Golconda Enters into Definitive PSA with Kasten Energy for Cold Lake JV

Golconda Resources Ltd. (the "Corporation" or "Golconda") announces that it has entered into a definitive purchase and sale agreement (the "PSA") with Kasten Energy Inc., a Calgary-based private oil and gas company ("Kasten"), that provides for the sale of the Corporation's interest in the joint venture agreement among the Corporation, Kasten and Tri-Rez Ebay Energy Ltd. (the "JVA") with respect to oil and gas exploration and development on approximately 1,600 acres of lands in the Cold Lake area in northeast Alberta (the "Asset Sale Transaction").

Completion of the Asset Sale Transaction will result in the sale of substantially all of the assets of the Corporation and requires approval by not less than 66 2/3% of the votes cast by the Corporation's shareholders, voting in person or by proxy, at the Corporation's upcoming annual and special meeting of shareholders which is currently expected to be held on January 23, 2015 (the "Meeting").

A brief summary of the key terms of the PSA (a copy of which will be filed on SEDAR) are as follows:

  • Kasten will acquire all of the Corporation's interest in the JVA such that after the completion of the Asset Sale Transaction, Kasten will be the 100% owner, and operator, of the JVA;
  • the Corporation will receive that number of common shares of Kasten equal to 35% of the outstanding shares of Kasten following the completion of the Asset Sale Transaction;
  • it is a condition to closing that a minority shareholder of Kasten (the "Funding Kasten Shareholder") advance to Kasten the amount of $821,530, representing the amount currently owing from the Corporation to Kasten for payment of the Corporation's unfunded portion of costs incurred to date under the JVA, and Kasten will forbear upon the collection of such amount;
  • the Corporation has agreed to assign to Kasten any interest in property located in the Cold Lake area that may be acquired by the Corporation pursuant to a joint venture agreement between the Corporation and Kasten prior to the completion of the Asset Sale Transaction;
  • the Corporation has made normal-course representations and warranties, including warranties associated with corporate authority and the absence of claims and contingencies; and
  • other conditions to closing include, among other things, the approval of the Asset Sale Transaction at the Meeting, the approval of the TSX Venture Exchange, the Corporation and the Funding Kasten Shareholder entering into a shareholder agreement (the "Shareholder Agreement"), the representations and warranties of each party being correct at the time of closing and no material adverse change having occurred at the time of closing.

The Shareholder Agreement to be entered into between the Corporation and the Funding Kasten Shareholder at closing of the Asset Sale Transaction will govern certain of the operations of Kasten and will provide the Corporation with two nominees to the board of directors of Kasten, which will be fixed at four members.

In the event that the Asset Sale Transaction is ultimately approved and completed according to the terms of the PSA, the Corporation will not have any ongoing business operations or assets. The Board of Directors intends to explore potential strategic alternatives following the closing of the Asset Sale Transaction.

The details of the Asset Sale Transaction together with the risks, processes and procedures associated therewith, and subsequent to completion thereof, will be disclosed in greater detail in the information circular of the Corporation (the "Circular") for the Meeting which will be filed on SEDAR.

Source: http://www.golcondaresources.com/

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