notice. If the DevFactory services agreement is terminated because of the company's material breach of a payment or confidentiality obligation, the company will have to pay fees that would have been payable to the end of the then-current SOW term. There are no other termination fees payable by the company in connection with the termination of the DevFactory services agreement.

Leadership changes

As part of the restructuring, Redknee announces changes to its executive leadership team designed to position the company for long-term growth and sustained profitability.

David Charron, chief financial officer, will be departing from Redknee. To ensure an orderly transition, Mr. Charron will remain in his role as chief financial officer until the rights offering is closed. Anin Basu will assume the role of chief financial officer on an interim basis. Mr. Basu currently serves as vice-president, finance, at Redknee and has previous experience in dealing with public companies and technology businesses. Following Mr. Charron's departure, the board will undertake a formal search process for a permanent chief financial officer.

Redknee would like to announce the appointments of Mo Jamal to chief revenue officer and Jozsef Czapovics to vice-president, engineering. Mr. Czapovics brings many years of experience to Redknee, having worked for a number of leading organizations in North America and Europe. Mr. Jamal has been with Redknee for over a decade in various high-impact sales positions. With more than 20 years of telecommunications software experience, he has been an instrumental part of Redknee, and has on-boarded some of its key global customers.

Vishal Kothari, chief operating officer, and Chris McGrady, vice-president, human resources, integration management and corporate information technology and security, will be departing the company in the next 12 months. In the interim, they will continue working with senior management to ensure an orderly transition. Redknee intends to undertake a formal search process with the intent of bringing on new leadership in operations, marketing and human resources. Mr. Kothari will continue to work with Redknee as an adviser following his departure from the company. Redknee's current senior management team led by Danielle Royston, chief executive officer, will assume responsibility for Redknee's operating and human resource initiatives following the departures of Mr. Kothari and Mr. McGrady.

Redknee remains committed to delivering long-term value to all stakeholders by strategically investing in the business, strengthening its customer relationships and executing on its long-term strategic growth plan.

About Redknee Solutions Inc.

Redknee monetizes today's digital world. It provides a complete portfolio of mission-critical monetization and subscriber management solutions, including real-time billing, charging, policy and customer care modules, which allow communications service providers to charge for things in new and innovative ways and create a unique user experience.