Charlotte Resources Ltd.
CNSX : CHT

April 10, 2012 08:00 ET

Charlotte Resources and Tanglewood Energy Announce Revised Terms for Business Combination and $9.0 Million Financing

CALGARY, ALBERTA--(Marketwire - April 10, 2012) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Charlotte Resources Ltd. ("Charlotte") (CNSX:CHT) and Tanglewood Energy Inc. ("Tanglewood"), a privately-held Alberta corporation based in Calgary with assets located in Toole County, Montana, announced today that they have agreed to revised terms for the proposed combination of Charlotte and Tanglewood. Holders of Tanglewood common shares representing 78.6% of the outstanding Tanglewood shares, and holders of Charlotte common shares representing 20.25% of the outstanding Charlotte shares, have entered into lock-up agreements pending execution of definitive agreements for the transactions.

Overview of the Transactions

The following sets forth a description of the material terms of the transactions to combine the business and assets of Charlotte and Tanglewood.

Purchase of Oil and Gas Properties

Charlotte (or its affiliate) intends to enter into an agreement with Tanglewood (or its affiliate) to purchase certain oil and gas properties of Tanglewood located in Montana for a cash purchase price of US$2,800,000 (less the amounts outstanding under the bridge loan described below). Charlotte will be purchasing a 100% working interest in 15,204 net acres in Toole County adjacent to Tanglewood's existing land package (the "Toole County Properties").

The proceeds of the sale would be used by Tanglewood (in part) to repay certain indebtedness incurred in connection with the original acquisition of the Toole County Properties. Completion of the acquisition would be subject to customary conditions, including completion of the Charlotte financing described below.

Joint Venture

Charlotte (or its affiliate) intends to enter into an agreement with Tanglewood (or its affiliate) to jointly develop certain other oil and gas properties comprising 27,034 net acres of which Tanglewood owns a 100% working interest in approximately 3,500 net acres (the "Joint Venture Properties").

Under the proposed terms of the joint venture, Tanglewood would assign 50% of its working interest in the Joint Venture Properties in exchange for Charlotte funding up to $6.0 million of the exploration and development plan for such properties on behalf of Tanglewood and Charlotte after which joint venture expenditures would be made according to the parties' respective working interests. Completion of the assignment is conditional on Charlotte becoming a party to the existing joint operating agreement for the Joint Venture Properties.

Non-Revolving Facility

Charlotte would establish an unsecured non-revolving loan facility to fund Tanglewood's general and administrative expenses for 2012 and 2013 up to a maximum of $500,000, and Tanglewood's working share of joint venture expenditures for the Joint Venture Properties following completion of Charlotte's funding obligations.

Acquisition of Tanglewood

Charlotte would agree to acquire all of the issued and outstanding shares of Tanglewood in exchange for the issuance of 60.0 million shares of Charlotte to the shareholders of Tanglewood. The acquisition would be completed by way of an exempt take-over bid or other mutually acceptable transaction structure as soon as practicable following the satisfaction of certain conditions precedent. The definitive agreement for the acquisition would be subject to customary covenants pending closing and representations and warranties of both parties. All outstanding options to purchase Charlotte common shares would be exercised or cancelled prior to the completion of the acquisition. In addition, all outstanding non-broker warrants to purchase Charlotte common shares would be re-priced from $0.10 to $0.30 per share and the term of such warrants extended for an additional three years and all outstanding options to acquire Tanglewood common shares would be exchanged for options to acquire Charlotte common shares on the completion of the acquisition.

If the acquisition of Tanglewood occurs before the first anniversary of the closing of the asset acquisition and joint venture described above, then 80% of the Charlotte common shares issued to the holders of the Tanglewood common shares would be subject to restrictions on resale and be released from such restrictions in equal instalments on the three, six, nine and twelve month anniversaries of the completion of the acquisition of Tanglewood. If the acquisition of Tanglewood occurs after the first anniversary of the closing of asset acquisition and joint venture described above, then 75% of the Charlotte common shares issued to the holders of Tanglewood common shares would be subject to restrictions on resale and be released from such restrictions in equal instalments on the three, six and nine month anniversaries of the completion of the acquisition of Tanglewood.

Bridge Loan

Charlotte has extended a $300,000 loan to Tanglewood to fund its short term general and administrative expenses. The loan is unsecured and does not bear interest prior to maturity. All amounts owing under the loan must be repaid on the earlier of (i) the business day the parties enter into definitive agreements for the transactions described above (in which case all such amounts shall be deducted from the purchase price payable by Charlotte for the acquisition of assets described above); and (ii) within 10 days following demand in the event such agreements are not entered into on or before May 30, 2012.

Charlotte Financing

Charlotte has entered into an engagement letter with Canaccord Genuity Corp. for a brokered private placement financing of units ("Charlotte Units") for gross proceeds of not less than $9.0 million at a price of not less than $0.25 per Charlotte Unit. Each Charlotte Unit will consist of one Charlotte Share and one-half of a common share purchase warrant ("Charlotte Warrant"). Each whole Charlotte Warrant will be exercisable at $0.35 per Charlotte Share for a period of 36 months from the date of distribution. If the volume weighted average trading price of the Charlotte Shares exceeds $0.70 per Charlotte Share for a period of 21 days or more, then Charlotte would be entitled to give notice to the holders that such warrants will expire on the date that is 30 days following the sending of such notice. The proceeds of the financing will be used to fund the transactions described above and for general corporate purposes.

Management of Charlotte

Upon closing, Mr. Peter Haverson will be appointed the President and Chief Executive Officer of Charlotte and Cory Dosdall, the current President of Tanglewood will act as advisor to the board of directors of Charlotte. The board of directors of Charlotte will be reconstituted to include Peter Haverson, as Chairman and Brad Nichol in addition to two current board members of Charlotte. At the next annual meeting of the Charlotte Shareholders, the nominees for election to the board of directors shall be comprised of two Charlotte nominees and two Tanglewood nominees.

The following is a summary of experience and qualifications of the new members of the Charlotte management team:

Peter Haverson, President, Chief Executive Officer and a Director: Mr. Haverson has over 36 years of varied, oilfield experience focused on exploration and production operations. He has excellent experience in both offshore and onshore operations, in harsh environment and remote operating arenas from the Canadian & US Beaufort seas, the East Coast of Canada to the desolate Libyan & Egyptian deserts. He has worked for major oil companies, such as BP, Gulf Canada & Petro-Canada and also junior oil companies such as Lundin Petroleum and Vanguard Resources and is therefore quite familiar with the differences in operating modes. He has also worked as both the Operator and Rig Contractor as both BP and Gulf Canada owned and operated their own offshore drilling rigs where he held senior supervisory and management positions. He held the positions of Operations Manager Egypt, General Manager Libya and General Manager/ Managing Director of a joint-venture company in Egypt. His most recent function has been as the General Manager Global Drilling & Completion operations for a major Canadian oil company. He holds an honours degree in Mechanical Engineering from the City University of London in the United Kingdom. He was an independent director of both Gallic Energy Ltd. and Rage Energy Ltd., and is currently a director of Cygam Energy Inc. He is both a Canadian and British citizen and is currently resident in Calgary, Alberta.

Brad Nichol, Director: Brad Nichol has held roles in the executive suite of junior oil and gas exploration and production companies. His experiences are in private and public startups, takeovers and turnarounds. In his position as Management Consultant at a top-tier international firm, Mr. Nichol advised management of Fortune 500 corporations on business and corporate strategies, mergers & acquisitions and corporate reorganizations throughout Europe and the United States. Mr. Nichol joined Schlumberger in 1992, and enjoyed an international career focused on technical excellence, project management and field operations. His early career focused on reservoir evaluation and enhancement strategies. In 1996 he assumed responsibility for reservoir stimulation and wellbore construction services for BP in Colombia. In 1999 Mr. Nichol joined a U.K. business unit in the Measurement and Systems division of Schlumberger, and was on the team responsible for the corporate turnaround and eventual sale of that business. Mr. Nichol is a Professional Engineer (Mechanical) and earned his MBA, with honours, from the London Business School.

Cory Dosdall, Advisor to the Board of Directors: Cory has lived in Calgary, Alberta since 2000 after leaving the financial industry in Wichita, Kansas where he developed professional relationships with many key personnel in the oil and gas industry in Oklahoma. Cory has been involved in numerous financings for public oil and gas companies in both Canada and the United States. Further, as part of management, Cory has participated in several successful mergers and acquisitions since 2006, several successor entities of which have subsequently become publicly traded companies. Mr. Dosdall is currently the President, Chief Executive Officer and a director of Tanglewood.

About Tanglewood

Tanglewood is a privately-held Alberta corporation based in Calgary with 39,321 net acres of exploration lands located in Toole County, Montana covered by thirty nine square miles of 3D seismic data. Sproule Associates Limited prepared a resource evaluation covering the acreage position in Montana.

About Charlotte

Charlotte Resources Ltd. is a publicly traded company listed on the Canadian National Stock Exchange ("CNSX") and trading under the symbol "CHT". Charlotte owns mining assets in the Osoyoos mining district of British Columbia. In connection with the acquisition, Charlotte agrees to cease carrying on its mining business.

Completion of certain of the transactions are subject to various conditions precedent. There can be no assurance that any of the proposed transactions will be completed as contemplated or at all.

Investors are cautioned that, except as disclosed in this news release, any information released or received with respect to the transactions may not be accurate or complete and should not be relied upon. Trading in the securities of Charlotte Resources Ltd. should be considered highly speculative.

Forward-looking statements

This news release contains forward-looking statements relating to the transactions, including statements regarding the anticipated closing dates of the transactions, the proposed members of management and the board of directors of Charlotte to be appointed or elected, respectively, repayment of the bridge loan, the use of funds under the bridge loan, the anticipated minimum proceeds of the Charlotte financing, the minimum pricing of the Charlotte financing and the number of shares to be issued under such offering, the purchase price of the Toole County Properties, the terms and conditions of the agreement in respect of the Joint Venture Properties, the terms and condition of the take-over bid, and the receipt of all necessary regulatory approvals and satisfaction of all other customary closing conditions in connection with the Transactions, and other statements that are not historical facts. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things: the risk that the transactions will not be completed or that the necessary approvals and/or exemptions will not be obtained or some other condition to the closing of the transactions will not be satisfied; the risk that the terms of the Charlotte financing will be changed; the risk that closing of the acquisition of the Toole County Properties if Tanglewood or Charlotte is not able to obtain the necessary approvals on the timelines it has planned; risks that the marketing efforts will not result in the completion of the Charlotte financing or the realization of the anticipated proceeds under the offering; the timing of obtaining required approvals and satisfying closing conditions for the transactions; risks that the take-over bid will not be commenced if Tanglewood cannot satisfy the conditions precedent; the state of the economy in general and capital markets in particular, investor interest in the business and future prospects of Charlotte and Tanglewood, the ability of the agents under the Charlotte financing to successfully market the proposed offering.

The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, Charlotte and Tanglewood disclaim any intention and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Charlotte and Tanglewood undertake no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed above.

The CNSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Charlotte Resources Ltd.
    John Proust
    President and Chief Executive Officer
    (604) 696-9020

    Tanglewood Energy Inc.
    Cory Dosdall
    President and Chief Executive Officer
    (403) 283-0010