Montec Holdings Inc.
TSX VENTURE : MTE.P

Montec Holdings Inc.

December 01, 2006 06:00 ET

Montec Holdings Inc. Obtains Conditional Approval of the TSX Venture Exchange in Connection with Qualifying Transaction

MONTREAL, QUEBEC--(CCNMatthews - Dec. 1, 2006) - Montec Holdings Inc., a capital pool company listed on the TSX Venture Exchange (TSX VENTURE:MTE.P), is pleased to announce that it has received the conditional approval of the TSX Venture Exchange in connection with its previously-announced Qualifying Transaction with Datex Billing Services Inc.

Background

As previously announced, Montec entered into an Agreement in Principle (AIP) dated March 21, 2006 with Datex, a private company based in Mississauga, Ontario specializing in customer management, business intelligence and billing solutions. On October 19, 2006, the parties entered into a definitive Share Purchase and Subscription Agreement in connection with the Qualifying Transaction.

Pursuant to the Share Purchase and Subscription Agreement, at the closing, Montec will acquire (i) 5,100 common shares of Datex from treasury for an aggregate subscription price of $1,020, payable in cash; and (ii) 2,250,000 preferred shares of Datex from Marc Carrafiello, Ed Leavens, 2085194 Ontario Limited, 2116428 Ontario Inc., Jen Read and Dave Harvey for an aggregate consideration of $2,250,000, plus an earn-out adjustment of up to an additional $1,250,000, representing in the aggregate 51% of the issued and outstanding shares of Datex. 2085194 Ontario Limited and 2116428 Ontario Inc. are both Mississauga-based holding companies, the respective shareholders of which are: (i) Marc Carrafiello, Ed Leavens, Jen Read, Dave Harvey and 2116428 Ontario Inc.; and (ii) Marc Carrafiello, Lori Dawson and Jim Dawson. Each of Jim Dawson, Lori Dawson, Marc Carrafiello and Ed Leavens is a senior officer of Datex.

$1,750,000 of the initial purchase price for the preferred shares will be payable at closing, by way of the issuance of 3,000,000 common shares of Montec and 7,294,118 series A preferred shares of Montec, at a price of $0.17 per share. The preferred shares of Montec 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 (Form 5D of the TSXV) to be entered into in connection with the Qualifying Transaction, which is expected to be 36 months following the date of the closing. The balance of $500,000 will be payable at the closing in cash. The earn-out 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%(a)(net earnings of Datex(a)51%-$337,500), subject to the maximum amount of the earn-out. The Share Purchase and Subscription Agreement was negotiated at arm's-length between Montec and Datex.

Following the closing of the Qualifying Transaction, it is expected that the directors of Montec will be Myer Bentob, Jan Holland, Rosemonde Mandeville, Jeffrey A. Mandel, Jim Dawson and Ed Leavens.

Concurrent Private Placement

Concurrent with the closing of the Qualifying Transaction, Montec intends to effect a private placement of units to accredited investors resident in Canada through Union Securities Ltd., as agent, on a best-efforts basis. Each unit will be comprised of 30,000 common shares of Montec and 30,000 common share purchase warrants. Each warrant will entitle the holder to acquire one additional common share of Montec for a period of two years from the closing date of the private placement at a price of $0.25 per common share. The units will be issued at a price of $5,100 per unit (equivalent to $0.17 per common share).

It is expected that the private placement will be for minimum gross proceeds to Montec of $586,500, representing 115 Units or 3,450,000 common shares and 3,450,000 warrants, and maximum gross proceeds of $1,020,000, representing 200 Units or 6,000,000 common shares and 6,000,000 warrants.

In connection with the private placement, Montec will pay the agent a cash fee equal to 10% of the gross proceeds of the private placement with respect to any subscriptions, other than by the founders of Montec. In respect of any subscriptions made by its founders, Montec will pay the agent a cash fee equal to 5% of the gross proceeds from such subscriptions. In addition, Montec will grant "broker warrants" to the agent, exercisable for that number of units equal to 10% of the number of units sold under the private placement. The broker warrants will be exercisable at the issue price of the private placement for a period of two years from the closing date of the private placement.

The closing of the Qualifying Transaction is conditional upon the completion of the minimum offering.

Effect of Qualifying Transaction

Following the closing and taking into account the completion of the private placement, there will be 14,454,500 common shares of Montec issued and outstanding in the event of the minimum offering and 17,004,500 common shares of Montec issued and outstanding in the event of the maximum offering. It is expected that (i) Montec will hold an aggregate of 5,100 common shares and 2,250,000 preferred shares of Datex (51% of the outstanding shares of Datex), and will thus effectively control Datex; (ii) Ed Leavens, 2085194 Ontario Limited and 2116428 Ontario Inc. will hold an aggregate of 4,900 common shares and 2,161,765 preferred shares of Datex (49% of the outstanding shares of Datex), 3,000,000 common shares of Montec (20.7%, assuming the completion of the minimum offering and 17.6%, assuming the completion of the maximum offering, in both cases prior to the conversion of the series A preferred shares of Montec) and 7,294,118 series A preferred shares of Montec (100%); and (iii) the current shareholders of Montec will hold 8,004,500 common shares of Montec in the aggregate (55.4%, assuming the completion of the minimum offering and 47.1%, assuming the completion of the maximum offering, in both cases prior to the conversion of the series A preferred shares of Montec). Upon the conversion of the series A preferred shares of Montec in accordance with their terms, there will be an aggregate of 21,748,618 common shares of Montec issued and outstanding in the event of the minimum offering and an aggregate of 24,298,618 common shares of Montec issued and outstanding in the event of the maximum offering, of which (i) Ed Leavens, 2085194 Ontario Limited and 2116428 Ontario Inc. will hold an aggregate of 10,294,118 common shares of Montec (47.3%, assuming the completion of the minimum offering and 42.4%, assuming the completion of the maximum offering); and (ii) the current shareholders of Montec will hold 8,004,500 common shares of Montec (36.8%, assuming the completion of the minimum offering and 32.9%, assuming the completion of the maximum offering).

Conditions to Completion of Qualifying Transaction

The completion of the proposed Qualifying Transaction is subject to a number of conditions, including, but not limited to, final acceptance by the TSX Venture Exchange and other regulatory approvals; the completion of the proposed concurrent private placement by Montec; and completion of formal agreements. These include employment agreements with key employees of Datex and a shareholders' agreement among the principal shareholders of Montec and Datex.

It is also a condition of the Qualifying Transaction that Datex and Montec enter into a management agreement, pursuant to which Montec will provide various financial, administrative, marketing and legal services to Datex.

Filing Statement on SEDAR

Full details of the Qualifying Transaction are available in Montec's filing statement dated November 29, 2006, available at www.sedar.com.

Closing and Resumption of Trading

The closing of the Qualifying Transaction is expected to take place on or about December 29, 2006. It is expected that trading in Montec's common shares will resume immediately following the closing, subject to Montec fulfilling all of the listing requirements of the TSX Venture Exchange.

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.

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.

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