The Acquisition will take place through a Plan of Arrangement under the provisions of the Business Corporations Act (Alberta).
KOV and the Consortium (as defined below) will offer Winstar shareholders, in exchange for each Winstar share held, either:
-- 7.555 shares of KOV (the "Share Consideration"); or-- C$2.50 in cash (the "Cash Consideration").
The Cash Consideration will be subject to a maximum of C$35 million in cash being paid to Winstar shareholders in aggregate and will be funded by a consortium of investors (the "Consortium") led by Kulczyk Investments S.A. ("KI"), the major shareholder of KOV.
The Plan of Arrangement will include a sequence of transactions in the following order:
-- The Consortium will purchase shares from those Winstar shareholders who wish to tender their shares for the Cash Consideration;-- KOV will purchase shares from those Winstar shareholders who wish to tender their shares for the Share Consideration; and-- The Consortium will then tender their shares to KOV for the Share Consideration.
(3) Winstar may earn up to a 60% working interest upon funding 100% of 180 km2 of 3D seismic and two exploration wells by May 2015, with the gross cost estimated at US$8 million
Pursuant to the terms of the Acquisition, Winstar shares acquired by the Consortium for the Cash Consideration will be subsequently tendered for the Share Consideration which will be subject to a hold period of 180 days following closing of the Acquisition.
KOV will issue 272 million shares to Winstar shareholders and the Consortium(4). In addition, it is a condition of the Arrangement Agreement that KI exercises its option to convert the existing US$12 million loan amount plus accrued interest into common shares of KOV on or prior to the effective date of the Acquisition in accordance with the provisions of the loan agreement. KOV has been informed by KI that it is KI's current intention to serve the conversion election notice on or about 8 May 2013. The loan amount will be converted into KOV shares at a price per share equal to the five day volume weighted average price of KOV shares on the WSE during the five trading days immediately prior to but excluding the date of the conversion election notice, therefore the exact number of KOV shares issuable to KI upon conversion of the convertible debenture is uncertain, as the final conversion price will only be determined in the future. The conversion election notice will state that the conversion of the loan amount into KOV shares is conditional upon the successful closing of the Acquisition.
Upon completion of the Acquisition, Winstar shareholders and optionholders will hold approximately 21%, and KOV shareholders will hold approximately 79%, of KOV's enlarged resultant issued share capital(5).
TSX Listing, Share Consolidation and Name Change
Subsequent to the closing of the Acquisition, the shares of Winstar will cease trading and will be de-listed from the TSX. KOV will thereafter make an original listing application to the TSX to list the ordinary shares of KOV (including those issued in connection with the Acquisition) on the TSX. It is a condition to the completion of the Acquisition that the ordinary shares of KOV shall have been approved for listing on the TSX, subject only to the filing of documentation that cannot be filed prior to the effective date, such that the ordinary shares of KOV shall be listed and posted for trading on the TSX as soon as is reasonably practicable following the effective date in accordance with TSX policies.