Brilliant Resources Inc.
TSX VENTURE : BLT

Brilliant Resources Inc.

October 07, 2014 20:52 ET

Brilliant Announces Letter Agreement Setting Out Terms of Acquisition by Montana Exploration Corp.

EDMONTON, ALBERTA--(Marketwired - Oct. 7, 2014) - Brilliant Resources Inc. (TSX VENTURE:BLT) (the "Company" or "Brilliant") is pleased to announce that is has entered into a binding letter agreement (the "Agreement") with Montana Exploration Corp. ("Montana") pursuant to which, among other things, Montana will acquire all the issued and outstanding common shares ("Shares") of Brilliant.

Montana is a Canadian junior oil and gas exploration and production company focusing on the Shaunavon equivalent (named the Sawtooth in Montana) oil opportunities underlying its extensive land holdings in Montana. In the United States the company operates through its wholly owned subsidiary, Montana Land & Exploration, Inc.

Under the terms of the Agreement, Montana will issue to each Brilliant shareholder: (1) a fraction of a common share of Montana (a "Montana Share") determined by the Exchange Ratio (as outlined below); and (2) a Contingent Value Right (as outlined below) entitling the holder to participate in the proceeds of the previously announced arbitration (the "Arbitration") with the Government of Equatorial Guinea. It is anticipated that the acquisition will be completed by way of a statutory plan of arrangement (the "Arrangement") under the Business Corporations Act (Alberta) ("ABCA"). Under the terms of the Agreement, Brilliant and Montana have agreed to negotiate the terms of a definitive agreement (the "Arrangement Agreement") setting out the terms of the Arrangement.

The board of directors of Brilliant has over the past several months reviewed and analyzed numerous opportunities and believes that the business combination with Montana presents Brilliant with a unique opportunity. Through the business combination, Brilliant's financial resources will enable Montana to consolidate its interests in the Shaunavon Play in Northern Montana and to drill wells offsetting its recent Upper Shaunavon oil discovery. The directors of Brilliant believe that the Arrangement is in the best interests of Brilliant and its shareholders.

Transaction Terms

Completion of the Arrangement will be subject to certain conditions, including but not limited to the following: (a) completion of satisfactory due diligence and entering into the Arrangement Agreement by October 22, 2014; (b) receipt of all necessary consents, waivers, permits, exemptions, orders and approvals, including court approval of the plan of arrangement and the approval of the TSXV, as applicable; and (c) a vote of at least 66 2/3% in favour of the Arrangement of Brilliant shareholders and any other Brilliant or Montana securityholder approvals which may be required.

The Exchange Ratio will be determined by (i) multiplying Brilliant's net adjusted working capital at the effective time of the transaction by 1.15, then (ii) dividing that number by the then issued and outstanding Shares, and (iii) dividing that number by the lower of (a) the price per share at which the next material financing of common shares of Montana is completed and (b) $0.25. As a result of the Arrangement, shareholders of Brilliant are expected to receive approximately 37,950,000 Montana Shares, representing a deemed value of $0.063 for each Brilliant Share, excluding the value of the Contingent Value Rights.

Each Contingent Value Right will entitle the holder thereof to receive a pro rata portion of a one-time payment derived from the net proceeds paid, recovered or otherwise received by Brilliant's wholly-owned subsidiary, Ivory Resources Inc., in the Arbitration against the Government of Equatorial Guinea. The Company previously announced the Arbitration on June 12, 2014.

All outstanding options of Brilliant will be exchanged for options of Montana and holders of deferred share units of Brilliant ("DSUs") shall have their DSUs redeemed for an amount, in each case, based on the Exchange Ratio. Former DSU holders would then be allowed to participate in the Arrangement on the same basis as holders of Shares.

The Letter Agreement also provides the parties will not solicit alternative transactions, subject to the obligations of their respective boards to discharge their fiduciary duties.

The directors, officers and principal shareholders of Brilliant, who collectively exercise control or direction over approximately 32.8% of the Shares, are expected to enter into voting support agreements concurrent with the execution of the Arrangement Agreement. In addition, persons holding approximately 70% of the Montana Shares are also expected to agree to support the transaction and vote in favour of it to the extent Montana securityholder approval is required.

Following the completion of the Arrangement, and subject to any requirement of the TSXV or the ABCA, Brilliant directors Allan Bezanson and John Hawkrigg will be nominated to Montana's board of directors. Current Brilliant directors John Williamson and Courtenay Wolfe shall remain with Brilliant's board of directors.

Montana Loan

The Letter Agreement also provides that concurrent with the execution of the Arrangement Agreement, and subject to approval of the TSXV and other conditions, Brilliant will advance a secured loan (the "Loan") of $4 million to Montana. The Loan will be for a term of 11 months and will bear interest at 10% per annum. The Loan will be used to enable Montana to purchase 36,000 net acres held by its joint venture partner in Montana.

Other matters

On recommendation of Brilliant's Compensation Committee, and in recognition of their role in procuring the Letter Agreement and Arrangement with Montana, the board of directors of Brilliant has authorized a discretionary grant of DSUs, as permitted under Brilliant's deferred share unit plan, to the following directors (amounts as indicated): Allan Bezanson ($150,000), John Hawkrigg ($50,000), John Williamson ($50,000), and Courtenay Wolfe ($50,000).

About Brilliant Resources Inc.: The common shares of Brilliant trade on the TSXV under the symbol BLT. Additional information about the Brilliant is available on SEDAR at www.sedar.com and at www.brilliantresources.com.

Cautionary Statement Regarding Forward-Looking Information

This press release contains 'forward-looking information' within the meaning of Canadian securities legislation. Forward looking information in this press release includes information about the completion and timing of the proposed acquisition of Brilliant by Montana, the proposed $4 million Loan and the proposed share consolidation. These forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those anticipated, including, the contemplated business combination not being completed as a result of a number of factors including, without limitation, the shareholders of Brilliant or Montana not approving the transaction, or required regulatory or court approvals not being obtained, the possible failure to realize anticipated synergies, expense reductions or other benefits of the transaction; the loan not being completed as a result of required regulatory approvals not being obtained; and other risks and uncertainties. Readers should not place undue reliance on the forward-looking information contained in this news release. Neither Brilliant nor Montana undertakes to update any forward-looking information, except as required by applicable securities laws.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Arrangement, any information released or received with respect to the business combination may not be accurate or complete and should not be relied upon. Trading in the securities of Brilliant and Montana should be considered highly speculative.

The TSXV has in no way passed upon the merits of the proposed transactions and has neither approved nor disapproved the contents of this press release.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

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