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Xentel | | . | Press Release - June 4, 1999 |
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XENTEL DM Completes Acquisition of Nation-Wide U.S. Event Marketing Business New Business Unit to Operate in the U.S. Under XENTEL INC. Name CALGARY, ALBERTA, June 4, 1999 - XENTEL DM Incorporated (ASE:XDM) is pleased to announce that today it has completed the acquisition of a nation-wide U.S. event marketing business. The acquisition was effected through the purchase of all the issued and outstanding shares of Advanced Technology Concepts, Inc. and certain assets and liabilities of the Gehl Corporation, both U.S. companies. As a consequence of the acquisition, the Corporation has received client contracts, customer databases, multiple call centre locations and goodwill associated with the event marketing business. The business will continue operations through XENTEL Inc., a wholly owned subsidiary of the Corporation. The Gehl Corporation generated nearly $75,000,000 (CDN) in event revenue last year when restated under Canadian generally accepted accounting principles. Cause related event marketing entails creating, marketing and presenting sports and entertainment events and promoting them in partnership with public service organizations across the United States. XENTEL Inc. will begin operations in 31 states and plans to stage 200 events in fiscal 1999. The Gehl Corporation had an operating loss for the fiscal year ended December 31, 1998 equal to 3% of its revenue. However, the Corporation believes that the adoption in the United States of its profitable business model and a planned restructuring of the acquisition can bring the United States operations up to the same level of historical profitability as the Corporation's Canadian operations. Advanced Technology Concepts, Inc. was acquired through the issuance of 3,500,000 Class "A" Common Shares (the "Common Shares") of the Corporation to Mr. Joseph E. Gehl, its sole shareholder. Over 94% of such shares have been deposited with a trustee pursuant to a performance escrow agreement. In addition, upon the achievement of certain performance targets, up to $833,333 (USD) of Common Shares will be issued to Mr. Gehl in each year of the next three years. The deemed value of the shares will be determined by the weighted average trading price of the Corporation's Common Shares for the 20 days prior to the applicable year-end. Mr. Gehl held no shares in the Corporation prior to the acquisition and does not expect to acquire any further shares. He will be employed by XENTEL Inc. in connection with the acquired business. Certain assets were acquired from the Gehl Corporation for a purchase price of $2,500,000 (USD). In commenting on the acquisitions, Mr. Michael Platz, Chairman and Mr. Geoff Pickering, President stated: "We are pleased with these transactions and have begun immediately restructuring the U.S. companies. The acquisitions are a truly unique opportunity for XENTEL DM Incorporated to expand a solid base of clients and events into a powerful North American event marketing business." In conjunction with the acquisitions, the Corporation entered into an agreement with SCC Canada Inc., and certain institutional lenders providing for the issuance of $5,250,000 (CDN) in secured subordinated Notes bearing interest at 12% per annum. The Notes may be pre-paid at any time and mature on May 31, 2004. In connection with the financing the lenders have been issued warrants to purchase up to an aggregate 2,200,000 Common Shares of the Corporation upon the payment of an initial exercise price of $1.48 per share. The warrants have a five year term and following the second anniversary of their issuance, the exercise price will increase in accordance with the requirements of The Alberta Stock Exchange. XENTEL DM Incorporated is the largest and most experienced provider of fund-raising, membership recruitment and special events services to non-profits and community service organizations in Canada and now has a significant Unites States presence. The Alberta Stock Exchange has neither approved nor disapproved of the contents of this announcement. For further information, please contact:
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