FairWest has entered into a pre-acquisition agreement with ExploreCo Energy Inc. to purchase 75% of its outstanding common shares and has presented its offer to ExploreCo shareholders. FairWest owns the remaining 25% of ExploreCo common shares. ExploreCo shareholders have until close of business on November 28, 2008 to accept or decline the offer.
The ExploreCo directors have determined that the Offer is fair and have agreed to tender their shares to the Offer. The FairWest directors have approved the acquisition. A director of FairWest is a director of ExploreCo and an officer of FairWest is a director of ExploreCo.
Subject to regulatory approval and acceptance of FairWest's offer by ExploreCo shareholders, the purchase price of $2,112,600 will be paid through the issuance of convertible redeemable retractable preferred shares of FairWest ("Preferred Shares") at a price of $10.00 per share. Each Preferred Share is convertible into 33.33 FairWest common shares at any time after 24 months from the date of issuance. Each Preferred Share is redeemable at any time after 24 months from the date of issuance at the option of FairWest or retractable at any time after 30 months at the option of the ExploreCo shareholder. In the event that FairWest common shares trade at or above $0.30 per share for 10 consecutive days, FairWest may convert all of the outstanding FairWest Preferred Shares into FairWest common shares. ExploreCo shareholders will receive a cumulative dividend of 7% per annum. Conversion of Preferred Shares may result in the issuance of 7,041,296 Common Shares.
The offer to purchase ExploreCo is in keeping with FairWest's operating and financial strategy to create related private companies and related partnerships that are prepared to acquire oil and gas properties from FairWest and jointly participate with FairWest in exploitation and drilling operations. In the case of the private companies, FairWest holds a 25% equity interest in the private company. In the case of the limited partnerships, FairWest does not hold any interest in the general partner of the limited partnership. FairWest provides management services to the related companies and partnerships and allocates a portion of its corporate overhead expenses to these parties. After two years from formation of the company or partnership, FairWest has an obligation to make an offer to acquire its interest at fair market value.
ExploreCo was formed in December 2005 and holds joint interests with FairWest in the Antelope, Berry Creek and Provost areas of Alberta. FairWest has completed its due diligence review of ExploreCo's assets and liabilities and is satisfied with the results of its due diligence.
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