Item 1.01 Entry into a Material Definitive Agreement.
Further Extension of Blue Label Telecoms Subscription
Date and RMB Guarantee
As previously disclosed, on October 4, 2016, Net 1 UEPS
Technologies, Inc. (Net1), through one of its subsidiaries, Net1 Applied
Technologies South Africa Proprietary Limited (Net1 SA), entered into a
Subscription Agreement (the Blue Label Subscription Agreement) with Blue Label
Telecoms Limited (Blue Label), a JSE-listed company which is a leading
provider of prepaid electricity and airtime in South Africa. Pursuant to the
Blue Label Subscription Agreement, Net1 SA will subscribe for approximately
117.9 million ordinary shares of Blue Label at a price of ZAR 16.96 per share,
for an aggregate price of ZAR 2.0 billion.
As previously disclosed, on October 20, 2016, Net1 SA and Blue
Label signed an addendum to the Blue Label Subscription Agreement which, among
other things, established the subscription date and required FirstRand Bank
Limited (acting through its Rand Merchant Bank division) (RMB) to issue a
guarantee to Blue Label for the purchase price of the Blue Label shares to be
purchased by Net1 SA (the Guarantee). On that date, Net1 SA also entered into
a Common Terms Agreement (the CTA), a Senior Facility A Agreement, Senior
Facility B Agreement, Senior Facility C Agreement, Subordination Agreement,
Security Cession & Pledge and certain ancillary loan documents with RMB
(collectively, the Finance Documents), pursuant to which, among other things,
Net1 SA may borrow up to an aggregate of ZAR 1.4 billion to finance a portion of
its investment in Blue Label. The amounts available under these loans and an
escrow deposit of ZAR 600 million made by Net1 SA serve as security for the
Guarantee. Net1 agreed to guarantee the obligations of Net1 SA to RMB and
subordinate any claims it may have against Net1 SA and certain of its
subsidiaries to RMBs claims against such persons.
As previously disclosed, the Blue Label Subscription Agreement
was amended and restated on November 16, 2016 to, among other things, extend the
subscription date. On February 28, 2017, the Blue Label subscription date was
further extended to June 30, 2017, pursuant to the First Addendum to the Amended
and Restated Subscription Agreement (the Addendum).
As previously disclosed, on November 15, 2016, RMB, Net1, Net1
SA and certain of Net1s affiliates entered into a letter agreement (the
Guarantee Letter) amending the CTA to extend the term of the Guarantee, as
referenced therein, to February 28, 2017, and RMB issued a new guarantee in
favor of Blue Label for the purchase price of the Blue Label shares to be
purchased by Net1 SA. In accordance with the terms of the Guarantee Letter, this
guarantee would expire on February 28, 2017.
On February 28, 2017, RMB, Net1, Net1 SA and certain of Net1s
affiliates entered into a new letter agreement (the February 2017 Guarantee
Letter) amending the CTA to extend the term of the Guarantee, as referenced
therein, to May 31, 2017, and to correct certain outdated terms to the CTA, and
RMB issued a new guarantee (the New Guarantee) in favor of Blue Label for the
purchase price of the Blue Label shares to be purchased by Net1 SA. In
accordance with the terms of the February 2017 Guarantee Letter, this guarantee
will expire on May 31, 2017.
On February 28, 2017, RMB, Net1, Net1 SA and certain of Net1s
affiliates entered into a side letter agreement (the Guarantee Side Letter)
under which the parties agreed to amend the Finance Documents by March 15, 2017,
to contemplate and permit various guarantors to provide guarantees and to ensure
that only the original senior lenders retain the benefits of all amounts
credited to the escrow account and security in respect thereof. If the parties
fail to reach agreement and amend the Finance Documents by March 15, 2017, Net1
is required to deposit ZAR 1.4 billion into the escrow account. Failure to reach
agreement by March 15, 2017, or to deposit the additional funds into the escrow
account, would constitute a breach under the CTA.
The foregoing descriptions of the Addendum, the February 2017
Guarantee Letter, the Guarantee Side Letter, and the New Guarantee do not
purport to be complete and are qualified in their entirety by reference to the
full text thereof, copies of which are attached hereto as Exhibits 10.50 through
10.53 and are incorporated herein by reference.
On February 28, 2017, the USD/ZAR exchange rate was $1.00/ZAR
13.0283.