Sloane Petroleums Inc. — M&A Activity 2000

Dec 5, 2000

FORM 27 (BRITISH COLUMBIA, ALBERTA)

MATERIAL CHANGE REPORT OF SLOANE PETROLEUMS INC.

1. Reporting Issuer:

Sloane Petroleums Inc. Suite 2500, 101 6th Avenue S.W. Calgary, Alberta T2P 3P4

2. Date of Material Change:

November 22, 2000

3. Press Release:

The Joint News Release issued on November 22, 2000 through the Canada Newswire Service is attached hereto.

4. Summary of Material Change:

Gentry Resources Ltd. and Sloane Petroleums Inc. propose to amalgamate, subject to shareholder and regulatory approval and certain other conditions, effective January 31, 2001.

5. Full Description of Material Change:

Gentry Resources Ltd. (“Gentry”) and Sloane Petroleums Inc. (“Sloane”) have entered into an agreement respecting the proposed amalgamation of Gentry and Sloane to be effective, subject to shareholder and regulatory approval and satisfaction of certain other conditions, on or about January 31, 2001. The outstanding common shares of Gentry are listed for trading on The Toronto Stock Exchange under the trading symbol GNY. The outstanding common shares of Sloane are listed for trading on the Canadian Venture Exchange under the trading symbol SLN. Subject to the approval of The Toronto Stock Exchange on behalf of Gentry and the Canadian Venture Exchange on behalf of Sloane, each of Sloane and Gentry have entered into a Business Combination Agreement effective as of November 22, 2000 pursuant to which Sloane and Gentry are to be combined into one Canadian oil and gas company which is to continue under the name of “Gentry Resources Ltd.”.

The consideration to be paid to the shareholders of Sloane for each Sloane common share consists of $0.72 in cash and 0.10 of a common share of Gentry. The closing price of Gentry common shares on The Toronto Stock Exchange on Monday, November 20, 2000 was $0.70. Based on such closing price, the aggregate consideration to be received by shareholders of Sloane for each Sloane common share held is valued at $0.79. The

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consideration to be paid to the shareholders of Sloane is supported by an engineering report of the oil and natural gas reserves of Sloane and a formal valuation of Sloane conducted by First Associates Investments Inc.

Sloane currently has 6,945,207 common shares outstanding of which 2,918,518 Sloane common shares are held by Gentry representing 42% of Sloane’s outstanding common shares. An additional 1,214,805 Sloane common shares are held by common directors, officers and employees of Gentry and Sloane. Collectively, Gentry and its directors, officers and employees currently hold approximately 60% of the outstanding Sloane common shares. A further 1,005,000 Sloane common shares are issuable upon the exercise of outstanding warrants and stock options to acquire Sloane common shares. Of these, the directors, officer and employees common to Gentry and Sloane currently hold warrants and stock options to acquire up to 640,000 Sloane common shares.

Gentry currently has 20,406,117 outstanding common shares and shall be issuing a further 503,169 Gentry common shares to Sloane shareholders as a result of the amalgamation. The aggregate cash consideration to be paid by Gentry to Sloane shareholders is $3,622,816, assuming that all Sloane warrants and Sloane stock options are exercised prior to the amalgamation. Gentry has made arrangements with its primary lender, a major Canadian chartered bank, to fund the cash consideration to be paid to Sloane shareholders. The number of common shares to be issued by Gentry pursuant to the transaction is less than 5% of the current outstanding common shares of Gentry.

Gentry has been, and continues to be, the largest shareholder of Sloane, and Gentry and Sloane have common officers, management and employees. Four of the six directors of Gentry are also four of the six directors of Sloane. Each of Sloane and Gentry have two independent directors. Each of Gentry and Sloane have established Special Committees of their respective Boards of Directors to review the proposed transaction and make appropriate recommendations.

The transaction has been reviewed and recommended by the Special Committees of the Boards of Directors of each of Sloane and Gentry and approved by the independent directors of each of Gentry and Sloane. Under the agreement, the business combination is to be implemented by way of amalgamation to be approved by special resolutions of the disinterested minority shareholders of Sloane (excluding Gentry and those directors and officers of Gentry holding Sloane common shares) at an extraordinary and special meeting of Sloane shareholders and by special special resolutions of the disinterested shareholders of Gentry (excluding those directors and officers of Gentry holding Sloane common shares) at a special meeting of Gentry shareholders each of which is anticipated to be held on or about Monday, January 22, 2001. Sloane shareholders and Gentry shareholders of record on Friday, December 18, 2000 shall be mailed the required shareholder meeting materials, including a joint management proxy circular of Sloane and Gentry which shall include a formal valuation report of Sloane dated November 1, 2000 by First Associates Investments Inc. and the recommendation of the Special Committees of each of Sloane and Gentry to approve the amalgamation and certain other related and required matters. In addition to the approvals of the shareholders of each of

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Gentry and Sloane, the amalgamation is subject to compliance with certain securities regulatory requirements and approvals, certain due diligence matters, the receipt of certain legal, tax, financial and other opinions and reports, the execution of certain definitive agreements and certain other conditions. Subject to all of the foregoing being satisfied, the amalgamation is scheduled to be completed effective the close of business on January 31, 2001.

The Special Committee and independent directors of Sloane concluded that the transaction was in the best interests of Sloane shareholders for several reasons including:

• (a) the price being paid by Gentry is at a significant premium to the previous market price of Sloane’s shares;

• (b) that the ability of Sloane to raise additional equity or debt capital to fund further oil and gas asset acquisitions and further oil and gas property exploration and development was very limited due to its smaller market capitalization, limited common share liquidity and only recently having achieved significant natural gas production volumes; and

• (c) the ability of Sloane shareholders to be able to continue to participate in the combined entity through their holdings of Gentry common shares.

The Special Committee and independent directors of Gentry concluded that the proposed transaction was in the best interests of Gentry shareholders since the oil and gas assets of Sloane, which consist primarily of natural gas producing properties, should benefit from the enhanced access of Gentry to additional equity and debt capital and the combined entity would have a more balanced mix of oil and natural gas assets, production and opportunities and would be expected to achieve lower general and administrative expenses due to the management and operation of one public Canadian oil and gas company instead of two.

The Business Combination Agreement

Effective November 22, 2000, the Business Combination Agreement was entered into by Gentry and Sloane. The Business Combination Agreement sets forth a number of conditions to be satisfied or waived in order for the Amalgamation to become effective and provides the right of the parties thereto to terminate the Business Combination Agreement on the non-occurrence of certain events within specific time frames, each as described below. The Business Combination Agreement also sets forth a number of covenants on behalf of the parties thereto, including prescribing the manner of operation of the business and operations of the parties and precluding the parties from entering into certain new agreements or commitments with respect to their capitalization or assets during the term of the Business Combination Agreement.

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Conditions of the Amalgamation

The obligations of the parties to the Business Combination Agreement to consummate the Amalgamation are subject to the fulfilment or waiver of a number of significant conditions which must be satisfied on or before the effective date of the Amalgamation (the "Effective Date"), expected to be on or about January 31, 2000, or waived to the extent capable of being waived by the party benefiting by such condition. There is no assurance that the conditions will be satisfied or waived on a timely basis, if at all. The following is a summary of the material conditions:

• (a) neither Sloane nor Gentry shall have notified the other on or before 4:00 p.m.(Calgary time) on the business day immediately prior to the Effective Date of such party’s discovery of any material adverse change of the other from that previously known, in the case of Gentry, to Sloane or, in the case of Sloane, to Gentry;

• (b) all requisite regulatory approvals (including, without limitation, of any stock exchanges or other regulatory authorities) shall have been obtained on terms satisfactory to Sloane and Gentry, acting reasonably;

• (c) no act, action, suit or proceeding shall have been threatened or be outstanding before or by any court, regulatory authority or administrative agency by any elected or appointed public official or private person in Canada or elsewhere, whether or not having the force of law: and (i) no law, regulation or policy shall have been proposed, enacted, promulgated or applied which may impose adverse conditions on the amalgamation or the right of Gentry to own or exercise full rights of ownership of the Sloane shares or on the issuance pursuant to the amalgamation of Gentry shares or the right of the Sloane shareholders to own or, subject to any “control person” or existing escrow restrictions, exercise full rights of ownership of the Gentry shares issued in exchange for the Sloane shares under the amalgamation; or (ii) which would, in the judgement of Sloane or Gentry, acting reasonably, materially and adversely affect Gentry, Sloane and their respective subsidiaries considered on a consolidated basis;

• (d) the lenders of Gentry and Sloane shall have consented to the amalgamation and provided all necessary approvals, and shall continue to make financing available to Gentry as required for Gentry to complete the amalgamation and on terms and conditions acceptable to Gentry, acting reasonably;

• (e) there shall not have occurred any actual or threatened change that, in the judgement of Gentry or Sloane, acting reasonably, directly or indirectly, has or may have material adverse effect with respect to (i) the business or operations of either Gentry or Sloane and their respective subsidiaries or entities in which any of them has a material interest, with respect to the regulatory regime applicable to their respective businesses and operations; or (ii) with respect to consummating the amalgamation;

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• (f) the amalgamation having been consummated on or before the Effective Date (which shall occur no later than January 31, 2001 or such other date as may be mutually agreed by Gentry and Sloane).

The Business Combination Agreement also provides certain conditions for the benefit of Sloane and Gentry respectively, including that the respective representations and warranties of the parties to the Business Combination Agreement shall be true and correct and all covenants shall have been complied with as of the Effective Date.

Regulatory and Other Approvals

The Business Combination Agreement provides that receipt of regulatory and lender approvals is a condition precedent to the Amalgamation becoming effective. Application has been made or is intended to be made to such authorities including, without limitation, the TSE and to certain Canadian securities regulators in order to obtain all approvals required with respect to the Amalgamation prior to closing. Additionally, approvals of the respective lenders of each of Gentry and Sloane is being sought respecting financing arrangements for the merged corporation.

Non-Solicitation

The Business Combination Agreement also provides, among other things, that:

• (a) Sloane shall not, and shall cause its Subsidiaries not to, through any officer, director, employee, representative or agent of Sloane or any of its Subsidiaries or otherwise, directly or indirectly, (i) solicit, initiate or encourage any inquiries or proposals regarding any merger, amalgamation, arrangement, take-over bid, sale of substantial assets, sale of treasury shares (other than pursuant to the exercise of presently outstanding options or Sloane warrants) or any similar transactions involving Sloane or any of its subsidiaries (any of the foregoing, an “Acquisition Proposal”), or (ii) subject to certain exceptions, provide any confidential information to, participate in any discussions or negotiations relating to any such transactions with, or otherwise cooperate with or assist or participate in any effort to take such action by, any corporation, person or other entity or group provided, however, that the foregoing will not prevent the board of directors of Sloane from responding to an acquisition proposal which it determines to be a superior proposal as defined in the Business Combination Agreement.

• (b) If any of Gentry or Sloane receives a request for material non-public information from a person who proposes a bona fide acquisition proposal and the board of directors of such party determines that such proposal would be a superior proposal as described above, assuming the satisfactory outcome of a due diligence condition, then, and only in such case, the board of directors may, subject to the execution of a confidentiality agreement containing a twelve month standstill provision, provide such person with certain to information regarding the party,

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acting reasonably; provided, however that the person making the acquisition proposal shall not be precluded thereunder from making the acquisition proposal.

Termination

The Business Combination Agreement provides that it shall terminate upon the earlier of:

• (a) a date hereafter agreed upon in writing by Gentry and Sloane as a date of termination of the agreement;

• (b) the delivery by one party to another of a written notice stating that a condition precedent for the benefit of the party initiating such notice has not been fulfilled or satisfied within the time contemplated by the agreement and that the agreement is accordingly terminated;

• (c) the day after the Effective Date; and

• (d) the board of directors of Sloane having determined to irrevocably proceed with a superior proposal.

Interests of Interested Parties in the Amalgamation

Certain directors (or nominees for directors) of Gentry and officers of Gentry hold Sloane shares and will receive Gentry shares pursuant to the amalgamation on the same terms and conditions as other shareholders. Additionally, certain directors of Sloane who will continue as directors of Gentry following the amalgamation may be granted options to acquire Gentry shares pursuant to the option plan that is being amended in conjunction with the amalgamation.

6. Reliance on Confidentiality Sections of the Act:

Not applicable

7. Omitted Information:

No information has been omitted.

8. Senior Officers:

For further information, please contact Mr. Ketan Panchmatia, Chief Financial Officer of Sloane Petroleums Inc., 2500, 101 6[th] Avenue S.W., Calgary, Alberta, T2P 3P4, telephone (403) 264-6161, facsimile (403) 266-3069.

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9. Statement of Senior Officer:

The foregoing accurately discloses the material change referred to in this report.

This statement is made in Calgary, Alberta as of the 4[th] day of December, 2000.

Ketan Panchmatia Chief Financial Officer Sloane Petroleums Inc.

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JOINT NEWS RELEASE

Gentry Resources Ltd. and Sloane Petroleums Inc. Announce Business Combination

Calgary, Alberta, November 21, 2000 - Gentry Resources Ltd. (TSE-GNY) (“Gentry”) and Sloane Petroleums Inc (CDNX-SLN) (“Sloane”) have today announced that they propose to enter into a Business Combination Agreement, effective November 21, 2000, pursuant to which Sloane and Gentry shall be combined into one Canadian oil and gas company whose common voting shares are to be listed for trading on The Toronto Stock Exchange. The combined entity is to be called Gentry Resources Ltd.

The consideration to be paid to the shareholders of Sloane for each Sloane common share consists of $0.72 cash and 0.10 common share of Gentry. The closing price of Gentry common shares on The Toronto Stock Exchange on Monday, November 20, 2000 was $0.70. Based on such closing price, the aggregate consideration to be received by shareholders of Sloane for each Sloane common share held is $0.79.

Sloane currently has 6,945,207 common shares outstanding of which 2,918,518 Sloane common shares are held by Gentry. An additional 1,214,805 Sloane common shares are held by common directors, officers and employees of Gentry and Sloane. Gentry and its directors, officers and employees currently hold and own approximately 60% of the outstanding Sloane common shares. A further 1,125,000 Sloane common shares are issuable upon the exercise of outstanding warrants and stock options to acquire Sloane common shares. Common directors, officers and employees of Gentry and Sloane currently hold warrants and stock options to acquire up to 760,000 Sloane common shares.

Gentry currently has 20,406,117 outstanding common shares and shall be issuing a further 515,169 Gentry common shares to Sloane shareholders as a result of the transaction. The aggregate cash consideration to be paid by Gentry to Sloane shareholders is $3,709,216, assuming that all Sloane warrants and Sloane stock options are exercised.

Since Gentry has been and continues to be the largest shareholder of Sloane, Gentry and Sloane have common officers, management and employees. Four of the six directors of Gentry are also four of the six directors of Sloane. Each of Sloane and Gentry have two independent directors.

The transaction which has been reviewed and recommended by the Special Committees of the Boards of Directors of each of Sloane and Gentry and approved by the independent directors of each of Gentry and Sloane is to be implemented by way of amalgamation to be approved by special resolutions of the shareholders of Sloane at an extraordinary meeting of Sloane shareholders and special resolutions of the shareholders of Gentry at a special meeting of Gentry shareholders each to be held on Monday, January 22, 2001. Sloane shareholders and Gentry shareholders of record on December 15, 2000 shall be

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mailed the required shareholder meeting materials including a joint management proxy circular of Sloane and Gentry which shall include a formal valuation of Sloane and the Sloane common shares and the recommendation of the independent directors of each of Sloane and Gentry to approve the amalgamation and certain other related and required matters. In addition to the approvals of the shareholders of each of Gentry and Sloane, the amalgamation is subject to compliance with certain securities regulatory requirements and approvals, certain due diligence matters, the receipt of certain legal, tax, financial and other opinions and reports, the execution of certain definitive agreements and certain closing conditions. Subject to all of the foregoing being satisfied, the amalgamation is scheduled to be completed effective the close of business on January 31, 2001.

The Special Committee and independent directors of Sloane concluded that the transaction was in the best interests of Sloane shareholders for several reasons including the following:

• (a) the ability of Sloane to raise additional equity or debt capital to fund further oil and gas asset acquisitions and further oil and gas property exploration and development was very limited due to its smaller market capitalization, limited common share liquidity and only recently achieved growth in natural gas production volumes;

• (b) the aggregate cash and Gentry common share consideration being paid to Sloane shareholders provided a 41% premium over the trading price of $0.56 per share of Sloane common shares on the Canadian Venture Exchange on November 20, 2000; and

• (c) the ability of Sloane shareholders to continue to participate in the combined entity through their holdings of Gentry common shares.

The Special Committee and independent directors of Gentry concluded that the proposed transaction was in the best interests of Gentry shareholders since the oil and gas assets of Sloane, which consist primarily of natural gas producing properties, should benefit from the enhanced access of Gentry to additional equity and debt capital and the combined entity would have a more balanced mix of oil and natural gas assets, production and opportunities and would expect to achieve lower general and administrative expenses due to the management and operation of one public Canadian oil and gas company instead of two.

For Details, Contact: Hugh Ross, President & Chief Executive Officer	(403) 264-6161
Ketan Panchmatia, Chief Financial Officer	(403) 264-6161
Roger Fullerton, Manager, Investor Relations	(612) 929-7243
CDNX Symbol: SLN TSE Symbol:	GNY

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