Corero Network Regulatory News (CNS)

THIS ANNOUNCEMENT IS RESTRICTED AND IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, SOUTH AFRICA, THE REPUBLIC OF IRELAND OR AUSTRALIA OR ANY OTHER STATE OR JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR A SOLICITATION OF ANY OFFER TO ACQUIRE, PURCHASE OR SUBSCRIBE FOR, SHARES OR ANY OTHER SECURITIES OF THE COMPANY IN ANY JURISDICTION, INCLUDING THE UNITED STATES.

30 July 2015

Corero Network Security plc

("Corero" or the "Company")

Proposed Fundraising to raise up to £5.0 million

Corero Network Security plc (AIM: CNS), the AIM listed network security company, is pleased to announce a conditional subscription by directors, existing shareholders and certain other investors to raise up to £5.0 million (before expenses).

Proposed Fundraising

Further to its announcement earlier today, Corero is pleased to confirm a conditional fundraising to raise up to £5.0 million (before expenses) (the "Fundraising") by directors, including Jens Montanana, existing shareholders and certain other investors (together, the "Subscribers") of, in aggregate, up to 50,000,000 new ordinary shares of 1p each (the "New Ordinary Shares") at 10p per ordinary share ("Issue Price"). The Issue Price represents a 5.88% per cent. discount to the closing middle market quotation price of an Ordinary Share on 29 July 2015 (of 10.625 pence per Ordinary Share), the day prior to this announcement.

The Fundraising is being undertaken to fund the Company's ongoing development and sales and marketing activities. A more detailed explanation of the use of proceeds is outlined below.

Background to the Fundraising

As outlined in more detail in the update on trading, announced earlier today, the directors of the Company (the "Directors" or the "Board") maintain a positive outlook on the future for the Company.

The net proceeds of the Fundraising will be deployed to support SmartWall TDS sales and marketing activities in the US and Europe, and the further development of the SmartWall TDS product. It is anticipated that the fund raise will enable the Company to achieve positive cash flows from trading in the second half of 2016.

The Directors, who hold approximately 41.06 per cent. of the existing shares of the Company, support the Fundraising. Furthermore, shareholders of the Company who hold approximately 35.57 per cent. of the existing shares of the Company are also proposing to participate in the Fundraising and have entered into, or have confirmed that they will enter into, conditional Subscription Agreements (defined below) with the Company dated the same date as this announcement. Together, this represents a significant majority of the Company's shareholders who are committed to the support of the Company's strategy. If the Special Resolution (defined below) is not approved by the requisite number of shareholders or the Fundraising does not proceed for any other reason, the Company will be required to secure financing, for the purposes set out above, from alternative sources.

Details of the Fundraising

Each Subscriber has entered into, or has confirmed that they shortly will enter into, a separate conditional subscription agreement with the Company dated 30 July 2015 pursuant to which each Subscriber has conditionally agreed (or will conditionally agree) to subscribe for a specified number of New Ordinary Shares set out in that Subscriber's subscription agreement (together the "Subscription Agreements"). None of the Subscription Agreements are conditional on completion of any of the other Subscription Agreements but each Subscription Agreement is subject to the same conditions.

The Fundraising is conditional upon:

· the passing (without amendment) of a special resolution to grant the Directors authority to allot the New Ordinary Shares on a non-pre-emptive basis at a general meeting of the Company (the "General Meeting") (the "Special Resolution"); and

· the admission of the New Ordinary Shares to trading on AIM ("Admission").

A circular setting out full details of the Fundraising and convening the General Meeting will be posted to shareholders in due course (the "Circular"). The Circular will set out why the Board considers the Fundraising to be in the best interests of the Company and its shareholders as a whole.

The New Ordinary Shares are not being made available to the public and are not being offered or sold in any jurisdiction where it would be unlawful to do so. The Fundraising is not being underwritten. Application will be made for the New Ordinary Shares to be admitted to trading on AIM. Subject to the Special Resolution being passed at the General Meeting, the New Ordinary Shares will be credited as fully paid and will rank pari passu with the existing ordinary shares of 1 pence each of the Company ("Ordinary Shares") if and when issued.

Participation by Directors

It is proposed that Jens Montanana, Andrew Miller and Richard Last, each a Director of the Company, will participate in the Fundraising. The interests of the Directors immediately following Admission will be as follows:

* If the Fundraising is fully subscribed and no further Ordinary Shares are issued following the date of this announcement.

** "Enlarged Issued Share Capital" means the 165,637,416 Ordinary Shares of the Company as it will be immediately following the Fundraising (assuming the Fundraising is fully subscribed and assuming that no further Ordinary Shares are issued following the date of this announcement).

*** held in the name of Jens Montanana and beneficial entities.

Due to certain restrictions under the City Code on Takeovers and Mergers, if the Fundraising becomes unconditional then, in the unlikely event that any other Subscriber either (i) does not enter into a Subscription Agreement after giving confirmation to the Company that he or it would do so or (ii) defaults under his or its Subscription Agreement and does not subscribe for some or all of the New Ordinary Shares specified therein, Jens Montanana and, if applicable, Andrew Miller shall reduce the number of New Ordinary Shares which each will subscribe for in the Fundraising to such numbers so as to ensure that, on Admission, Jens Montanana will only hold such number of Ordinary Shares as will represent 39.51 per cent. of the Company's issued share capital at that date and Andrew Miller will only hold such number of Ordinary Shares as will not exceed 0.63 per cent. of the Company's issued share capital at that date (and may hold a smaller percentage).

Advance Agreement

Jens Montanana has agreed to lend the Company the total principal sum of £0.5 million pursuant to a share subscription advance by way of loan agreement dated the same date as this announcement (the "Advance Agreement"). This loan is repayable on the earlier of (i) the day immediately following the date that the Special Resolution is passed at the General Meeting and (ii) 31 July 2016. The Company may have to repay the loan early if it commits an event of default. Interest is payable on the loan at the end of each three month period at a percentage rate per annum equivalent to the Bank of England's published base rate from time to time plus 5.0 per cent. However, no interest shall be payable and accrue on the loan if it is repaid or prepaid by the Company during the period of 60 days commencing on the date the loan is made.

If the Special Resolution is passed at the General Meeting, part of the subscription monies owed by Jens Montanana pursuant to his Subscription Agreement in respect of the New Ordinary Shares which he will subscribe for will be satisfied by the release of the Company of its obligation to repay the liquidated sum which the Company will owe Jens Montanana pursuant to the Advance Agreement.

If the Fundraising does not proceed, the Company will continue to owe the principal sum plus accrued interest under the Advance Agreement to Jens Montanana in accordance with its terms and a security interest will be granted at that time to Jens Montanana over the Company's shares in its subsidiary, Corero Network Security, Inc. This loan will then be repayable on 31 July 2016.

Related Party Transactions

The participation in the Fundraising by Jens Montanana, Andrew Miller and Richard Last as directors of the Company constitutes a related party transaction pursuant to Rule 13 of the AIM Rules. The independent directors (being the Board excluding Jens Montanana, Andrew Miller and Richard Last as participants in the Fundraising) (the "Independent Directors") consider, having consulted with finnCap, the Company's nominated adviser, that the participation in the Fundraising by these individuals, as set out above, is fair and reasonable insofar as the shareholders are concerned.

Additionally, the provision of the loan by Jens Montanana under the Advance Agreement, as outlined above, constitutes a related party transaction pursuant to Rule 13 of the AIM Rules.

The Independent Directors consider, having consulted with finnCap, the Company's nominated adviser, that the entering into of the Advance Agreement is fair and reasonable insofar as the shareholders are concerned.

Finally, Richard Koch is a substantial shareholder in Corero, holding in aggregate 13,891,000 Ordinary Shares of the Company, representing 12.01 per cent. of the voting rights and, consequently, Richard Koch is considered to be a related party of the Company pursuant to Rule 13 of the AIM Rules.

Richard Koch is subscribing for 9,700,000 New Ordinary Shares at the Issue Price, representing 19.40 per cent. of the Fundraising. This subscription by Richard Koch also constitutes a related party transaction for the purposes of the AIM Rules.

The Independent Directors consider, having consulted with finnCap, the Company's nominated adviser, that the participation in the Fundraising by Richard Koch, as set out above, is fair and reasonable insofar as the shareholders are concerned.

Enquiries:

About Corero Network Security

Corero Network Security, an organization's First Line of Defense® against Distributed Denial of Service (DDoS) attacks and cyber threats, provide enterprises and service providers with an additional layer of security capable of inspecting and analysing Internet traffic and mitigating attacks. Corero products and services enhance existing security architecture with a scalable, flexible and responsive defence against DDoS attacks and cyber threats before they reach the targeted IT infrastructure, allowing online services to perform as intended. The latest addition to Corero First Line of Defense® product family includes the Corero SmartWall® Threat Defense System (TDS) allowing for modular, highly scalable network visibility and DDoS defence for the Large Enterprise, Datacentre and Hosting Provider, as well as the Internet Service Provider.

For more information about how Corero solutions are protecting over 500 businesses across the globe, visit www.corero.com.

Disclaimer

This announcement contains a number of forward looking statements relating to Corero and its subsidiaries (the "Group") with respect to, amongst others, the following: financial conditions; results of operations; the business of the Group; future benefits of the Fundraising; and management plans and objectives. The Company considers any statements that are not historical facts to be "forward looking statements". They relate to events and trends that are subject to risks, uncertainties and assumptions that could cause the actual results and financial position of the Group to differ materially from the information presented in the relevant forward looking statement. When used in this announcement, the words "estimate"; "project"; "intend"; "aim"; "anticipate"; "believe"; "expect"; "should" and similar expressions, as they relate to the Group or management of it, are intended to identify such forward looking statements. Shareholders are cautioned not to place undue reliance on these forward looking statements which speak only as at the date of this announcement. The Company does not undertake any obligation to update publicly or revise any of the forward looking statements whether as a result of new information, future events or otherwise, save in respect of any requirement under applicable laws, the AIM Rules or other regulations.

finnCap Ltd, which is authorised and regulated by the Financial Conduct Authority, is acting as nominated adviser and broker to the Company in connection with the matters described in this announcement. finnCap Ltd will not be responsible to anyone other than the Company for providing the protections afforded to clients of finnCap Ltd or for advising any other person on the Fundraising or any other arrangements described in this announcement. finnCap Ltd has not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by finnCap Ltd for the accuracy of any information or opinions contained in this announcement or for the omission of any information.