CHAG : solid start-up ! the co funded by 2 creditord that gave them huge of credit line ! please (re)read :
ITEM 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
.Western National Bank Loan Agreement
On April 13, 2007, we closed on a Loan Agreement with Western National Bank ("WNB"), Midland, Texas, for a $5,000,000 senior loan facility (the "WNB Loan Agreement"). At the closing of the purchase of the Caldwell Assets, we drew down $2.3 million under the WNB Loan Agreement and issued a Multiple Advance Term Promissory Note to Western National Bank in the amount of $2,300,000. Amounts advanced under the WNB Loan Agreement are secured pursuant to a first priority Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement on the Caldwell Leases. The interest rate under the WNB Loan Agreement is a variable rate equal to the prime rate as defined in this Agreement plus 2%, but in no event to be less than 9.25%, and not higher than the highest lawful rate as defined in this agreement.
.CapWest Resources Loan Agreement
On April 13, 2007, we also entered into a Loan Agreement with CapWest Resources, Inc. ("CapWest"), Midland, Texas, for an advancing line of credit/term loan facility (the "CapWest Loan Agreement"). At the closing of the purchase of the Caldwell Assets, we drew down under this facility $2,700,000 for the balance of the purchase price of the Caldwell Leases, $291,500 for the Caldwell equipment, $111,000 for bank fees, legal expenses and associated costs, and $130,000 for initial working capital. We issued to CapWest Resources, Inc. our Advancing Line of Credit/Term Note at such closing to cover the above advances. The interest rate under the CapWest Loan Agreement is a variable rate equal to the prime rate as defined in this Agreement plus 4%, but not higher than the highest lawful rate as defined in this Agreement.
Under the CapWest Loan Agreement, CapWest has a 2% overriding royalty interest in the Leases. After the payout of CapWest's loan, or in the event that the Company is sold, this overriding royalty interest will convert to a 15% net revenue interest in the Leases. This interest may be purchased by us under a formula specified in this Agreement.
At the closing of the purchase of the Caldwell Assests, pursuant to an Agreement to Issue Warrants, dated April 13, 2007 (the "CapWest Warrant Agreement"), we also issued CapWest a warrant to purchase 2,000,000 shares of our common stock, at a purchase price of $0.001 per share, which warrant is exercisable at any time up to April 13, 2012. CapWest has a put option (the "Put Option") during the period beginning on the first to occur of the following dates (a) the second anniversary of the CapWest Loan Agreement; or (b) the date when the Company shall have paid CapWest's loan in full to put the CapWest warrants to the Company for repurchase at an exercise price of $1,000,000.
FOR THE FULL TERMS OF THE WNB AND CAPWEST LOAN AGREEMENTS, OF OUR NOTES ISSUED TO WNB AND CAPWEST AND OF THE CAPWEST WARRANT AGREEMENT, PLEASE REFER TO THE COPIES OF THOSE AGREEMENTS AND NOTES FILED AS EXHIBITS 10.7 THROUGH 10.11 TO THIS REPORT.
