Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

November 01, 2005 09:00 ET

Xentel Reports Update on Operations

CALGARY, ALBERTA--(CCNMatthews - Nov. 1 2005) - Xentel DM Incorporated (TSX VENTURE:XDM) a North American specialty entertainment and relationship marketing company announces several changes to its operations and organization which will assist in positioning Xentel DM for the future.

Xentel is pleased to announce that it has established new credit facilities. The Company's US lender JP Morgan Chase has agreed to provide senior debt and operating credit to both the Canadian and US operations. Both the senior and subordinated debt lenders have agreed to reset the financial covenants and prior defaults have been waived such that the Company's borrowings are now in full compliance with all lending agreements. This will have a positive impact on the Company's balance sheet allowing the reclassification of $2.7 million of subordinated debt to be reclassified from current liabilities to long term liabilities, resulting in a similar improvement in the Company's working capital position.

Further, the Company has recently completed negotiations with Kevin Paykel and David Winograd, senior officers of the Company and former owners of the companies acquired in 2003, to reorganize their debt and ownership holdings in Xentel, as follows:

- Kevin Paykel will resign his position, and transfer his ownership of the $5,000,000 US subordinated Sellers' note payable and his outstanding share ownership in Xentel DM Incorporated shares (approximately 1.5 million shares) to David Winograd for a cash payment of approximately $830,000 US.

- David Winograd will agree to a purchase price adjustment of the $5,000,000 US Sellers' note, reducing it to $2,650,000 US and will subscribe for approximately 1.4 million treasury shares of Xentel DM Incorporated on a private placement basis. The completion of this private placement is subject to the approval of the TSX Venture Exchange and all other necessary regulatory approvals.

- To effect this transaction, the Company will loan David Winograd approximately $1.3 million US. Of this amount, $900,000 US will be financed by the subordinated debt lender. This $1.3 million US note will be fully secured and bearing interest at 3.9%.

- The price per share attributable to the shares purchased from Paykel and issued from treasury is $0.40, which is the 10 day moving average price.

- The overall impact of this transaction, for the fourth quarter 2005, will increase earnings before income tax by approximately $2.4 million CAD and reduce long term debt by $1.2 million. This will be reported as a subsequent event in the third quarter shareholders' report and be reflected in the annual financial statements.

- This transaction establishes David Winograd as a third significant shareholder in the Company, along with Messrs. Platz and Pickering.

It is anticipated that the foregoing transactions will close in the next 10 days.

Xentel also announces changes to the management structure of Xentel DM Incorporated. Geoffrey Pickering will resign as President, Co-CEO and Director of the Company but will continue with similar duties as a consultant to the Company. This is the first step in developing a longer term succession plan for emerging management members to assume more senior roles in the organization.

Xentel has had in place a succession process in anticipation of Mr. Pickering's move to a management contract with the objective of maintaining vitality, adapting to a rapidly evolving industry, and ensuring continuity. The Company is confident that its younger management is going to be well positioned to provide the required leadership for the Company in the future. Michael Platz will continue as Chairman and CEO of the enterprise, and David Winograd will continue as President of the US operations.

During 2006 Xentel intends to identify and position key managers in new roles to assist Xentel during this transition process

Additionally, after many years of dedicated service, John Burns has resigned from the Board. The Board expresses its sincere thanks to John Burns for his years of commitment and contribution to Xentel.

Messrs. Burns and Pickering will forfeit their stock options of 100,000 shares each in accordance with the terms of their stock options agreements.

The Board is pleased to announce the Messrs. Burns and Pickering will be replaced by Craig Copland and Barry Sattell.

Mr. Copland is the owner of a long standing firm providing consulting services to not for profit enterprises. He has served on over 30 Boards for not-for profit organizations and frequently publishes articles on related subjects. He has a Ph.D in Educational Administration and a Masters Degree in Environmental Studies. Mr. Copland resides in Muskoka Ontario

Mr. Sattell is a CPA and is the President of the firm of Sattel, Johnson Appel & Co., S.C., Certified Public Accountants based in Milwaukee Wisconsin. He is on the Board of the Zoological Society of Milwaukee County and Chairman of the Simba Society, an organization involved in legacy gifting. Barry's areas of expertise include business consulting, and financial and tax planning with areas of industry concentration in healthcare, hospitality and not-for profits.

The new directors bring diversified backgrounds to the Board that will contribute significantly to the management and operation of the Company.

As part of the reorganization of the Board of Directors, the audit committee membership has been amended. The audit committee is now comprised of Andy Wilson, Chairman together with Craig Copland and Barry Sattell.

XENTEL DM Incorporated is one of North America's leading relationship-marketing concerns and producers of cause related entertainment events. The Company's success is attributable to proprietary sales tools including technologically advanced teleservices and sophisticated customer databases. With the completion of the AMT acquisition, Xentel DM Incorporated has over 450 clients and 3,000 employees in 34 offices across North America.

Certain statements in this press release may constitute "forward looking statements" and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any performance or achievement expressed or implied by such "forward looking statements".

The TSX Venture Exchange has neither approved nor disapproved the contents of this announcement.

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