Growthgen Equity II Inc.
TSX VENTURE : GGE.P

April 26, 2007 15:41 ET

Growthgen Equity II Inc.: Press Release

TORONTO, ONTARIO--(CCNMatthews - April 26, 2007) - Growthgen Equity II Inc. (TSX VENTURE:GGE.P)("Growthgen"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), announced today that it has entered into a letter of intent with GuestLogix Inc. ("GLX") dated April 20, 2007 pursuant to which Growthgen intends to acquire all of the issued and outstanding securities of GLX (the "Acquisition") in exchange for issuing securities of Growthgen.

Prior to completion of the Acquisition, GLX will complete a private placement (the "Private Placement") of subscription receipts (the "Subscription Receipts") at an issue price of $0.70 per Subscription Receipt for a minimum of $6 million and a maximum of $10 million in gross proceeds. Each Subscription Receipt will entitle the holder to receive 0.2538 common shares of GLX, however concurrently with the closing of the Acquisition it is intended that each Subscription Receipt will be exchanged into one common share of Growthgen.

Under the letter of intent, Growthgen will issue 48,432,424 common shares in exchange for (i) all of the issued and outstanding common shares of GLX; (ii) the assignment of convertible debt, and (iii) the Subscription Receipts (assuming that GuestLogix raises $9 million through the Private Placement); all on the basis of a share exchange ratio of approximately 3.94 Growthgen common shares for each GLX share. Growthgen will also issue 8,427,361 options in exchange for all of the options and warrants currently outstanding to purchase GLX shares, based on the same ratio by which the share exchange is calculated. Additionally, assuming GuestLogix raises $9 million through the Private Placement, Growthgen will issue 1,428,484 share purchase warrants in exchange for share purchase warrants to be issued by GLX in connection with the financing. The Growthgen share purchase warrants will entitle the holder to purchase common shares of Growthgen at $0.70 per share for a period of 2 years following their date of issuance.

Growthgen currently has 1,933,333 common shares issued and outstanding (fully diluted). Upon completion of the deal, the current shareholders of Growthgen will hold approximately 3.2%, and the former GuestLogix shareholders and debt holders and holders of Subscription Receipts and GuestLogix options and warrants (assuming $9 million worth of Subscription Receipts are issued) will hold approximately 96.8%, of the outstanding Growthgen Shares (on a fully diluted basis).

The Acquisition is intended to constitute a Qualifying Transaction, as defined in the Exchange's Policy 2.4, and is subject to the approval of the Exchange. The closing of the Qualifying Transaction is expected to occur on or before June 30, 2007 and Growthgen intends to list on the Exchange as a Tier 2 issuer upon completion of the Qualifying Transaction. The Qualifying Transaction will not constitute a non-arm's length transaction, and there is currently no cross-ownership between Growthgen and GLX.

Paradigm Capital Inc. and Murphy and Durieu, LP have been engaged to act as agents to GLX in connection with the Private Placement, and will receive cash equal to 9% of the gross proceeds raised and broker warrants equal to 10% of the number of Subscription Receipts issued. 85% of the proceeds, less certain offering costs, received from the Subscription Receipts will be held in escrow pending the completion of the Acquisition, and all proceeds of the Private Placement will be used for general working capital purposes.

The Acquisition is also conditional upon, among other things, completion of the Private Placement, receiving all necessary regulatory and third party approvals and authorizations, the receipt of an independent valuation of GLX if required by the Exchange, approval by each of the board of directors of Growthgen and GLX, approval by the shareholders of GLX, the entering into of satisfactory employment agreements and life insurance policies for senior management, confirmation of no material adverse change having occurred for either entity prior to close, Growthgen not having any outstanding indebtedness to any party not incurred in its ordinary course of business, the completion of a definitive agreement setting forth the terms and conditions contained in the letter of intent, the completion of due diligence satisfactory to each party, and completion of the Acquisition no later than June 30, 2007. There can be no assurance that the transaction will be completed as proposed or at all.

GLX is a corporation continued under the laws of Canada and has its head office located at 111 Peter Street, Suite 302, Toronto, Ontario. GLX was established on January 23, 2002 and its principal business concerns the passenger travel industry. Through its proprietary technologies and processes, GLX provides on-board retailing technology and solutions to airlines, railways and ferries. The major shareholders of GLX are Tom Douramakos, Brett Proud and Gerry Osborne, that collectively own or control approximately 57.4% of the currently outstanding voting stock of GLX. The remaining 42.6% of GLX is owned by 29 shareholders, none of which own 10% or greater of GLX. Mr. Douramakos serves as President and Chief Executive Officer of GLX and David Campbell serves as its Chief Financial Officer. Mr. Osborne resides in Pickering, Ontario.

It is currently anticipated that, upon completion of the Acquisition, the following persons will constitute "Insiders" of the resulting issuer: Mr. Douramakos, Mr. Campbell, Mr. Proud, and a current director of Growthgen, as yet to be determined. Mr. Douramakos and Mr. Campbell reside in Toronto, and Mr. Proud lives in Stouffville, Ontario.

Tom Douramakos, President and Chief Executive Officer of GuestLogix, has over 20 years experience in product development and business development operations, and has held senior level positions with Silverline, CIT Global, AT&T, CSG, Manulife and SunLife. Tom's goal is to create unique market products based on a holistic approach to the challenges faced by guest services providers and their suppliers. Tom received his Bachelor of Science at York University.

David Campbell, Chief Financial Officer of GuestLogix, came to GuestLogix from Dexit Inc., a payments technology and services company where he was a co-founder and has been CFO since 2001. Prior to Dexit, David was at Basis100 Inc., a TSX-listed financial services technology company, where he was co-founder and Chief Financial Officer from 1998 until 2001. Before joining Basis100, David was a venture capital investor with a Canadian venture fund. David earned a degree in Honours Business Administration at Richard Ivey School of Business at the University of Western Ontario. He was granted the Chartered Financial Analyst designation in 1996.

Brett Proud, Vice President, Business Development of GuestLogix, has significant domain expertise in both supply chain planning and retail. Brett has significant professional services experience in the information technology sector, including senior positions with Silverline Technologies, Mastech, Keane Inc. and Accenture. Brett has successfully managed growth at both small and large technology companies. In 1997, he established a 250-person software development centre for Keane Inc. in Halifax by negotiating for $3+ million in job-creation funding from the Nova Scotia government. Brett received his Bachelor's Degree in Mathematics from the University of Waterloo

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurances that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in filing statement to be prepared in accordance with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

Growthgen will engage a sponsor in connection with the transaction if required in accordance with the requirements of the TSX Venture Exchange. Any agreement to sponsor should not be construed as an assurance with respect to the merits of the transaction or the likelihood of completion.

About Growthgen

Growthgen is a Capital Pool Company with its common shares listed on the Exchange. Its principal business is the identification and evaluation of assets, businesses, or interests with a view to completing a Qualifying Transaction. Growthgen has not commenced operations of any kind and has no assets other than cash.

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Growthgen and GLX to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Examples of such statements include: (A) the intention to complete the Acquisition, the Private Placement and the Qualifying Transaction; (B) the description of Growthgen that assumes completion of the Acquisition; and (D) the intention to grow the business and operations of Growthgen and GLX. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of Growthgen to obtain necessary financing; satisfy conditions under any definitive agreement; satisfy the requirements of the Exchange with respect to the Acquisition, the Private Placement and the Qualifying Transaction; the economy generally; consumer interest in Growthgen's and GLX's services and products; competition; and anticipated and unanticipated costs. While Growthgen anticipates that subsequent events and developments may cause its views to change, Growthgen specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing Growthgen's views as of any date subsequent to the date of this press release. There are many factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect Growthgen or GLX.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the content of this news release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Growthgen
    Craig Leon
    (416) 368-4397
    or
    GLX
    Tom Douramakos
    (416) 642-0395 x401