Stetson Oil and Gas, a Forbes & Manhattan Group Company, Receives $16 Million Judgment Against Thomas Weisel Partners (now a subsidiary of Stifel Financial)
- Stetson Successfully Defends Canadian Bought Deal Practice
TORONTO, ONTARIO -- (Marketwire) -- 03/05/13 -- Forbes & Manhattan, Inc. notes with pleasure that Stetson Oil & Gas Ltd. (TSX VENTURE:SSN) has received the decision of the Ontario Superior Court of Justice (Commercial List) that Thomas Weisel Partners Canada Inc. breached its bought deal engagement letter with Stetson dated July 13, 2008. To compensate Stetson for the damages caused by the 2008 failed bought deal financing, the court has ordered Weisel to pay Stetson damages of $16,042,669 plus interest and costs incurred by Stetson in connection with this litigation.
Commenting on the decision, Stan Bharti, the Executive Chairman of F&M, stated, "Everyone associated with Stetson is very pleased with the result of our claim against Weisel. We believe that the decision represents a victory for the Canadian bought deal financing system. The decision recognizes standard Canadian practice relating to "bought deal" financings - the underwriters and the issuer enter into a binding agreement when they sign the "engagement letter"."
"Stetson management and board, supported by Forbes & Manhattan, faithfully and diligently prosecuted the claim against Thomas Weisel Partners during the past four and a half years. We believe that this is a testament to the dedication and continuing support that Forbes & Manhattan provides its member companies."
As a result of a 2010 merger transaction, Thomas Weisel Partners Canada Inc. has become a subsidiary of Stifel Financial Corp., which is a full service brokerage and investment banking firm based in St. Louis, Missouri.
History of the Claim against Thomas Weisel Partners
In June 2008, Stetson made a proposal to the Fort Berthold Tribe of North Dakota to lease tribal lands to explore in the Bakken Formation in North Dakota. On July 11, 2008, Stetson announced publicly that it had received Tribal Council approval to lease 8,570 acres of "tribal lands" and 4,500 acres of adjacent freehold lands.
Stetson needed to raise money to meet its commitments under the land leases that it obtained. In an effort to secure this financing mandate, Thomas Weisel Partners promoted to Stetson its expertise and knowledge of the Bakken formation. On July 14, 2008, Weisel released a press release announcing on behalf of Stetson that Stetson had entered into an agreement with Weisel as lead underwriter to purchase on a bought deal private placement basis 45,454,600 subscription receipts in the capital of Stetson at a price of $0.55 per subscription receipt for aggregate gross proceeds of approximately $25,000,030.
Unfortunately, during the first week of marketing, Weisel had managed to find substitute purchasers for only $2 million of its position. When the financing did not close as scheduled on July 31, 2008, Stetson's lawyers wrote to Weisel's lawyers and said that Stetson "agrees to allow the extension of the closing past July 31, 2008 to a later date that reasonably coincides with the Corporation's capital expenditure requirements." In early August 2008, Stetson and Weisel representatives met to try to negotiate new terms for the financing. On August 14, 2008, Weisel offered to make a debt investment of $8 million in return for a release of its obligations under the engagement letter. On August 18, 2009, Stetson's legal counsel replied that Stetson would not release Weisel from the terms of the engagement letter and that if Weisel did not fulfill its obligations, it would take action.
In early August 2008, Stetson began to consider alternatives to the Weisel financing. Stetson met with, and considered, a number of strategic alternatives. During this period, Stetson had to obtain two bridge loans from Longford Energy Inc., a public company that was also a member of the Forbes & Manhattan group, to make lease payments that had become due. Eventually, Stetson signed an agreement with Canaccord Capital Corporation effective August 28, 2009 pursuant to which Canaccord agreed to provide a $12,000,000 financing on a "best efforts" basis in exchange for 60,000,000 units, each unit consisting of a common share and a share purchase warrant. In addition, Stetson agreed to issue approximately 85,000,000 preferred shares to every existing shareholder of Stetson who would be entitled to a portion of the proceeds of any final judgment or settlement monies paid to and received by Stetson in connection with its claim against Weisel. The preference shares trade on the TSX Venture Exchange under the symbol "SSN.PR.A". The Canaccord financing closed on September 17, 2009 for net proceeds to Stetson of $11,215, 928 after fees paid to Canaccord. The Canaccord financing did not provide sufficient funds for Stetson to undertake development of its Bakken lands. Eventually, in October 2008, Stetson assigned 50% of its oil and gas rights in the allotment lands and 60% of its rights in the tribal lands to Red Willow Great Plans, LLC. In exchange, Red Willow agreed to pay for Stetson's first $3,500,000 of drilling costs and also to pay for its share of all land, drilling and exploration costs, to provide its technical expertise and to act as the operator of the programme.
Justice Newbould of the Ontario Superior Court of Justice (Commercial List) presided at the trial during January 2013.
Forbes & Manhattan, Inc.