AccelRate Power Systems Inc.
FRANKFURT : KCG
TSX VENTURE : AXP

AccelRate Power Systems Inc.

March 16, 2010 14:07 ET

AccelRate Announces Proposed Acquisition/Change of Business

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 16, 2010) - AccelRate Power Systems Inc. ("AccelRate" or the "Company") (TSX VENTURE:AXP)(FRANKFURT:KCG) has entered into a letter agreement (the "Agreement") dated March 12, 2010 for the purchase of eight petroleum and natural gas leases (the "Leases") which will give the Company oil and gas exploration and production rights to eight non-contiguous parcels of land situate in Saskatchewan and Manitoba.

Information on the Target Assets and the Company

The Leases grant to the holder oil and natural gas exploration and production rights ("Oil and Gas Rights") relating to eight undeveloped parcels of property totaling 2,364.4 acres, generally described as follows:

Parcel 1 Lease – a five year lease issued on August 12, 2009, granting a 100% interest in all Oil and Gas Rights to a 64.76 hectare parcel in southeastern Saskatchewan;

Parcel 2 Lease – a five year lease issued on August 12, 2009, granting a 100% interest in all Oil Rights to a 64.75 hectare parcel in southeastern Saskatchewan;

Parcel 3 Lease – a five year lease issued on August 12, 2009, granting a 100% interest in all Oil and Gas Rights to a 56.143 hectare parcel in southwestern Manitoba;

Parcel 4 Lease – a five year lease issued on August 12, 2009, granting a 100% interest in all Oil and Gas Rights to a 128 hectare parcel in southwestern Manitoba;

Parcel 5 Lease – a five year lease issued on October 5, 2009, granting a 100% interest in all Oil and GasRights to a 128.69 hectare parcel in Southwestern Saskatchewan;

Parcel 6 Lease – a five year lease issued on October 5, 2009, granting a 100% interest in all Oil and Gas Rights to a 259 hectare parcel in southeastern Saskatchewan;

Parcel 7 Lease – a five year lease issued on February 8, 2010, granting a 100% interest in all Oil and Gas Rights to a 113.31 hectare parcel in southeastern Saskatchewan;

Parcel 8 Lease – a five year lease issued on February 8, 2010, granting a 100% interest in all Oil and Gas Rights to a 64.75 hectare parcel in southeastern Saskatchewan.

On completion of the proposed acquisition ("Closing"), the Company will commence the oil and natural gas exploration business as an "Oil & Gas Issuer" on Tier 2 of the TSX Venture Exchange (the "TSXV"). The Company intends to appoint a person who is a qualified person in respect of oil and gas projects to its Board of Directors before Closing, and will make other changes it deems necessary or desirable in connection with it proposed new business.

The Company currently carries on the business (the "Charger Business") of licensing technology for the manufacture and sale of high-speed battery chargers as a "Technology or Industrial Issuer" on Tier 2 of the TSXV. On Closing, the Company will cease to carry on the Charger Business.

Transaction Terms

Pursuant to the Agreement, the Company will purchase a 100% interest in and to the Leases from a syndicate formed to carry out research on oil and gas prospects for acquisition. The syndicate members, 1511558 Alberta Inc., an Alberta corporation, and 0739796 B.C. Ltd. and 517769 B.C. Ltd., both British Columbia corporations (collectively the "Vendors"), are at arm's length from the Company and its principals. The essential terms of the Agreement are as follows:

1. As consideration for the Leases, the Company will pay $771,219.19 (Canadian funds) (the "Acquisition Payment") to the Vendors and issue to the Vendors a total of 3,000,000 common shares (the "Purchase Shares") of the Company and warrants (the "Purchase Warrants") exercisable for five years after Closing to purchase up to an additional 6,000,000 common shares of the Company for $$0.10 per share. The Purchase Shares and any shares issued pursuant to the exercise of Purchase Warrants will be subject to a four month hold period from Closing and, in addition, escrow resale restrictions described under "Escrow Resale Provisions" below. The Purchase Warrants will be transferable and will contain a term stipulating that they may not be exercised if such exercise would make the person exercising such Purchase Warrants a "control person" as that term is defined in the Securities Act (British Columbia).

2. The Company will complete the Working Capital Private Placement and Special Warrant Private Placement described under "Private Placements and Debt Settlements" below not later than April 30, 2010.

3. The Company will complete the Closing Private Placement described under "Private Placements and Debt Settlements" below on or before Closing.

4. The Company will satisfy approximately $1,070,000 of existing indebtedness in the manner described under "Private Placements and Debt Settlements" below on or before Closing.

5. The Company will transfer its Charger Business and related assets and liabilities to the President of the Company on Closing in satisfaction of the Company's indebtedness to the President, described under "Private Placements and Debt Settlements" below.

The Vendors have reserved a gross overriding production royalty described under "Royalty" below. The Company plans to obtain a NI 51-101 compliant report on the Leases and Lands. The Company also plans to obtain a valuation of the Charger Business in connection with the proposed disposition of the Charger Business on Closing. The Agreement includes conditions precedent considered standard for transactions of the nature described in this news release.

Private Placements, Debt Settlements and Escrow Resale Provisions

Working Capital Private Placement

The Company announces a private placement (the "Working Capital Private Placement") of 8,666,667 common shares at $0.075 per share to raise $650,000 to pay debts and provide working capital to complete the proposed transactions. No warrants will be issued. The Working Capital Private Placement is subject to acceptance by the TSXV. All shares issued pursuant to the Working Capital Private Placement will be subject to a four month hold period from the date of completion of the financing and, in addition, escrow resale restrictions described under "Escrow Provisions" below.

Special Warrant Private Placement

The Company also announces a private placement of 2,000,000 special warrants (each a "Sidecar Special Warrant") at the price of $0.20 each (the "Special Warrant Private Placement") to raise $400,000. The Sidecar Special Warrants will have the following essential terms:

1. The proceeds from the sale of Sidecar Special Warrants will be advanced to two of the Vendors (the "Borrowers") jointly as a non-interest bearing loan (the "Loan");

2. To ensure that AccelRate is protected in the event that the filing (the "TSXV Filing") required to be made by the Company in respect of the Agreement is not accepted by the TSX Venture Exchange (the "TSXV"), the Sidecar Special Warrants will have the following essential terms:

(a) if the TSXV Filing is accepted by 4:30 p.m. (local Vancouver time) (the "Expiry Time") on September 30, 2010, then on Closing:

(i) each holder (a "Holder") of Sidecar Special Warrants Holder will receive one AccelRate Share for each Sidecar Special Warrant held by such Holder, and

(ii) the Loan will be set off against $400,000 of the Acquisition Payment otherwise required to be made on Closing; and

(b) if the TSXV Filing is not accepted by the Expiry Time, then:

(i) the Holder will receive promissory notes (each a "Loan Note") from the Borrowers for the subscription price (the "Sidecar Debt") paid for Sidecar Special Warrants;

(ii) the Holders will be entitled to be paid the full amount of the Sidecar Debt from the Borrowers' share of net proceeds from the sale of oil and natural gas production from the Properties before the Borrowers shall be entitled to any share of such production; and

(iii) the Company shall have no obligation or liability whatsoever to the Holders or the Vendors.

The Special Warrant Private Placement is subject to acceptance by the TSXV. The Sidecar Special Warrants will be non-transferable. All Company shares issued pursuant to the deemed exercise of Sidecar Special Warrants will be subject to a four month hold period commencing on the date of issue of the Sidecar Special Warrants.

Closing Private Placement

The Company announces a private placement (the "Closing Private Placement") to be completed on or before Closing to raise $5,500,000 by the issue of subscription receipts or common shares at the price of $0.25 per share. If the Closing Private Placement consists of subscription receipts, proceeds from the Closing Private Placement will be held in escrow pending Closing. No warrants will be issued. Proceeds from the Closing Private Placement will be used to carry out drilling and other exploration work on the Lands, and for general working capital. The Closing Private Placement is subject to acceptance by the TSXV. All shares issued pursuant to the Closing Private Placement (or in exchange for Subscription Receipts on Closing) will be subject to a four month hold period from the date of completion of the Closing Private Placement.

Debt Settlements

The Agreement provides that indebtedness of the Company to its President will be paid and satisfied as follows:

1. $50,000 in cash from the Working Capital Private Placement;

2. $100,000 by issuance of 1,333,334common shares of the Company at the deemed price of $0.075 per share concurrently with completion of the Working Capital Private Placement;

3. $125,000 in cash on Closing from the Closing Private Placement; and

4. the remaining balance by transfer of the Company's Charger Business to the President on Closing.

As noted above, the Company plans to obtain a valuation of the Charger Business in connection with the proposed disposition of the Charger Business on Closing. As the assets included in the Charger Business include the "AccelRate Power Systems Inc." name and related trademark, on Closing the Company will change its name to a name reflective of its new business.

The Agreement also provides that arm's length indebtedness of the Company in the amount of approximately $200,000 will be satisfied by issuance of approximately 2,666,666 common shares of the Company at the deemed price of $0.075 per share concurrently with completion of the Working Capital Private Placement. The intended result is that the Company will on Closing have no assets or liabilities associated with the Charger Business.

Escrow Resale Provisions

The Agreement provides that all Shares issued pursuant to the Working Capital Private Placement, all shares issued in settlement of debt, all Purchase Shares issued to the Vendors on Closing and all shares issued to the Vendors after Closing pursuant to the exercise of Purchase Warrants will be subject to such escrow requirements as may be imposed by the TSXV or the escrow resale restrictions set forth below, whichever are more onerous:

- 25% 6 months after issuance;

- 25% 12 months after issuance;

- 25% 18 months after issuance; and

- 25% 24 months after issuance.

In the case of shares issued on exercise of Purchase Warrants, the escrow resale restrictions set forth above will commence to run on the date of issuance of the Purchase Warrants.

Finders' Fees and Commissions

The Company will pay finders' fees or commissions in connection with the private placements described herein in accordance with the policies of the TSXV. The finder's fees payable in connection with each of the Working Capital Private Placement and Special Warrants Private Placement are anticipated to be an amount equal to 10% of gross proceeds from those financings, but will be payable only on, and subject to, Closing. The finder's fee payable in connection with the Closing Private Placement is anticipated to be an amount equal to 10% of gross proceeds from those financings in cash and 10% warrants issuable to a registrant, and will be payable only on Closing.

Gross Overriding Royalty on Production

The Agreement provides that the Vendors shall have a twenty (20%) percent interest (the "GOR") in oil and gas production from the Lands; provided that the GOR will be reduced by 1% for each 1%) by which the aggregate of all royalties payable to any government in respect of such Well exceed 5%; and further provided that in no event shall the GOR be reduced below 10%. In addition, the Vendors have granted a royalty holiday on the first 8,500 barrels of oil production from each vertical well drilled on the Lands within four years after Closing and on the first 25,000 barrels of oil production from each horizontal well drilled on the Lands within four years after Closing.

Regulatory Issues

The proposed transaction will constitute a Change of Business under the policies of the TSX Venture Exchange. If the acquisition is completed, the Company will become a Tier 2 Oil & Gas Issuer. The Company has not retained a sponsor in connection with the proposed transaction. The Company will be requesting that the TSX Venture Exchange waive sponsorship requirements.

Completion of the transaction is subject to a number of conditions, including TSX Venture Exchange acceptance and disinterested 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 or Management Information Circular to be prepared in connection with the proposed transaction, 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 the Company 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.

Reimar Koch, President and CEO

This new release may contain forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in the company's Management Discussion & Analysis filed with its interim and most recent annual financial statements or other reports and filings with the TSX Venture Exchange and applicable Canadian securities regulators. The Company does not assume any obligation to update any forward-looking statements.

Neither 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 release.

Contact Information