Rainmaker Entertainment Inc.

Rainmaker Entertainment Inc.

January 07, 2013 17:36 ET

Rainmaker Entertainment Announces Letter Agreement to Co-Invest in an Animated Feature Film Property and Announces Proposed Rights Offering

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 7, 2013) -


Rainmaker Entertainment Inc. (TSX:RNK) announced today that it has entered into a letter of intent to co-invest in and co-produce a feature length animated film preliminarily scheduled for release during the third quarter 2014. Rainmaker also announces that it intends to raise up to $6.2 million pursuant to a proposed rights offering of unsecured convertible debentures, subject to receipt of all regulatory approvals (the "Proposed Offering").

The Feature Film

Pursuant to the letter of intent among Rainmaker, CNHK Media Corp. ("CNHK") and Entertainment Financial Consultants, LLC dba Film Financial Services ("FFS"), Rainmaker and CNHK have agreed to enter into negotiations in respect of collaborating on a slate of five animated feature films. Preproduction of the first film is expected to commence immediately with financial closing expected to occur on or before January 31, 2013. The proposed title and details regarding the film's content will be disclosed at a later date upon receipt of the consent of the third party rights holder. The film is preliminarily scheduled for release in North America during the third quarter 2014.

Michael Hefferon, Rainmaker's President and Executive Producer stated, "Rainmaker is thrilled to be partnering with CNHK, who has positioned itself to become a leading producer and distributor in China, as our co-producer on this upcoming film. The film reconfirms Rainmaker's commitment to investing in and producing audience-driven content for the international market."

The Proposed Offering

The Proposed Offering is subject to the approval of the Toronto Stock Exchange ("TSX") and applicable securities regulatory authorities. While Rainmaker believes that the terms and conditions of the Proposed Offering will be as set forth in the summary below, such terms and conditions are subject to change. There can be no assurance that the Proposed Offering will be approved by the TSX and applicable securities regulatory authorities on the terms and conditions described herein or at all. The definitive terms of the Proposed Offering will be set forth in the short form prospectus to be filed with the applicable securities regulatory authorities as soon as possible. Rainmaker will disseminate a news release disclosing the terms and conditions of the Proposed Offering once such terms and conditions have been settled.

Number of Rights to be Granted

One right will be granted to shareholders on the basis of one right for each issued and outstanding common share. There are 17,485,175 common shares issued and outstanding on the date hereof. The rights will be transferable and are expected to be listed for trading on the TSX.

Attributes of the Convertible Debentures

Three thousand (3,000) rights will entitle the holder thereof to purchase unsecured convertible debentures (the "Debentures") in the aggregate principal amount of $1,000. The Debentures will be a direct obligation of Rainmaker, will bear interest at a rate of 8% per annum, will have a maturity date that is 36 months after the date of issue and will be unsecured. The Debentures will be convertible into common shares at a price of $0.20 per share, subject to adjustment in certain circumstances. Debentures will only be issued in denominations of $1,000 principal amount.

Investment and Backstop Commitments

Rainmaker has received non-binding commitments from three of its largest shareholders and Craig Graham, Rainmaker's Chief Executive Officer, to provide investment and backstop commitments to ensure a minimum of $5.0 million principal amount of Debentures are sold pursuant to the Proposed Offering. The investment and backstop commitment is expected to be provided by funds managed by McElvaine Investment Management Ltd., Chou Associates Management Inc., Stacey Muirhead Capital Management Ltd. and Mr. Graham. The parties have currently agreed to subscribe for $3.4 million principal amount of Debentures and the current shareholders have agreed to backstop the offering to ensure a minimum aggregate offering of $5.0 million principal amount of Debentures. No fee is expected to be payable to any party in respect of the backstop commitment. Binding commitments are expected to be entered into prior to filing the preliminary short form prospectus with the applicable securities regulatory authorities and will be described in detail in the short form prospectus.

Record Date

The record date for the Proposed Offering will be determined following the approval of the Proposed Offering by the TSX and applicable securities regulatory authorities. There can be no assurances that the TSX and applicable securities authorities will approve the Proposed Offering on the terms and conditions set forth herein or at all.

Expiry of Exercise Period

Shareholders will be provided a period of not less than 21 calendar days to exercise their rights. The precise exercise period will be disclosed in the offering document.

Subscription Privilege

Shareholders will be provided with a basic subscription privilege that will entitle them to subscribe for Debentures on a pro rata basis based upon the number and percentage of common shares owned by them on the record date. Shareholders will be provided with an additional subscription privilege that will entitle them to subscribe for additional Debentures in the event that less than all of the shareholders exercise their rights.

Maximum Number of Debentures to be Issued

Based upon the number of common shares outstanding on the date hereof, the maximum principal amount of Debentures that may be purchased pursuant to the exercise of rights and Mr. Graham's investment will be approximately $6.2 million.

Use of Proceeds

The proceeds of the Proposed Offering will be to fund Rainmaker's commitments in respect of the feature film production announced today, strengthen Rainmaker's balance sheet, provide funds for operations, to allow Rainmaker to explore potential acquisitions, co-investments on other film properties and to develop in-house programming.

U.S. Sales

This news release is not an offer of securities for sale in the United States. The rights and the Debentures will not be registered under the U.S. Securities Act of 1933, or the securities laws of any state, and may not be offered or sold in the United States or to, or for the account or benefit of, any U.S. person or person in the United States without registration unless an exemption from registration is available.

Board Update

Rainmaker advises that, further to its press release dated November 14, 2012, Delna Bhesania has advised the board that she has decided not to accept her appointment to Rainmaker's board of directors.

Forward-Looking Statements

Certain information set forth in this press release contains "forward-looking statements", and "forward-looking information" under applicable securities laws. These statements relate to future events or future performance and include, but are not limited to, statements regarding the timing to file the preliminary short form prospectus in respect of the Proposed Offering. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and similar expressions are often used to identify forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific. In evaluating these statements, readers should specifically consider risks which may cause actual results to differ materially from any forward-looking statement. These risks include, but are not limited to, risks relating to the possibility that the definitive agreements may not be entered into with respect to any of the proposed feature films and the Proposed Offering may not be completed. The forward-looking statements contained herein are based upon certain assumptions considered reasonable at the time they were prepared. Such assumptions include, but are not limited to, assumptions regarding: (i) general economic conditions, (ii) Rainmaker's future business prospects and opportunities, (iii) Rainmaker's ability to complete any or all of the proposed feature films, and (iv) the outcome of the Proposed Offering. Should one or more of the risks or uncertainties identified herein materialize, or should the assumptions underlying the forward-looking statements prove to be incorrect, then actual results may vary materially from those described herein. In respect of Rainmakers business generally, readers should also refer to Forward-looking Statements in the Management Discussion & Analysis for the third quarter of 2012. Readers are cautioned not to place undue reliance on forward-looking statements. Except as required by applicable securities laws, Rainmaker does not assume any obligation to update the forward-looking statements contained herein.

About Rainmaker Entertainment

Rainmaker Entertainment Inc., a multifaceted animation studio, is one of Canada's largest producers of CG animation. Rainmaker's first feature film Escape from Planet Earth will be distributed by The Weinstein Company in February 2013. For more information, go to www.rainmaker.com.

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