Montec Holdings Inc.
TSX VENTURE : MTE.P

Montec Holdings Inc.

January 04, 2007 06:00 ET

Montec Holdings Completes Qualifying Transaction With Datex Billing Services and Concurrent Private Placement

MONTREAL, QUEBEC--(CCNMatthews - Jan. 4, 2007) - Montec Holdings Inc., a capital pool company listed on the TSX Venture Exchange (TSX VENTURE:MTE.P), is pleased to announce that it has completed its previously-announced Qualifying Transaction with Datex Billing Services Inc. of Mississauga, Ontario. At the same time, Montec completed a private placement for total proceeds of $586,500.

"We are delighted to have completed our Qualifying Transaction and look forward to our association with Datex" said Myer Bentob, Chairman and Chief Executive Officer of Montec. Jim Dawson, President and Chief Executive Officer of Datex said, "We are confident that there will be great synergies between Datex and Montec. This will help us to continue to build Datex's business".

Qualifying Transaction

Montec acquired 51% of the issued and outstanding shares of Datex by subscribing for 5,100 common shares from treasury for a subscription price of $1,020, and by purchasing 2,250,000 preferred shares from Marc Carrafiello, Ed Leavens, 2085194 Ontario Limited, 2116428 Ontario Inc., Jen Read and Dave Harvey for an aggregate amount of $2,250,000, paid in cash and shares, plus an earn-out adjustment of up to an additional $1,250,000. The shareholders of 2085194 Ontario Limited are Marc Carrafiello, Ed Leavens, Jen Read, Dave Harvey and 2116428 Ontario Inc., while the shareholders of 2116428 Ontario Inc. are Marc Carrafiello, Lori Dawson and Jim Dawson. Jim Dawson, Lori Dawson, Marc Carrafiello and Ed Leavens are senior officers of Datex.

Of the purchase price of $2,250,000 for the Datex preferred shares, Montec paid $1,750,000 by issuing 3,000,000 common shares and 7,294,118 Series A preferred shares, at a price of $0.17 per share. The balance of $500,000 of the purchase price was paid in cash. The Series A preferred shares will be automatically converted on a one-for-one basis into common shares of Montec, for no additional consideration, on the date which coincides with the final release date pursuant to the Tier 2 Value Security Agreement entered into in connection with the Qualifying Transaction, which is expected to be three years following the date of the closing. The earn-out portion of the purchase price will be payable in cash by June 30 in each of the seven fiscal years of Datex following the closing, with the payment in each such year being equal to 46%(i)(net earnings of Datex(i)51%-$337,500), subject to the maximum amount of the earn-out. The Qualifying Transaction was effected at arm's length between Montec and Datex.

Pursuant to the policies of the TSX Venture Exchange, all of the shares issued by Montec in connection with the Qualifying Transaction are subject to a Tier 2 Value Security Agreement pursuant to which such shares will be held in escrow for a period of three years following the closing, subject to the release provisions set out in the agreement. Under applicable securities legislation, the 3,000,000 common shares and 7,294,118 Series A preferred shares issued by Montec in connection with the Qualifying Transaction are also subject to a hold period expiring on April 30, 2007.

Other agreements entered into at the closing of the Qualifying Transaction include employment agreements with key employees of Datex, a shareholders' agreement among all of the shareholders of Datex (including Montec), and a management services agreement between Montec and Datex, pursuant to which Montec will provide various financial, administrative, marketing and legal services to Datex.

Resumption of Trading

It is expected that trading in Montec's common shares will resume on the TSX Venture Exchange under the symbol MTE in early January 2007. As a result of the closing of the Qualifying Transaction and the concurrent private placement, there are 14,454,500 common shares of Montec issued and outstanding.

Board of Directors

David Williams and Winnie Fok have resigned as directors of Montec and, at the closing of the Qualifying Transaction, Jim Dawson, Ed Leavens and Jeffrey Mandel were appointed to the Board. Jim Dawson and Ed Leavens are senior officers of Datex. The Board of Directors of Montec now consists of Myer Bentob (Chairman), Jan Holland, Dr. Rosemonde Mandeville, Jim Dawson, Ed Leavens and Jeffrey Mandel.

In addition, Myer Bentob, Jan Holland, and Jeffrey Mandel were appointed to the Board of Directors of Datex. The other directors of Datex are Jim Dawson and Ed Leavens.

Concurrent Private Placement

In the concurrent private placement, Montec issued 115 units to investors in Quebec and Ontario at a price of $5,100 per unit, for total proceeds to Montec of $586,500. Each unit consists of 30,000 common shares and 30,000 common share purchase warrants, for a total of 3,450,000 common shares and warrants. Each warrant entitles the holder to acquire one additional common share of Montec at a price of $0.25 for a period of two years.

The net proceeds from the private placement will be used by Montec in order to carry out its business strategies and objectives, namely to continue to investigate potential acquisition opportunities in order to identify target companies, and enter into discussions with such companies, with a view to completing a second acquisition.

Under applicable securities legislation and the policies of the TSX Venture Exchange, all of securities issued pursuant to the private placement are subject to a hold period expiring on April 30, 2007.

In connection with the private placement, Montec paid Union Securities Ltd., the agent for the private placement, a cash fee of $31,110. In addition, Montec granted "broker warrants" to Union Securities, giving it the right to acquire up to 11.5 additional units at a price of $5,100 per unit for a period of two years. Each unit will be comprised of 30,000 common shares and 30,000 common share purchase warrants. Each warrant will entitle the holder to acquire one additional common share of Montec at a price of $0.25 for a period of two years from the closing date of the private placement.

Related-Party Transaction

Given that Myer Bentob, the Chairman of Montec and Jim Dawson and Dr. Rosemonde Mandeville, both directors of Montec, subscribed for an aggregate of 101 units in connection with the private placement, the private placement is a "related-party transaction" within the meaning of applicable securities legislation and the policies of the TSX Venture Exchange.

The private placement was effected in order to allow Montec to meet the listing requirements of the TSX Venture Exchange in connection with its Qualifying Transaction. Following the completion of the private placement and the Qualifying Transaction, Myer Bentob owns 5,059,000 common shares of Montec, Jim Dawson owns 150,000 common shares and Dr. Rosemonde Mandeville owns 130,000 common shares of Montec, respectively representing 34.99%, 1.04% and 0.09% of the total issued and outstanding common shares. The securities subscribed for by each of the three are subject to a Tier 2 Value Security Agreement, pursuant to which such securities will be held in escrow for a period of three years following the closing, subject to the release provisions set out in the agreement.

The insiders' participation in the private placement was effected on the same terms and conditions as all other subscribers and none of them derived any special benefit from the transaction. The terms of the private placement were negotiated at arms' length between Montec and Union Securities Ltd. The Board of Directors of Montec conducted a thorough review of the terms of the private placement and unanimously approved the transaction.

In connection with the private placement, Montec was exempt from the formal valuation and minority shareholder approval requirements of Quebec Regulation Q-27 respecting Protection of Minority Securityholders in the Course of Certain Transactions pursuant to a decision obtained from the Autorite des marches financiers. Montec was also exempt from the formal valuation and minority shareholder approval requirements of Ontario Securities Commission Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, in that no securities of Montec are listed on or quoted on the Toronto Stock Exchange, New York Stock Exchange, American Stock Exchange, NASDAQ or a stock exchange outside of Canada and the United States, neither the fair market value of the securities distributed in the transaction nor the consideration received for those securities exceed $2,500,000 at the time the transaction was agreed to, and the sole independent director of Montec approved the transaction.

Montec will file a material change report in connection with the private placement. Given that none of the insiders participating in the private placement received any special benefit from the private placement, and that their respective subscriptions were confirmed only at closing, Montec is of the view that the filing of the material change report less than 21 days before the closing of the private placement is reasonable in the circumstances.

Forward-Looking Statements

This press release contains certain forward-looking statements that reflect the current views and/or expectations of Montec with respect to performance, business and future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary significantly. Investors are cautioned not to rely on these forward-looking statements. Montec does not undertake to update these forward-looking statements.

Investors are cautioned that, except as disclosed in the filing statement prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying 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.

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

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