11:28:28 EDT Fri 29 Mar 2024
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Quantum International Income Corp
Symbol QIC
Shares Issued 25,460,105
Close 2014-06-27 C$ 0.33
Market Cap C$ 8,401,835
Recent Sedar Documents

Quantum enters LLC operating agreement with DGAT

2014-08-08 14:04 ET - News Release

Mr. Grant White reports

QUANTUM INTERNATIONAL INCOME CORP. PROVIDES FURTHER DETAILS ON CHANGE OF BUSINESS TRANSACTIONS AND CONCURRENT FINANCING

Quantum International Income Corp. (QIIC) is providing an update on matters announced in QIIC's June 27, 2014, news release regarding its previously announced transactions, which, collectively, will constitute a change of business (within the meaning of the policies of the TSX Venture Exchange) and which would see the company reactivated and thereby graduate from a listing on the NEX board of the exchange to a listing on the TSX-V as a Tier 2 issuer.

The company is pleased to announce that Quantum CSS Holdings Corp. (Quantum U.S.), a wholly owned Delaware subsidiary of the company, has entered into a limited liability company operating agreement with DGAT Partners LLC, a New York limited liability company, through which Quantum U.S. and DGAT will form Centers for Special Surgery LLC (CSS), a Delaware limited liability company. Quantum expects that a wholly owned subsidiary of CSS, Center for Special Surgery of Essex County LLC (CSS Essex), a New Jersey limited liability company, will ultimately complete the previously announced acquisition of certain assets comprising the Roseland Ambulatory Surgery Center (RASC). DGAT is controlled by Dr. David Greuner and Dr. Adam Tonis, the principals of NYC Surgical Associates (NYCSA), a medical group practice headquartered in New York. Pursuant to the CSS agreement, conditional upon the closing of the acquisition of the RASC, it is expected that the member surgeons of NYCSA will begin performing surgical procedures at the RASC. CSS Essex has additionally entered into a management agreement with an affiliate of DGAT, pursuant to which, conditional upon the closing of the acquisition of the RASC by CSS Essex, such affiliate will manage and operate the RASC.

QIIC is also pleased to announce it has entered into definitive documentation with respect to its previously announced acquisition of a controlling interest in Multiple Media Entertainment Inc. (MME), a full-service independent media content creation and distribution company located in Toronto, Ont. Pursuant to an investment agreement among QIIC, MME and the two current shareholders of MME, Michael Taylor and J. Drew Craig, QIIC will subscribe for securities in the capital of MME that carry a voting interest in MME equivalent to two-thirds of the issued and outstanding voting securities for a total purchase price of $500,000, subject to the terms and conditions described further as follows.

Separately, QIIC is also providing additional details to those outlined in the initial news release on the concurrent offering of subscription receipts of QIIC at the price of 35 cents per subscription receipt. QIIC is pleased to announce that it has revised the proposed minimum and maximum gross proceeds of the financing and, upon completion thereof, expects now to raise minimum gross proceeds of $5-million and up to $7-million.

Upon completion of the transactions, subject to certain conditions, it is intended that QIIC will complete its reactivation from NEX. Though the transactions constitute a change of business pursuant to exchange rules, the directors and officers of QIIC are not expected to change as a result of the transactions. QIIC expects the closing of the transactions to take place not later than Aug. 31, 2014. Completion of the proposed transactions is subject to, among other things, receipt of all necessary regulatory approvals and approval of the shareholders of QIIC, which approval is expected to be satisfied through receipt by QIIC of written consent resolutions from holders of common shares of QIIC representing not less than 50.1 per cent of those issued and outstanding.

CSS agreement

Quantum U.S. and DGAT (the members) have entered into the CSS agreement primarily to pursue health-care-related opportunities, including the development of the RASC and other ambulatory surgery centres to be identified in a geographic area determined by the members. The members hold all economic, voting or other interests in CSS and the CSS agreement establishes certain restrictions on the transfer, or granting of, membership interests to other parties.

The management and control of CSS is vested in the board of managers, and the board of managers may make all decisions and take all actions for CSS, except in matters for which approval of the members is required by the CSS agreement or as otherwise required by applicable law. The board of managers will initially consist of four members, two nominees of Quantum U.S. and two nominees of DGAT. The managers are initially expected to be Grant White, chief executive officer of QIIC; Manu Sekhri, president of QIIC; Dr. Greuner; and Dr. Tonis.

The members expect to initially capitalize CSS with an investment of $4-million (U.S.), to comprise debt from Quantum U.S. and equity from both members, which capital CSS or its operating subsidiary will use to complete the acquisition of the RASC and finance initial working capital requirements. Once operations at the RASC have commenced, it is expected that most surgical procedures performed at the RASC will generate two types of fees -- a facility fee and a professional fee. The facility fee will be paid directly to the RASC for the use of its infrastructure, surgical equipment, nursing staff, non-surgical professional services and other support services. It is expected that the revenue from such facility fees will form the basis of distributions of cash flow to CSS and the members. Professional fees earned through procedures performed at the RASC will be paid directly to the physician performing such procedure and will not be included in the revenue or expenses of the RASC.

QIIC expects and the CSS agreement requires that the debt advance be repaid by CSS in its entirety prior to any distributions being made to members on account of their respective equity interests in CSS. Following the repayment of the debt advance, and provided no additional debt is then payable by CSS to Quantum U.S., distributions from CSS shall be paid to the members according to distribution formulae set out in the CSS agreement, which provides for distributions on a 50/50 basis to each of Quantum U.S. and DGAT. In each fiscal year, if specified distribution levels to CSS are realized, the CSS agreement provides for the distribution of 80 per cent of cash flow to DGAT and 20 per cent of cash flow to Quantum U.S.

Proceeds received by CSS from the sale of any of its assets, including but not limited to the sale of any ownership interest in a subsidiary of CSS, including CSS Essex or any interest held by CSS, plus proceeds received by CSS in liquidation or dissolution of any subsidiary of CSS or any entity in which CSS held an ownership interest, shall be distributed amongst the members in equal proportion. There are also certain events, which are set out in the CSS agreement, that provide Quantum U.S. with the option to purchase the membership interest of another member.

CSS shall continue in existence and shall terminate only upon the approval of all members to dissolve, the entry of a decree of judicial dissolution pursuant to the Delaware Limited Liability Company Act, or the occurrence of an event that makes it unlawful for all or substantially all of the business of CSS to be continued.

RASC management agreement

CSS Essex has entered into the RASC management agreement with DGAT Management Limited Liability Company (DGAT Manager), an affiliate of DGAT, pursuant to which CSS Essex has delegated responsibility for the management and operation of the RASC to DGAT Manager, save and except for certain specified matters for which the approval of CSS as the sole member of CSS Essex will be required.

Pursuant to the RASC management agreement, DGAT Manager expects to, on behalf of CSS Essex and in connection with the operation of the RASC, set fee schedules for surgical procedures, establish billings and collections for such procedures, provide accounting, financial management, budget reporting and human resources services, manage records and technology for the RASC, and otherwise provide the administrative services required to manage the facility. In connection with these services, DGAT Manager is authorized to acquire, sell or otherwise deal with all or any part of CSS Essex's property and personal property, incur debt, enter into insurance arrangements, employ attorneys, brokers, consultants or accountants, enter into supply or service contracts, bring or defend claims or arbitrations, establish financing reserves for operations, perform all obligations under any agreement to which CSS Essex is party and execute any agreements or instruments to give effect to the performance of such duties. DGAT Manager may also subcontract any of the foregoing services to third parties, provided such subcontractor abide by the terms of the RASC management agreement.

DGAT Manager is, in respect of the performance of any of the specified duties, required to provide appropriately qualified personnel to ensure the provision of quality services at the RASC. CSS Essex also retains the authority to approve the operating budget and certain other budgetary matters with respect to the RASC and the responsibility for quality assurance and quality control.

In consideration for the provision of these services, DGAT Manager is entitled to retain a billings fee of 6 per cent of all collections in respect of the RASC services and an annual management fee as agreed by CSS Essex, which shall initially be set at $20,000 (U.S.) per month. DGAT Manager shall also be entitled to the reimbursement of out-of-pocket expenses, including wages, salary and benefits for personnel of DGAT Manager who perform services for or on behalf of the RASC.

Terms of agreement for MME

Pursuant to the investment agreement, QIIC will subscribe for securities in the capital of MME that carry a voting interest in MME equivalent to two-thirds of the issued and outstanding voting securities. The consideration to be paid by QIIC for the MME interest is $500,000. Following the closing of the MME investment, the current shareholders of MME, corporate entities controlled by Mr. Taylor and Mr. Craig, will each retain one-sixth of the voting interest in MME.

QIIC, Mr. Taylor and Mr. Craig have also agreed on a form of unanimous shareholder agreement setting out the terms and conditions pursuant to which MME will be governed and operated going forward. Pursuant to the shareholder agreement, following completion of the MME acquisition, the board of directors of MME is expected to comprise three directors -- one nominee of Mr. Taylor and Mr. Craig, and two nominees of QIIC. The initial directors are expected to be Mr. Taylor, Mr. White and Mr. Sekhri.

It is a condition of the MME acquisition that QIIC, Mr. Taylor and Mr. Craig enter into the shareholder agreement. The MME acquisition is further conditional upon the execution of an employment agreement between Mr. Taylor and MME on terms satisfactory to each and the adoption by the board of directors of MME of a cash performance plan to govern the distribution of cash incentives from MME's operations to incentive plan participants, initially expected to be Mr. Taylor.

The incentive plan will be administered by QIIC, and QIIC shall have authority to determine and approve participants in the incentive plan. Pursuant to the incentive plan, MME will grant cash incentive awards to participants equal to a certain percentage of cash flow distributed to QIIC in the event that MME meets certain predetermined internal-rate-of-return targets or in the event that QIIC determines to sell all or any part of the MME interest to a third party. MME will deposit incentives into a segregated bank account and any amount of incentives in such account will vest and become available for payment to participants on the basis of one-48th of such amount per month. QIIC believes the incentive plan will align participants' performance with MME's success and provide participants, including Mr. Taylor, with appropriate inducements to successfully implement MME's business strategy.

Following completion of the MME acquisition, QIIC expects the infusion of capital will allow MME to pursue higher calibre productions which will, in turn, enable it to generate increased revenues because of enhanced commercial marketability. By focusing on the acquisition of commercially viable completed productions, QIIC believes that MME's new media expertise will give it an advantage in generating increased revenue streams for the business going forward.

Additional financing details

QIIC has revised the proposed minimum and maximum gross proceeds of the financing and, upon completion thereof, expects now to raise minimum gross proceeds of $5-million and up to $7-million. As previously announced, the financing will be carried out through Global Securities Corp. as agent on a commercially reasonable efforts private-placement basis, pursuant to an agency agreement to be entered into between QIIC and the agent.

As compensation for acting as agent in respect of the financing, the agent will receive a cash commission equal to 6 per cent of the total gross proceeds of the financing, payable upon satisfaction of the previously disclosed escrow release conditions and the release of the escrowed funds to QIIC. The agent will also receive, upon satisfaction of the previously disclosed escrow release conditions, options to purchase that number of common shares of QIIC equal to 6 per cent of the number of subscription receipts sold pursuant to the financing at an exercise price equal to the subscription price at any time prior to the date that is 24 months from the date of issuance of the compensation options. A portion of the financing may be conducted as non-brokered, in which case QIIC expects certain finders will be entitled to compensation no more favourable than the compensation of the agent.

Other key conditions to completion of the transactions

Completion of the transactions is subject to a number of other key conditions, including exchange acceptance and disinterested shareholder approval. As there is no non-arm's-length party (as defined under exchange rules) to the transactions, it is not expected that any holders of common shares will be excluded from voting. The transactions cannot close until the required shareholder approval is obtained. There can be no assurance that the transactions will be completed as proposed, or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared and filed by QIIC in connection with the transactions, any information released or received with respect to the change of business may not be accurate or complete and should not be relied upon. Trading in the securities of QIIC should be considered highly speculative.

Trading of the common shares of QIIC was halted in connection with the dissemination of the company's news release on June 27, 2014. Together with initial news release, this news release constitutes QIIC's comprehensive news release with respect to the transactions for the purposes of exchange rules.

We seek Safe Harbor.

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