Charlotte Resources Ltd.
CNSX : CHT

November 11, 2011 08:25 ET

Charlotte Resources and Tanglewood Energy Enter Into Definitive Agreement for Acquisition of All Issued and Outstanding Common Shares of Tanglewood Energy and Concurrent $11.5 Million Financing

CALGARY, ALBERTA--(Marketwire - Nov. 11, 2011) -

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 entered into a definitive agreement dated November 10, 2011 (the "Pre-Acquisition Agreement") whereby Charlotte, or a wholly-owned subsidiary of Charlotte, will upon the satisfaction of certain conditions make an offer to purchase all of the outstanding shares of Tanglewood. In addition, Charlotte announced today that it is proceeding with a brokered private placement offering of subscription receipts at a price of $0.35 per receipt for gross proceeds of not less than $11.5 million.

Overview of the acquisition

Under the Pre-Acquisition Agreement, each outstanding common share of Tanglewood will be exchanged for one common share of Charlotte pursuant to an exempt take-over bid. The offer to purchase the Tanglewood shares will be made by Charlotte upon the satisfaction of certain conditions by Tanglewood, including receipt of all necessary approvals and consents from all applicable regulatory authorities including the Canadian National Stock Exchange ("CNSX") if required, receipt of lock-up agreements from certain Tanglewood shareholders representing in the aggregate of 66.67% of the outstanding Tanglewood shares and the absence of a material adverse change in respect of Tanglewood. At the date hereof Charlotte is in receipt of lock-up agreements representing 76.7% of the outstanding Tanglewood shares.

Pursuant to the Pre-Acquisition Agreement, Charlotte shall not be required to take up, purchase or pay for any Tanglewood shares unless certain conditions are satisfied, including the tender of at least 90% of the outstanding Tanglewood shares pursuant to the offer, receipt of approval of the transaction from holders of Charlotte shares representing a minimum of 50% of the issued and outstanding Charlotte shares and the CNSX.

It is expected that Charlotte will issue up to 60.0 million Charlotte shares to complete the acquisition of Tanglewood. Upon completion of the acquisition and related financing described herein, it is anticipated that Tanglewood shareholders will own approximately 49.4% of the combined entity.

Pursuant to the Pre-Acquisition Agreement, the parties agree that 5% of Charlotte shares issuable to the holders of Tanglewood shares on completion of the acquisition will be freely trading and the balance will be subject to certain prohibitions on resale which will expire as follows:

  • 45% of such Charlotte shares will be released of such prohibitions in equal instalments on the 6, 12 and 15 month anniversaries of the completion of the acquisition; and

  • 50% of such Charlotte shares will be released of such prohibitions in equal instalments on the 18 and 24 month anniversaries of the completion of the acquisition.

In addition, the Pre-Acquisition Agreement provides that: (i) Charlotte will assume all the outstanding Tanglewood options which will continue to be exercisable at an exercise price per share equal to the greater of (A) $0.20 per share and (B) the exercise price per share in respect of such Tanglewood options pursuant to the particular Tanglewood option agreement; (ii) all outstanding Charlotte options will either be exercised or terminated prior to the closing of the acquisition; and (iii) the terms of Charlotte's outstanding warrants will be amended effective upon closing of the acquisition to: (A) increase the exercise price of such warrants from $0.10 to $0.35 per share; (B) extend the term of such warrants to the date that is two years from the date the acquisition is completed; and ( C ) provide for the acceleration of the expiry date of such warrants if, during the period commencing on the date that is four months following the date the acquisition is completed and ending on the expiry date of such warrants, the daily volume weighted average trading price of the common shares underlying such warrants exceeds $0.50 each day for a period of 22 consecutive trading days. In such case, the holders of such warrants will be provided written notice within 30 days of such occurrence, and shall have 30 days from the date of such notice in order to exercise the warrants, failing which such warrants will expire.

The parties expect to complete the acquisition as soon as practicable subject to the receipt of all necessary regulatory, securityholder and other approvals and satisfaction of all other customary closing conditions, including the completion by Charlotte of the financing described in further detail below.

Overview of the Charlotte Financing

Charlotte has engaged Canaccord Genuity Corp. as agent for the offering to complete a brokered private placement offering, on a reasonable commercial efforts basis, of subscription receipts at a price of $0.35 per receipt for gross proceeds of not less than $11.5 million, subject to the requirements of the CNSX. Each subscription receipt will entitle the holder to receive one unit of Charlotte without additional payment or further action by the holder upon confirmation that the acquisition has been closed. Each unit will be comprised of one Charlotte share and one half common share purchase warrant of Charlotte, with each whole warrant entitling the holder thereof to one Charlotte share at an exercise price of $0.50 per share for a period of 24 months following the date the warrants are issued. The gross proceeds of the offering will be held in escrow pending completion of the Tanglewood acquisition. If the Tanglewood acquisition is terminated or does not close before March 31, 2012, the gross proceeds raised from the offering, plus interest earned thereon, will, on the earliest to occur of such events, be returned to the holders of the subscription receipts.

Further, if the Tanglewood acquisition does not close before December 31, 2011, each holder of subscription receipts will be entitled to an additional 0.1 of a Charlotte share on closing for every subscription receipt held. Further, if the Tanglewood acquisition does not close before February 29, 2012, each holder of subscription receipts will be entitled to an additional 0.05 of a Charlotte share on closing for every subscription receipt held.

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. Further details concerning the Montana assets and the results of Sproule's report will be announced in due course.

Management of the combined company

The combined company will be led by an experienced management team with a track record in developing and managing oil and gas companies. Upon completion of the acquisition, the existing board of directors (other than John Proust) and senior management team of Charlotte will resign and be reconstituted with: Cory Dosdall (Chief Executive Officer), Darrell Nimchuk (Chief Financial Officer), Eric Johnson (Vice President Exploration) and Scott Reeves (Corporate Secretary), and the board of directors with: John Proust, Cory Dosdall, Brad Nichol and Michael Stark.

The following is a summary of experience and qualifications of the Tanglewood senior management team:

Cory Dosdall, Chief Executive Officer and a Director: 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.

Darrell Nimchuk, Chief Financial Officer: Darrell has numerous years experience in construction, manufacturing and various oil and gas sectors. His most recent endeavour was as a founder of a start up oil and gas services company where he was directly responsible for financial, administrative and information systems and aided in growing the company from incubation in 2002 to $90 million in revenue in 2008, at which time they successfully marketed the sale of the company. Mr. Nimchuk has also been involved in mergers and acquisitions, internal auditing, investor relations, corporate governance and business development for companies of varying sizes. Darrell holds a Masters of Business and Administration from Athabasca University and a Certified Management Accountants designation. He was the chairman of the finance committee for the Petroleum Services Association of Canada and sits on the board of directors for a handful of private companies and non-for profit organizations, most notably The Impact Society, a not-for-profit organization.

Eric Johnson, Vice President Exploration: Mr. Johnson is a respected geophysical and geological consultant with 37 years of experience in domestic and international petroleum exploration and development. He is proficient at 3D seismic interpretation, geological interpretation, prospect generation, evaluations, reviews and recommendations and is experienced with 2D and 3D seismic data acquisition and processing, supervising land and marine seismic surveys, gravity and magnetic surveys, and sonic/velocity surveys in wells. Mr. Johnson is a Registered Professional Geologist (Wyoming) and expert witness for geological and geophysical matters before state oil and gas commissions. Mr. Johnson has been directly involved in the discovery and development of numerous oil and gas fields. He has generated and mapped prospects in northern and central Montana, the Montana Disturbed Belt, Wyoming Thrust Belt, Williston Basin, Big Horn Basin, Powder River Basin, Wind River Basin, northwest Colorado, Nevada, and the Gulf Coast (offshore and onshore).

Scott Reeves, Corporate Secretary: Scott Reeves is a partner at TingleMerrett LLP with a practice focused on securities, corporate finance and commercial transactions for emerging and growth companies, joint ventures and partnerships. He has advised numerous private and public corporations (including registered dealers) in a wide range of business matters including access to capital markets, corporate governance and operational issues both nationally and internationally. Mr. Reeves has extensive experience in financing options, private equity and public offerings, public listings and exchange matters, corporate acquisitions, share and asset acquisitions and dispositions, restructurings, securities regulatory requirements for issuers and dealers and other related business transactions. He also acts a director and/or corporate secretary for many public and private companies.

About Charlotte

Charlotte Resources Ltd. is a publicly traded company listed on the 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.

In accordance with the policies of the CNSX, trading in Charlotte Shares is currently halted and will remain halted until Charlotte has provided the required disclosure pursuant to the policies of the CNSX and that disclosure has been accepted and posted on the CNSX.ca website.

Completion of the acquisition is subject to a number of conditions, including CNSX acceptance and shareholder approval (including on a disinterested basis to the extent required). The acquisition cannot close until the required shareholder approval is obtained. There can be no assurance that the acquisition will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the authorized disclosure documents required to be prepared in connection with the acquisition, any information released or received with respect to the acquisition 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 acquisition and Charlotte financing, including statements regarding the exchange ratio for the acquisition, the anticipated closing date of the acquisition, and other related matters, issuing further announcements concerning the acquisition and other matters, the terms and conditions of the Charlotte financing, the anticipated minimum proceeds of the Charlotte financing, minimum pricing of the Charlotte financing and the number of shares to be issued under such offering, projected timing of closing the Charlotte financing and the receipt of all necessary regulatory approvals and satisfaction of all other customary closing conditions in connection with the acquisition and Charlotte financing, 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 acquisition 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 acquisition will not be satisfied; the risk that the terms of the Charlotte financing will be changed; the risk that closing of the acquisition and Charlotte financing could be delayed if Tanglewood 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 acquisition and offerings, 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 offering 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