AXEA Capital Corp.
TSX VENTURE : XEA.P

AXEA Capital Corp.

February 17, 2010 09:30 ET

AXEA Capital Announces Details of Qualifying Transaction

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 17, 2010) - AXEA Capital Inc. ("AXEA" or the "Company") (TSX VENTURE:XEA.P) today announced additional details concerning its proposed business combination with Propel Energy Corp. ("Propel"), which was first announced in the Company's news release on November 16, 2009.

Pursuant to a definitive agreement dated February 2, 2010 (the "Agreement"), Propel will complete a statutory amalgamation (the "Transaction") with a newly formed wholly-owned subsidiary of AXEA, to form an Alberta corporation ("Amalco"), with the Propel shareholders receiving an aggregate of 8,604,938 units of an AXEA ("AXEA Units") in exchange for the 13,746,555 Propel common shares issued and outstanding, with any unexercised warrants and options of Propel to be terminated in connection with the closing of the Transaction. Each AXEA Unit will be issued at a deemed price $0.1976 per Unit, and will be comprised of one (1) common share in the capital of AXEA ("AXEA Share") and one half (1/2) common share purchase warrant ("Warrant"); each whole Warrant will entitle the holder thereof to purchase one AXEA Share for a period of 12 months from the date of issue at a price of $0.25 per share.

The Transaction, when completed, is intended to be AXEA's "qualifying transaction" for the purposes of the capital pool company requirements of the TSX Venture Exchange (the "TSX-V") and to enable the Company to qualify as a Tier 2 Oil & Gas Issuer on the TSX-V. None of the insiders of AXEA or their associates and affiliates has any interest in the business of Propel or is otherwise an insider of, or has any relationship with, Propel or its direct or indirect shareholders, and the Transaction is not a "Non Arm's Length Qualifying Transaction" as defined in under TSX-V policies.

The AXEA Shares and Warrants to be issued to the shareholders of Propel in the Transaction will be issued pursuant to exemptions from the prospectus requirements of applicable securities legislation, may be subject to resale restrictions as required under the applicable securities legislation and may be subject to escrow conditions as required by the TSX-V.

The parties have agreed to use their best efforts to complete the Transaction by April 8, 2010, or such other mutually acceptable date. Propel will hold a shareholders' meeting on or about April 8, 2010 to approve of the Transaction. The Transaction is not subject to approval by AXEA shareholders under the policies of the TSX-V and applicable law. Trading in the common shares of the Company is currently halted and will remain halted until further notice in accordance with the policies of the TSX-V.

AXEA has entered into voting agreements with certain Propel shareholders, including those directors and officers of Propel who are Propel shareholders, representing not less than 21.26% of the outstanding Propel Shares, each of which provides that, inter alia, such directors, officers and shareholders will vote in favour of the Transaction.

Upon completion of the Transaction, the Company will have its head office located in Calgary, Alberta. Propel will be a wholly owned subsidiary of the Company and the Company plans to change its name to that which is acceptable to the proper regulatory authorities, including the TSX-V, and the common shares of the Company are expected to be listed on the TSX-V under a new trading symbol.

Private Placement

Concurrently with and conditional upon the completion of the of the Transaction, the Company plans to complete a non-brokered equity financing of up to 8,000,000 units ("Units") at a price of $0.25 per Unit for gross proceeds of up to $2,000,000 (the "Private Placement"), $500,000 of which is proposed to be completed prior to closing of the Transaction with the balance of $1,500,000 to be completed contemporaneously with the Transaction closing. Each Unit will be comprised of one (1) common share and one-half of one ( 1/2) common share purchase warrant ("Private Placement Warrant") of AXEA, each whole Private Placement Warrant exercisable into one (1) common share of AXEA for a period of 12 months from the date of issuance at an exercise price of $0.35 per share. The net proceeds of the Private Placement will be used to fund the costs of completing the Transaction, develop the resulting issuer's oil and gas properties, and for general working capital purposes, including the payment of Propel's outstanding trade payables. In connection with the Private Placement, the Company may pay a finder's fee to an arm's length finder on a portion, or all, of the gross proceeds raised under the Private Placement, to be settled in cash and/or warrants, subject to the approval of the TSX-V. A further news release will be issued if a finder's fee is payable.

AXEA currently has 6,000,000 outstanding common shares and 600,000 common shares reserved for issuance under the outstanding stock options under AXEA's stock option plan with a further 200,000 common shares reserved for issuance under an agent's option granted on closing of AXEA's IPO. Propel currently has 13,746,555 outstanding common shares (the "Propel Shares") and outstanding stock options exercisable into 1,662,500 Propel Shares and warrants exercisable into an aggregate of 248,672 Propel Shares. All of the Propel options and warrants are out of the money.

Subject to TSX-V approval, AXEA anticipates granting stock options after closing to the new and any ongoing officers, directors, employees and consultants of the Company pursuant to the option plan of the Company, with the exercise price of such options being determined based on the market price of the AXEA Shares at the time of granting.

Conditions to the Completion of the Qualifying Transaction

The obligations of AXEA and Propel to consummate the Transaction shall be subject to, among other things: (i) the receipt of all necessary regulatory and TSX-V approval, including, without limiting the generality of the foregoing, the approval of the Transaction as a Qualifying Transaction in accordance with the TSX-V policies; (ii) the receipt of all necessary shareholder and board of director approvals; (iii) the completion of the Private Placement; (iv) the confirmation of the representations and warranties of each party to the Agreement; (v) the absence of any material adverse effect on the financial and operational condition or the assets of each of the parties; (vi) the delivery of standard completion documentation; and (vii) other conditions precedent customary for a transaction such as the Transaction. The conditions listed above are for the benefit of, and maybe waived by, AXEA and Propel as it relates to the obligations of the other party to perform or obtain the same.

About Propel Energy

Propel is a private oil and gas company incorporated in Alberta with its head office located in Calgary, Alberta. Propel has various working interests in 3,680 gross acres (2,938 net acres) of lands in the Minard area of eastern Saskatchewan. There are currently two producing oil wells, six shut-in oil wells, two abandoned oil wells, and one active water disposal well. Current production is 45 barrels per day of light sweet crude that receives an attractive price relative to WTI benchmark.

Propel has a 100% working interest in a horizontal well at 4-14 that is producing light oil from the Frobisher and Huntoon formations and a 75% working interest in the horizontal 4-22 well that is producing from the Bakken formation.

Two shut in horizontal Frobisher wells have been producing and are awaiting pump repairs. Once back on stream it is expected they will resume at previous production rates adding approximately 60 barrels of oil per day. Propel also has a battery at Minard that is 100% owned. The facility has emulsion treating capability and water disposal capacity of 3,000 m3 per day. The battery is currently handling third party emulsion and water disposal for other operators in the area.

Propel has undeveloped properties in Hill and Kikino areas of Alberta. At Hill, Propel has a 50% working interest in two sections of land (net 640 acres) that is prospective for Montney shale gas. The company has 3D seismic coverage over the property. At Kikino, Propel has a 50% working interest in 9 sections of land (2,880 net acres) that is prospective for gas in the Viking, Manville, and Grosmont formations.

Propel is in the process of obtaining an updated reserve report prepared by an independent qualified reserves evaluator in compliance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities, containing the reserve estimates in respect of Propel's current oil and natural gas interests. Once the reserve report becomes available, AXEA will issue a subsequent press release summarizing the reserve estimates in accordance with regulatory requirements.

Based on unaudited management-prepared financial statements for the nine months ended September 30, 2009, Propel had oil and gas revenue net of royalties of $941,956 and operating expenses of $2,433,808, and after a gain on sale of assets of $3,815,129, net income for the nine month period of $2,393,000.

As at September 30, 2009, Propel had a working capital deficiency of $869,000, total assets of $3,358,323 and total liabilities of $1,406,405 (of which $1,161,586 were current liabilities).

Pro forma Capitalization upon Completion of the Transaction

Based on the foregoing, upon completion of the Transaction, and assuming the Private Placement is fully subscribed, AXEA will have a total of 22,604,938 common shares issued, 4,302,469 common shares reserved for issuance under the Warrants, 4,000,000 common shares reserved for issuance under the Private Placement Warrants and 800,000 common shares reserved for issuance under the stock options and agent's option. Of the issued shares, 38% will be held by existing Propel shareholders, 26.6% will be held by existing AXEA shareholders, and 35.4% will have been issued to the investors under the Private Placement. Of the total number of AXEA Shares reserved for issuance pursuant to the Warrants, Private Placement Warrants and the options, 60.6% will be issuable upon exercise of the Warrants, 28.2% will be issuable upon exercise of the Private Placement Warrants and 11.2% will be issuable on exercise of the options.

Gilbert G. Schneider and Paul E. Heney, each a Principal of the Company (as such term is defined under the policies of the TSX Venture Exchange), have agreed to transfer to Greg T. Busby, who is expected to be considered a Principal of the Company, and certain other persons who will become key employees of the Company a total of 2,000,000 common shares in the capital of the Company, comprising 1,000,000 common shares at a price of $0.07 per share and 1,000,000 common shares at a price of $0.10 per share, such shares currently being held in escrow under the escrow agreement dated May 1, 2008 entered into among the Company, Computershare Investor Services and certain principals.

The principal shareholders of Propel are as follows:

Name Propel Shares
K2 Capital Management (now called Zografos Investment Management) a Toronto based, private investment management firm owned by Greg Zografos 2,500,000
Scott Rogers, a director of Propel 1,712,582
Golden Opportunities Fund Inc. 937,500
MMCAP Asset Management 625,000

Those shares of the Company to be issued to Propel shareholders who become principals of the Company will be subject to TSX-V escrow requirements.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSX-V unless exempt in accordance with TSX-V policies. The Company is currently reviewing the requirements for sponsorship and may apply for an exemption from such requirements. There is no assurance that AXEA will ultimately obtain an exemption from sponsorship.

Loan to Propel

AXEA may advance Propel a loan up to $25,000 which would be payable on demand together with interest calculated at 4.25% per annum in order to provide Propel with additional working capital and to facilitate the Transaction.

Board of Directors and Executive Officers on Completion of the Transaction

Subject to any necessary shareholder and regulatory approvals, the board of directors and officers of the Company upon the completion of the Transaction will be as follows:

Greg T. Busby –President, CEO and Director
Bill Calsbeck - Director
Dennis Nerland - Director
Alastair Robertson – Vice President and CFO
Leigh Stewart, Corporate Secretary

Summary Biographies of the Board of Directors and Executive Officers

The background of each of the aforementioned persons is as follows:

Greg T. Busby – President, CEO and a Director:

Mr. Busby is a professional landman with over 20 years of industry experience. Most recently, Mr. Busby was President, CEO, Interim CFO & Director of Tuscany Energy Ltd., a Calgary-based junior oil and gas company listed on the TSX-V. Mr. Busby was instrumental in the financial restructuring and corporate development of Tuscany until June, 2008. Prior thereto, Mr. Busby was co-founder of Predator Exploration Ltd., a public exploration and production gas company active in west central Alberta and NE British Columbia. Mr. Busby has held senior level positions both as an employee and consultant with various public and private oil and gas companies. Mr. Busby is an active member of the Canadian Association of Petroleum Landmen (CAPL) and holds a Bachelor of Arts degree from the University of Calgary.

Bill G. Calsbeck - Director:

Mr. Calsbeck brings over 25 years of capital market and micro-cap experience to AXEA. He began his career in Banking and Trust Services and after several years moved into the Human Resources field, providing consulting services to clients such as the Vancouver Stock Exchange, Expo 86, MDA, and several major institutions. His duties extended from executive recruiting and board member selection to financial planning, mergers and acquisitions, IPO's and raising capital. Bill is the founding partner and Managing Director of Ubequity Capital Partners Inc.'s Pacific Rim office. Ubequity, with offices in Vancouver, Toronto, and London, England, has raised hundreds of millions in capital for clients and firms both in equity and capital market activities. Bill also serves on the Board of Directors for Deloro Resources Ltd., an emerging Junior Oil Company with projects in the Heavy Oil corridor in Southwestern Saskatchewan.

Dennis Nerland - Director:

Mr. Nerland has been a partner with the law firm Shea Nerland Calnan since 1990 practicing primarily in the areas of tax and trust law. Mr. Nerland is a current and past director of a number of private and public companies listed on the TSX-V and the Toronto Stock Exchange and is currently a trustee of a number of private investment trusts. Mr. Nerland has a Bachelor of Laws degree from the University of Calgary, a Master of Arts degree (Economics) from Carleton University and a Bachelor of Science degree (Economics and Mathematics) from the University of Calgary. He is a member of the Law Society of Alberta.

Alastair Robertson – Vice-President, Finance and CFO:

Mr. Robertson has over 27 years of experience in founding, growing, financing and managing companies, as well as in the areas of business planning, financing, public markets, shareholder relations, tax planning and acquisitions. He has been a member of the Institute of Chartered Accountants of Scotland for over 27 years. He was Chief Financial Officer and Director of Ausam Energy Corporation, a public oil and gas exploration company with operations in the United States and Australia, since June, 2004, and Chief Executive Officer of Northlinks Limited from 1997 to June, 2004. From 1982 to 1996 he was with Nowsco Well Service Ltd., a TSX and NASDAQ listed international oilfield service company, and finally as Senior Vice President and Chief Financial Officer. Mr. Robertson is Chairman of the Board and Chairman of the Audit Committee of Adeptron Technologies Inc., a TSX-listed electronics manufacturing company (TSX:ATQ) and a Director of the Artumas Group, an Oslo listed oil and gas exploration and production company with operations in East Africa.

Leigh Stewart, Corporate Secretary:

Mr. Stewart is currently employed at Davis LLP as counsel, previously employed as an associate lawyer with Gowling Lafleur Henderson LLP from May 2006 to April 2009. From December 2003 to April 2006, Mr. Stewart was a partner at Robinson Stewart, Barristers & Solicitors, a corporate securities firm. Mr. Stewart also practiced as an associate lawyer at a corporate securities law firm from 1993 to 2000, and as a sole practitioner from 2000 to 2002. In 2002 to the Spring of 2003, Mr. Stewart was seconded to a law firm in Kuwait City providing advice in connection with industrial construction projects and general international business matters. Mr. Stewart serves as an executive officer and on the board of directors of several TSX-V listed companies.

All information provided in this news release related to Propel has been provided by management of Propel and has not been independently verified by management of AXEA.

Completion of the Transaction is be subject to a number of conditions, including but not limited to, TSX-V acceptance and if applicable pursuant to TSX-V Requirements (as such term is defined under the TSX-V policies), majority of the minority shareholder approval. Where applicable, 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 management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the 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.

Certain information in this press release may contain forward-looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in the Company's filings with the Canadian securities regulators, which filings are available at www.sedar.com.

The TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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