TSX VENTURE EXCHANGE: SRO
MONTREAL, QC, April 7 /CNW Telbec/ - Section Rouge Media Inc. (TSX
Venture Exchange: SRO) announces today that it has signed an Engagement Letter
with Union Securities Ltd. and that it has reached on March 27, 2006 a new
agreement to acquire all the issued and outstanding common shares of Image In
Media. The latter agreement replaces the October 11, 2005 agreement previously
announced and is subject to the conditions outlined by the TSX Venture
Exchange. Trading in Section Rouge Media's common shares on the TSX Venture
Exchange remains halted until the date of the closing of the acquisition.
The authorized share capital of Image In Media consists of an unlimited
number of common shares without par value. There are currently
20,010,000 common shares issued and outstanding. The principal shareholders of
Image In Media are Pierre Bernatchez, the company's founder and President and
Chief Executive Officer (34.98%) residing in L'Assomption, QuDebec, 4194420
Canada Inc (34.98%), having its registered office in Lachine, QuDebec, and Paul
Allard, residing in MontrDeal, QuDebec (19.3%). The sole shareholder of 4194420
Canada is Luigi Porco, Senior Vice President, Financing and Business
Development of Image In Media, residing in Lachine, QuDebec.
There are 2,260,000 common shares reserved for future issuances. From
this number, there are warrants outstanding allowing the holders thereof to
purchase collectively 1,010,000 common shares. These warrants, having a term
of 24 months and an exercise price of $0.25 per share, were issued to
employees of Image In Media in June 2005. There are convertible debentures
totalling $100,000 issued to private investors. The principal amount on the
investors convertible debentures is automatically convertible into units of
the Resulting Issuer upon the closing of the acquisition. Each investors unit
will consist of one common share of the Resulting Issuer and one common share
purchase warrant. Each warrant allows its holder to subscribe one common share
of the Resulting Issuer at $0.22 until February 26, 2007. The terms and
conditions of the convertible debentures are subject to the approval of the
applicable regulatory authorities.
The current officers of Image In Media will continue to hold their office
following the closing of the proposed transaction. They are: Pierre Bernatchez
- President, Chief Executive Officer and Director: Age 51, and Luigi Porco -
Senior Vice President, Financing and Business Development and Director:
Age 46.
About the Proposed Transaction
On March 27, 2006, Section Rouge Media, Image In Media and its
shareholders have come to an agreement for the acquisition by Section Rouge
Media of all the issued and outstanding common shares of Image In Media. The
acquisition is subject to shareholder approval from Section Rouge Media
(however the controlling shareholders of Section Rouge Media have indicated
their intention to approve by written resolution the acquisition), the closing
of the concurrent financing, due diligence, and all required regulatory
approval pursuant to laws, regulations and applicable policies.
The acquisition will be realized by way of a Share Purchase Agreement to
be entered into between Section Rouge Media, Image In Media and its
shareholders. The aggregate purchase price for the acquisition will be
$4,333,333 (after giving effect to the conversion of the Convertible
Debentures) and will be paid by Section Rouge Media by the issuance of
17,333,333 common shares. Under the Share Purchase Agreement, holders of
common shares of Image In Media will receive 0.82500395 common shares of
Section Rouge Media at a deemed price of $0.25 for every common share of Image
In Media owned. Each of the 1,010,000 warrants of Image In Media will be
exchanged on a 0.82500395 to 1 basis and the exercise price will be adjusted
accordingly in accordance with applicable regulatory requirements. All other
terms will remain the same, subject to regulatory approval. On the Closing of
the Acquisition, the Convertible Debentures will be automatically converted
into 825,004 Units of the Resulting Issuer. A maximum of 5,522,842 common
shares of the Resulting Issuer will be reserved for future issuances.
Pierre Bernatchez and 4194420 Canada Inc. agreed with Section Rouge Media
that 4,620,022 (or 40%) of the shares issued collectively to them under the
Share Purchase Agreement will be Performance Shares, to be held in escrow
under a Performance Escrow Agreement to be governed by the following rules:
for a period of 24 months starting July 1st, 2006 and ending June 30, 2008,
the Image In Media Division of Section Rouge Media must reach the cumulative
gross revenues (including productions in progress) of at least $11,000,000 and
EBITDA of at least $1,100,000. Failing to reach the milestones anticipated
before June 30, 2008, (1) the number of shares shall be deducted on a pro rata
basis to the total amount of shares issued collectively to Pierre Bernatchez
and 4194420 Canada Inc. and those shares so deducted shall be cancelled and
returned to the treasury of Section Rouge Media; and (2) Richard Desmarais,
Jean-Pierre Rancourt and related parties shall have the option to acquire the
remainder of Pierre Bernatchez and 4194420 Canada Inc.'s shares in Section
Rouge Media (6,930,034 shares) if and only if Pierre Bernatchez and Luigi
Porco are not on June 30, 2008 associated with Section Rouge Media or an
affiliate company in a employment, directorship or managerial relationship.
Upon approval of the acquisition, the Board of Directors of Section Rouge
Media will be comprised of 5 directors: Richard Desmarais, President and
Director; Pierre Bernatchez, President of Image, Chief Operating Officer of
Section Rouge Media and Director; Jean-Pierre Rancourt, Senior Vice-president
Print, Secretary and Director; RenDe Lacroix, Director; and Mark Vaillancourt,
Director.
Concurrent Financing
As a condition of the acquisition, Section Rouge Media will complete a
public offering of units of a minimum gross value of $1,000,000 (minimum of
4,000,000 units) and a maximum of $2,500,000 (maximum of 10,000,000 units).
Each unit at the price of $0.25 per unit, consists in one common share and one
common share purchase warrant. One warrant and $0.30 will allow its holder to
subscribe one common share of Section Rouge Media for a period of 24 months
following the closing of the financing. Section Rouge Media shall have the
option to accelerate the warrant exercise period should the average price of
its shares trade at a value equal or greater than $0.45 for 20 consecutive
trading days. The net proceeds arising from the financing will be used for
project development and working capital. Section Rouge Media anticipates that
it will have sufficient financial resources to carry on its business plan for
the next 24 months. Union Securities Ltd. ("USL") will act as exclusive
financing agent on a "best efforts" basis for the proposed offering, subject
to due diligence.
Section Rouge Media will pay USL a cash commission of ten percent (10%)
of the gross proceeds received from the offering. In addition, on closing of
the offering, USL shall have the option to purchase within 24 months, the
number of units of the Corporation equal to 10% of the total number of units
sold pursuant to the offering at a price of $0.25 per unit. The Corporation
agrees to pay to USL an agency fee of $20,000, plus applicable taxes, of which
half is payable as a non-refundable deposit upon the signing of the Engagement
Letter, with the balance payable at the closing of the offering.
A maximum of 10,000,000 common shares of Section Rouge Media may be
issued under the offering, and a further 12,000,000 common shares of Section
Rouge Media may be reserved for the exercise of the warrants and the option to
USL.
A finder's fee of 800,000 common shares of Section Rouge Media at $0.25
per share and a warrant to acquire 393,330 common shares will be paid to
InterCapital Consultants Inc. upon closing of the Acquisition. Of the
800,000 common shares issued as finder's fee, 185,419 common shares are
subject to the Performance Escrow Agreement. The warrants issued as finder's
fee are subject to the same terms and conditions as the warrants issued under
the public offering. The total consideration paid as finder's fee is $249,166.
About Image In Media
Image In Media acquires, produces, and exploits television and filmed
content for the international market. Image In Media, located in Montreal, is
led by entertainment experts specialized in international finance, development
and production, distribution, sales and marketing. The company is engaged in
acquiring rights through the financing and the production of properties for
the international television and motion picture markets.
Image In Media owns 25% of all the issued and outstanding shares of
Z Production Inc., headed by Paul Allard and Daniel LaflGeche and located in
Montreal.
Image also owns 25% of the International Program Exchange for Television
("IPEXTV(TM)"), a digital platform of television programs. IPEXTV is lead by
Paul Allard.
About Section Rouge Media
Section Rouge MDedia is a company registered with the TSX Venture Exchange
and publishes 30 publications.
Completion of the transaction is subject to a number of conditions,
including but not limited to, Exchange acceptance and Shareholder approval.
The transaction cannot close until the required Shareholder approval is
obtained. There can be no assurance that the transaction will be completed as
proposed or at all. Investors are cautioned that, except as disclosed in the
Filing Statement to be prepared in connection with the transaction, any
information released or received with respect to the acquisition may not be
accurate or complete and should not be relied upon. Trading in the securities
of Section Rouge MDedia Inc. 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.
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